Trade negotiation between the UK and the EU

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The United Kingdom in green; the European Union (27 member states) in orange.

Trade negotiation between the UK and the EU is the negotiation after Brexit between the United Kingdom and the European Union for a trade agreement to make trade easier than it would be without such a deal. The deal might cover (or eliminate) both tariff and non-tariff barriers to trade.

During the Brexit negotiations in 2017, the two sides agreed that trade negotiation could only start after the UK's withdrawal, because such negotiations could not happen when the UK still has a veto right within the EU.[1] For this and other reasons, a transition period after Brexit day was defined to allow those negotiations. The transition period started on the first February 2020, in accordance with the withdrawal agreement. The first deadline is the 31 December 2020, a deadline which can be extended for two years.[2] The British government has declared that it will not apply for any such extension.[3] In addition, it clarified the only kind of trade deal the UK is interested is in, if any, is a Canadian style trade deal[4], as documented in a so-called "staircase" slide.[5]

According to an (unnamed) French government adviser speaking to journalist Pierre Briançon of Politico.eu, the sides have different approaches of this trade deal negotiation:[4]

  • "The UK wants to preserve as much as it can from the current situation. Their viewpoint is they’re in, and what’s being discussed is simply stripping away some components of the edifice".
  • Given that the UK is legally out of the Union, the EU considers that each part of the relation has to be fully renegotiated bottom-up.

UK needs a trade deal because it will leave of the European Single Market and European Union Customs Union as soon as 1 January 2021.[6] The trade deal would affect EU-UK trade, which accounts for 49% of international UK trade.[6] A Canadian style trade deal would offer the UK reduction on most of custom tariffs between the EU and the UK, but without eliminating VAT, customs and phytosanitary checks.[6] The arrangements for its dominant financial services sector are of particular importance to the UK.[4]

Negotiator teams[edit]

Michel Barnier

For the UK, prime minister Boris Johnson has chosen career diplomat David Frost as lead negotiator.

On the EU side, the main negotiator is Michel Barnier,[7] who received his negotiating mandate from the European Council on 25 February 2020.[8]

UK trade with the rest of the EU before Brexit[edit]

The rest of the EU (EU27) was the UK's largest trading partner before Brexit: In 2018, the bloc made up 45% of UK exports and 53% of UK imports.[9] Outside EU, the biggest trading partner of the UK is USA, which in 2018 made up 19% of UK exports and 11% of UK imports.[9]

For the EU27, the UK is its second largest export market (after USA), and third largest import market (after China and USA).[10]

Chronology[edit]

EU slides detailing timeline for post-Brexit EU–UK partnership negotiations

In February 2020, the UK government published the UK’s approach to the negotiations in a document presented by the prime minister to Parliament titled The Future Relationship with the EU.[11]

The draft EU negotiating position was published on 3 February.[12]

The UK expects to have a Canada style agreement, while the EU considers proximity and the size of its trade makes Canada style trade deal dependent on UK adoption of "level playing field" measures..[13]

European mandate was published on 25 February 2020, while UK's mandate was published on 27 February 2020.[14]

Ten rounds are planned every three weeks, alternately in Brussels and in London.[15]

March 2020[edit]

The first official meeting was scheduled for the afternoon of the Monday 2 March 2020.[7] The Guardian anticipated that the 'flash-points' would be "the level playing field' (on workers' rights, environmental protection, product safety standards and state aid), fisheries, dispute resolution, financial services, security and law enforcement, foreign policy and defence, cross-border transport, science and research".[7] In addition, the EU expressed its concern that the UK had not begun any work to implement the Ireland Protocol in the Withdrawal Agreement (a formal treaty) and that UK Government appeared to be backsliding on the obligations it had entered into.[16]

It was expected that the first rounds deals with regulatory standards and fisheries.[14][17] It is understood that if those points are not agreed by the end of June, both sides will break off negotiations to concentrate on no deal preparedness.[17]

The first round of talks concluded on 5 March 2020.[18] Barnier reported 'grave differences' between the sides, citing in particular the UK's reluctance to commit formally to continued participation in the (non-EU) European Convention on Human Rights as a serious obstacle to security and criminal intelligence cooperation.[18]

