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June 16, 2020

UK/EU: A new deadline in late July?

BY Carsten Nickel

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As expected, the high-level meeting between PM Boris Johnson and the presidents of the three EU institutions on 15 June did not yield any substantial news. Any other outcome would have been surprising, given the limited progress previously made on the level of technically detailed negotiations. In the political format of yesterday’s talks, instead, both sides confirmed their previous agreement to continue with talks on a weekly basis throughout July.

The fact that the UK has not requested any extension to the transition period beyond 31 December was at best a side note to yesterday’s meeting. Instead, the main news of the day came after the conference call. In a unilateral announcement, Johnson declared that he wanted both sides to reach an agreement at the end of the envisaged intensive cycle of negotiations in July.

The PM’s move appears to be intended to keep alive the possibility of the UK walking away with no-deal before the end of the talks. Johnson’s statement could perhaps be read as a threat of the UK quitting in case of limited progress by end-July. As such, it is probably designed for domestic political consumption. After all, the PM seemed to suggest that, unlike him, some in Brussels might be eager to talk for longer.

For now, however, there is no reason to assume that any side would end the talks if no agreement has been reached by end-July. The more realistic deadline – resulting from technicalities, rather than political construction – remains autumn, roughly around the 15-16 October European Council. Until then, the Commission appears to stand ready to continue negotiating throughout August, instead of sticking to the more traditional habit of most of EU institutions (and, in fact, the city of Brussels) effectively closing down for the month.

Most importantly, however, the UK’s decision against a transition extension already curtails the available timeframe. From the perspective of Brexiters, this ensures that any deal that might be negotiated during that period remains superficial enough to exclude any meaningful regulatory dimension. These limitations, in turn, guarantee that the UK will be (formally) free to deviate from EU rules in key policy areas. But again, without an extension, this logic is already in play – and new, structural border frictions will be ahead – regardless of whether or not both sides also use August and September to finalize a simple no tariffs/quotas trade deal.

In sum, the limited scope of any deal should ultimately facilitate the search for a solution, perhaps by leaving out fish, somewhat toning down level playing field commitments and adjusting the depth of dispute settlement plans to the anyway outdated, goods-only nature of the deal under preparation. The flipside of this more constructive take is that new customs controls will negatively affect cross-border trade in any scenario, with or without a deal. One question to watch remains when and how clearly Johnson tells businesses to start and get ready for these disruptions inevitably ahead as of 2021.

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