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June 10, 2020

UK/EU: Get ready for border checks – but how clear will the message be?

BY Carsten Nickel

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( 3 mins)

There is still no date for the high-level meeting between PM Boris Johnson and the Presidents of the European Commission and Council, Ursula von der Leyen, and Charles Michel. However, the once envisaged UK request of an extension to the transition beyond 31 December has become highly unlikely.

As previously discussed, this means that past the high-level meeting, the focus will turn to a double question: deal or no-deal in time for the end of the transition on 31 December, and, in case of a deal, the outlook for some form of “phase-in period” for a handful of weeks at the beginning of 2021. This would be nothing but a very short extension of the transition, but with a different name, to make it acceptable in the UK. On the European side, this could no longer occur under article 50 of the EU treaty, thus requiring domestic parliamentary sign-off across all 27 member states.

The idea behind such a technical extension is that, even if there is a deal, new border controls would have to be phased in between the UK and EU. Assuming that the talks might last well into October, businesses and customs authorities might end up with not enough time to get respective systems up and running. Constructing a phase-in period could help with this problem.

On the other hand, it has long been clear that the border controls required under a mere zero tariffs/quotas deal would look much like they would in a no-deal scenario. Against this backdrop, it would make sense if, coming out of the high-level meeting with no extension, the UK government would clearly communicate to businesses and customs authorities to prepare immediately for the checks that will be ahead as of 2021, regardless of the outcome of the talks. The stronger and clearer this messaging is after the June summit, the less likely are there to be any UK attempts to secure a phase-in period.

In terms of the talks, a basic FTA is still possible by year-end. Reports about the EU’s failure to agree on a softer stance on the fishing question serve as a reminder of the political trickiness of the issue. But they might also point to the long-discussed scenario of both sides completely excluding the issue, leaving the EU with no access to UK waters and UK fishermen with no chance to export into the EU.

On the question of state aid, meanwhile, there have been some signals of potential EU willingness to compromise. This would be in line with our previously outlined scenario where the UK commits only to broad minimal standards (most of which it already outperforms), given that the overall relationship is merely a basic FTA.

It remains true that, given public scrutiny for global trade, it will be challenging for the EU to agree to any FTA that does not include respective competition safeguards. However, member states’ pandemic responses have further added to long-lasting EU-internal pushes for a revamped competition policy, fostering “European champions” rather than curtailing them. A more activist EU stance on this front could, in turn, somewhat ease the bloc’s fears of UK state aid disrupting the level playing field.

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