The second round, due to take place in mid-March, was postponed due to the 2020 coronavirus pandemic in Europe.[19] Both sides have been exploring alternative ways to continue discussions, including if possible the use of video conferences.[20] On 13 March 2020, the draft of the Commission's proposals were circulated to national governments for comment;[20] it was then published on 18 March.[21]

In late March, it emerged that negotiations had been abandoned as a result of the coronavirus pandemic, that negotiating via video-conferencing had not proved practicable, and that the British side had failed to table a legal draft that the sides could work on.[22] At the end of March, the UK side declared that it had shared its text, while concerns grew about the realism of a timetable set before the pandemic.[23] It also emerged that the UK had rejected an EU request for a permanent technical office in Belfast, saying that the request would go "beyond what is stipulated in the withdrawal agreement".[24] (Article 12 of the Ireland Protocol states that the UK government is “responsible for implementing and applying the provisions of [EU] law” but EU officials “shall have the right to be present during any activities” relating to checks and controls).[24]

April 2020[edit]

In April, against a background of the UK's and member states' preoccupation with managing the rapidly escalating coronavirus emergency,[25] commentators began increasingly to question the practicality of the UK's timetable. Amanda Sloat, a senior fellow at Brookings Institution remarked "In all circumstances it’s very difficult to imagine how some sort of large scale trade deal between the U.K. and the EU gets done by the end of the year."[26] Preliminary negotiations resumed on 15 April, limited to agreeing the phasing of subsequent negotiations to end in June 2020.[27] (The deadline for completing negotiations is 30 June 2020).[28] The following day, UK lead negotiator Frost reiterated his Government's position that the end date will not be changed:

As we prepare for the next Rounds of negotiations, I want to reiterate the Government's position on the transition period created following our withdrawal from the EU. Transition ends on 31 December this year. We will not ask to extend it. If the EU asks we will say no. Extending would simply prolong negotiations, create even more uncertainty, leave us liable to pay more to the EU in future, and keep us bound by evolving EU laws at a time when we need to control our own affairs. In short, it is not in the UK's interest to extend.

— David Frost[28]

A week of full negotiations began on 20 April, by video-conference. The issues to be addressed included the future trade relationship, security policy, trade rules and the contentious issue of fishing rights.[29] Briefing journalists at the end of the week, Barnier expressed disappointment and frustration at the lack of progress made.[30] In a comment to The Guardian, "a UK spokesman openly questioned the value of the deal being offered by Brussels when compared with a no-deal outcome".[31] According to The Guardian, "there is recognition on both sides of the talks that there is little prospect of agreement on the most contentious issues without a major reset of positions".[32] The Financial Times summarised the week's negotiations as "serv[ing] to underline [...] that the UK and the EU are seeking to negotiate fundamentally different projects".[33]

May 2020[edit]

On 13 May, the UK announced that it was moving to establish Border Control Posts at Belfast Harbour, Larne and Warrenpoint to manage livestock and agrifood products, in accordance with the Ireland Protocol in the withdrawal agreement.[34] The withdrawal agreement specifies that Northern Ireland will continue to follow European single market rules on agricultural and manufactured goods.[34]

On 15 May, the May round of trade negotiations (by video-conferencing) ended in acrimony, with each side blaming the other for lack of progress.[35] While these talks were in progress, responsible Cabinet Minister Michael Gove raised the question of whether an agreement based on quotas and tariffs (like the EU–Canada CET Agreement) might be a better option but EU sources dismissed the idea of agreeing terms in the time available.[36] On 19 May, the UK Government published its draft text for the deal.[37]

Main topics[edit]

Regulatory alignment[edit]

UK and EU agree on their aim for a free-trade agreement without any restriction on imports or exports, knows as zero tariffs, zero quotas.[7]

During the talks preceding Brexit, some British government ministers said UK would seek to diverge from EU rules and standards. This was confirmed by Johnson, just after Brexit.[2]

The issue of regulatory alignment is that the EU believes that the UK would need to 'closely shadow' EU regulations (on product safety, environmental protection, workers' rights, subsidies, etc.) to permit 'unfettered' trade in goods and services, while the UK declares that it will not do so.[17] The Withdrawal Agreement recognises that standards in Great Britain will diverge in many respects from those in the EU (with consequent loss of trade privileges in these areas), with a special status being accorded to Northern Ireland to keep open the Irish border.

