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August 13, 2020


UK/EU: As talks resume, a deal remains possible

BY Carsten Nickel

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( 3 mins)

Following a rather short summer break, EU-UK trade talks will resume next week. Despite some negative noise, a deal remains possible, but as at previous iterations of the Brexit saga, an agreement should probably be expected closer to the deadline. The talks need to be wrapped up in autumn, ideally in time for the 15-16 October European Council.

The noise over recent weeks should be considered as rather typical of a summer break ahead of a crucial negotiation phase. While Germany’s Europe minister called for greater UK realism in the talks, France has been complicating cooperation with the UK to control the recent increase in migrant arrivals across the English Channel.

On the UK side, meanwhile, senior Brexiters within the Conservative party have voiced questions again over last year’s withdrawal agreement. They have raised concerns over everything from Northern Irish border controls to remaining UK financial contributions – issues long settled in the deal that has since become binding international law.

All this, however, should be seen in conjunction with some positive indications on the substantial issues of the talks. In line with previous expectations, the EU’s position seems to keep softening on some key questions. This is a result of multiple factors, one of which is that the EU opening line in the talks was indeed much tougher than what would necessarily have followed from the previous political declaration.

Another aspect is that the envisaged zero tariffs/quotas agreement is so unambitious in scope that far-reaching demands for UK dynamic regulatory alignment would indeed seem inappropriate. Recall that even in the scenario of a deal, the border controls to be phased in will look pretty much the same as they would without a trade agreement.

Finally, as discussed in the past, the key future power tool for the EU will be the ability to scale back the market access granted to the UK (i.e., temporarily scrapping some tariff and quota exceptions) if the UK were to drastically undercut, say, EU state aid rules. UK single market access in crucial areas such as financial services will be granted under the EU’s unilateral discretion anyway.

Looking ahead, the basic trade agreement will only be the starting point for continuous conversations within the UK and between both sides over equivalence and cooperation arrangements that do justice to the depth of the UK’s integration into the European market and the sophistication of the parting country’s economy (for instance, its focus on services). The coming years of further negotiations will allow the EU to exert further pressures.

In substance, both sides might still agree on broad minimal standards for everything from taxation to workers’ rights and the environment, but without the initial, harsh EU demands of altering these rules dynamically and enforcing them through the setup of some “mini commission” in the UK post-Brexit. If instead, an arbitration mechanism were to be the immediate point of call for any disputes, this would leave fisheries as the main sticking point. But already before the summer, both sides seemed interested in a detailed agreement rather than leaving this issue entirely unresolved (thus withholding fishing rights from the EU fleet and banning all UK fish exports into the single market).

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