Time is ticking
rounds of talks so far this year, AFTER THREE
UK-EU negotiations have failed to yield significant progress toward a deal. The coronavirus outbreak has undoubtedly taken up much of the bandwidth of UK and EU authorities since March, but there are also fundamental differences between their negotiating positions, which I have explored before. June is set to be a critical time for UK-EU negotiations. A fourth round of talks will begin on June 1, the final set before a high-level stock-taking exercise due later in the month. Crucially, these will also be the last set of talks before the end-June deadline on deciding whether to extend the transition period, currently set to conclude at end-2020. Given recent statements from the UK government, I think it is highly unlikely a request for an extension will be made by the end-June deadline. Recall also that it was written into UK domestic legislation by the government that no minister could request such an extension. As a result, it would take a separate piece of legislation to be passed through the UK Parliament, requiring the support of many Conservative MPs, to overturn this legislation and allow an official request to be made.
Also, there’s a distinct possibility that talks could break down at some point in June. There has been some progress on fishing rights, as recent reports suggest the EU could abandon its ‘maximalist’ approach, in which it aims to maintain status quo access arrangements for EU fishing vessels. But on issues such as the role that the European Court of Justice (ECJ) would play in future disputes, and level playing field (LPF) provisions such as environmental standards, competition policy, state aid, workers’ rights, and tax policy, both sides remain far apart. The UK government still seeks a free-trade agreement (FTA) analogous to the one the EU negotiated with Canada, which provides close to zero tariffs and quotas on traded goods, limited access for services sectors, no direct role for the ECJ, and limited commitments on LPF provisions.
Later in the year, assuming talks do not collapse, or any breakdown results in a reset further down the line, I see a greater chance that both sides will agree to extend the transition period. The UK government could be swayed by a number of dynamics: (1) evidence that the economic impact from C•VID-19 is worse than anticipated, (2) polling evidence suggesting a majority of Conservative or pro-Leave voters support an extension, (3) increased pressure from British business and/or clear evidence that significant sectors of the economy will not be in a position to effectively cope with the effects of a no-deal outcome, and (4) progress toward a deal, but a short-extension (six months) is required to finalize talks and ratify any deal via UK and EU parliaments. With (4), there may be an attempt from the UK government to call it something other than a transition period extension, potentially opting for a ‘bridging arrangement’. This assumes that the EU will accept an extension request later in the year. If an extension is requested by end-June, it would only need to be ratified by the European Council on the EU side, and the UK Parliament, given the previous legislation that restricts a minister from requesting an extension.