“We aren’t frightened by suggestions there is going to be friction, there are going to be greater barriers. We know that and have factored this in and we look further forward – to the gains of the future,”

— UK’s chief negotiator, David Frost[38]

On its side, the European Union expects the UK to commit to a "level playing field" on various topics in order to offer "robust" guarantees to ensure fair competition and protection of the standards.[38] President of the European Commission, Ursula von der Leyen, observed that zero tariffs and quotas requires the UK to commit to 'zero dumping'.[38]

Fisheries issue[edit]

Photo of crabs in large, open metal box surrounded by fishermen
Fishermen sorting velvet crabs at Fionnphort, Scotland

The fishing sector in the UK has (as of 2018) 22,000 jobs related to fish processing, 6,036 UK-registered vessel, and 11,961 fishermen.[39] In the British economy, the fishing sector has a value of £784 million. In comparison, financial services have a value of £132 billion.[39] Despite being a little proportion of the economy, fishery is of high importance to both the UK and coastal EU states nearby.[40][41] In 2018, 75 % of all seafood caught in the UK was exported, most to the EU, while of the seafood consumed in the UK, two thirds are imported.[39]

The EU has a common fisheries policy (CPF), which allows EU fishers access to waters of every other EU member state, outside the first 12 nautical miles (22 km) from the coast.[39] Following the end of the transition period, the UK will become a third party coastal state with, in accordance with the United Nations Convention on the Law of the Sea, an 'exclusive economic zone' of 200 nautical miles from the coast.[39][42] Under CPF, catch quotas are allocated for species individually, and distribute among the member states, who in turn distribute them to fishers.[40] Most UK quotas are concentrated on few companies, and over half of the quotas are controlled by foreign-owned companies. The UK does not have the fishing capacity to fully catch their allowed quotas.[39]

The EU has linked negotiations on fishing policy to trade talks, while the UK wishes to keep them apart.[41] A point to be negotiated is the length of the agreement: the EU expects a permanent agreement, the UK expects a Norwegian like annual agreement to be in line with biology of fish, aspirations of fishermen, and fisheries science.[39]

In exchange for a right for European trawlers to fish in British waters, France proposes that Britain should have the right to sell its fish and seafood products on the European market.[39]

Dispute resolution and the European Court of Justice[edit]

The European Union expects a comprehensive trade agreement that covers trade, transport, foreign policy and fishing.[7] Consequently, it believes, resolution of any dispute related to the interpretation of EU law could only be determined by the European Court of Justice.[7]

The United Kingdom aims to obtain a 'comprehensive free trade agreement' (like the EU's CETA agreement with Canada) that does not include fishing, security, transport or energy. These matters, it believes, should be covered in a separate deal where 'appropriate governance arrangements', rather than European Court of Justice, would adjudicate.[7]

Financial services[edit]

The Bank of England, the central bank of the United Kingdom

The EU-Canada deal does not contain financial passporting.[4] Also, the 'Most favoured nation' clause in CETA requires that every privilege given to the UK must also have to be given to Canada.[4]

It is assumed a deal containing financial services cannot be negotiated in less than two years.[4]

Financial services makes up 6.9% of UK 2018 GDP. The EU considers that it is alone allowed to establish its equivalence decisions (that the regulatory and supervisory environment of the prospective partner to be in line with its own) in its own interest, and may withdraw them at any time without notice. The UK expects to maintain access to European financial services clients, avoiding future equivalence withdrawal decisions by the mean of appropriate consultation and structured processes.[7]

Security and law enforcement[edit]

For the security and law enforcement matters, UK and EU issues include the European Convention on Human Rights, Europol, Eurojust, and the European arrest warrant.[7] In April 2020, the UK's request to retain access to Europol and Schengen Information System databases (without ECJ oversight) met a frosty reception, especially in Germany.[43]

Expected benefits[edit]

According to the UN Conference on Trade and Development, a trade agreement between the UK and the EU would help limit the drop of exports from UK to EU to 9%, while the expected decrease would be 14% in case of no deal.[14]

