What are the red lines that could block a trade deal?
For anyone who thought Boris Johnson had “got Brexit done” with the deal he struck with Brussels in October and passed through parliament in January, the fact that fresh negotiations will begin in Brussels on Monday may come as some surprise.
And the fact that these talks could lead to a no-deal Brexit at the end of 2020 is something so contrary to the prime minister’s narrative that he refuses to use the term himself, preferring to call it an “Australian-style settlement”.
In reality, last year’s withdrawal agreement dealt only with the terms of the UK’s divorce and put in place a “transition period” lasting until the end of December during which London and Brussels can try to thrash out a trade deal to avoid the additional paperwork and levies, the disruption to ports and airports and the imposition of non-tariff barriers which would result from departure on World Trade Organisation terms.
And the position taken by Johnson since December’s general election – and confirmed in the negotiating stance agreed by his Brexit committee yesterday – has made the prospect of such a deal seem much more remote.
The prime minister has ditched the rhetoric of an “ambitious” deal and “frictionless” trade used by Theresa May when she attempted to forge a withdrawal settlement which her critics branded “Brexit in name only”. Instead, the PM’s spokesman now says the UK’s top priority is to “restore its economic and political independence”, with smooth trade relations with Britain’s closest trading partners coming a distant second.
While the UK continues to seek a “zero-tariff, zero-quota” deal for goods along the lines of Canada’s CETA free trade agreement, Johnson insists that Britain will still prosper without such an accord. The principal bone of contention in talks is the EU’s demand for a “level playing field” on rules and regulations relating to issues from state aid to workplace rights, environmental safeguards, taxation and climate change.
Brussels insists that this is necessary to prevent Britain systematically undercutting Europe’s businesses with cheap food and other goods produced to far lower standards than those required from continental producers. And French president Emmanuel Macron succeeded this week in hardening the EU stance to require the UK to mirror new Brussels regulations in the years after Brexit.
But Downing Street counters that such “onerous” requirements have not been required from other major trading partners like Canada and Japan and are anyway unnecessary as the UK can be expected to match or outstrip the EU on protections for food safety or animal welfare.
The first big clash, however, is likely to involve access to UK fishing waters for EU boats, with a deadline for agreement as early as June this year. The negotiating position agreed by the remaining 27 EU member states requires “existing reciprocal access” to fishing waters, effectively committing the UK to continue allowing Spanish and French trawlers to continue operating on pre-Brexit terms.
In a major speech in Greenwich earlier this month setting out his approach to trade talks, Johnson made clear this would cross his red line that access must be renegotiated each year to ensure that UK fishing grounds are “first and foremost for British boats”.
Brussels also appears to be resisting British pressure for an early conclusion to mutual assessments of one another’s financial services regulations, designed to allow continued access to continental markets on the basis of the “adequacy” of UK rules.
And rows are expected over the transfer of electronic data on which so much of modern commerce depends, with the EU wanting guarantees that the UK will maintain standards of privacy and security equivalent to those required by its GDPR rules.
Unlike the divorce talks, which took place in Brussels, negotiations on the trade deal will alternate between the Belgian capital and London. None of those involved is under any illusion that a vast amount of work remains to be done to deliver an agreement, and few expect anything other than escalating tensions as the New Year’s Eve “deal or no deal” deadline approaches.