References[edit]

  1. ^ Foster, Peter (29 April 2017). "EU Brexit guidelines: What's in the document, and what it really means". The Daily Telegraph. Retrieved 14 May 2017.
  2. ^ a b Sandford, Alasdair (February 11, 2020). "Post-Brexit Guide: Where are we now? *latest updates*". euronews.
  3. ^ "UK will not extend Brexit transition period - Johnson's spokesman". Reuters. 6 January 2020. Retrieved 8 March 2020.
  4. ^ a b c d e f Briançon, Pierre (January 11, 2018). "Brexit trade deal will contain financial services, but UK may not like it". POLITICO.
  5. ^ "Slide presented by Michel Barnier, European Commission Chief Negotiator, to the Heads of State and Government at the European Council (Article 50) on 15 December 2017" (PDF). European Commission. 15 December 2017. Retrieved 8 March 2020.
  6. ^ a b c Edgington, Tom (March 2, 2020). "Which countries does the UK do the most trade with?". BBC News.
  7. ^ a b c d e f g h i Boffey, Daniel; Rankin, Jennifer (1 March 2020). "Brexit: what are the key flashpoints as EU-UK trade talks begin?". The Guardian.
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  9. ^ a b Ward, Matthew (16 December 2019). "Statistics on UK-EU trade" (PDF). House of Commons Library. Retrieved 5 March 2019.
  10. ^ "Latest Eurostat data on international trade" (PDF). Eurostat. 14 February 2020. Retrieved 5 March 2019.
  11. ^ "The Future Relationship with the EU" (PDF). Government of the United Kingdom. February 2020.
  12. ^ Chen Weihua (1 February 2020). "Emotional send-off to give way to unsentimental talks". China Daily.
  13. ^ Savage, Michael (February 23, 2020). "UK and Brussels clash over post-Brexit trade deal even before key talks begin". The Guardian.
  14. ^ a b c Fox, Benjamin (February 25, 2020). "Brexit deal will be 'difficult', Barnier says as ministers agree mandate".
  15. ^ correspondent, Lisa O'Carroll Brexit (March 2, 2020). "EU warns UK to tone down political rhetoric as trade talks start". The Guardian.
  16. ^ John Campbell (25 February 2020). "Brexit: EU warns UK over goods checks between NI and GB". BBC News. Retrieved 10 March 2020.
  17. ^ a b c "UK threatens to walk away from EU trade talks 'if no progress within four months'". France 24. February 27, 2020.
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  30. ^ Katya Adler (24 April 2020). "Brexit: Disappointing progress in trade talks, says Michel Barnier". BBC News. Retrieved 24 April 2020. Fishing, competition rules, the form of an eventual deal and what kind of mechanism would be used for disputes between the two sides. Those have been the screaming areas of disagreement between EU and UK negotiators from the start. And if they can't be resolved, the EU insists there will be no trade deal at all.
  31. ^ Philip Oltermann; Daniel Boffey (24 April 2020). "Britain running down the clock in Brexit talks, says Michel Barnier. EU negotiator expresses frustrations at UK refusal to discuss key issues of transition". Retrieved 24 April 2020. A UK spokesman [...] openly questioned the value of the deal being offered by Brussels when compared with a no-deal outcome.
  32. ^ Daniel Boffey (26 April 2020). "Post-Brexit trade talks with EU on course to fail, Johnson warned. Prime minister expected to press EU leaders to dedicate attention to faltering negotiations". The Guardian. Retrieved 27 April 2020. Boris Johnson is expected to push for an intervention from EU leaders in the faltering trade and security negotiations with the bloc after being warned by advisers that the current talks are on course to fail.
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  37. ^ "Our approach to the Future Relationship with the EU". GOV.UK.
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  43. ^ Philip Oltermann; Daniel Boffey (23 April 2020). "UK making 'impossible demands' over Europol database in EU talks". The Guardian. Retrieved 23 April 2020. “It is nothing short of brazen by the British government to want to take part in Europe’s largest police database in spite of repeatedly breaking its rules,” said Andrej Hunko, a spokesman on European affairs for Die Linke, the German left party.