A revealing thread by Mujtaba Rahman on the current state of the UK-EU relations after the publication of both parties’ mandates for the incoming Brexit negotiations.
First published in February 2020.
After spending the week in Brussels, I can report that the mood among senior EU officials regarding Monday’s start of the UK trade talks is extremely gloomy.
Expectations have adjusted that the EU might end up trading with the UK like the US or China, on WTO terms.
Here is how I see things.
I agree with most in Brussels that the odds of a no-deal are rising and the space for a deal is shrinking – and rapidly. This is largely driven by Number 10’s super-hardline on divergence, and the need to square this with the EU’s expectations on the Level Playing Field (LPF).
The EU’s now-final mandate has three major asks of the UK on the Level Playing Field:
1) a dynamic alignment on state aid;
2) a commitment to not go below environmental, social, labour and fiscal standards that will be in place at the end of the transition period; and
3) an aim to maintain regulatory coherence with the EU in the future.
Senior EU officials tell me that the last bit (3) is where Member States turned the screws the most. The EU’s original mandate only spoke of the UK not rowing back on environmental, social, labour and fiscal standards from where they sit when the UK formally exits the transition period at the end of the year.
The revised text also throws in a forward-looking element. Not the full bell and whistles of a dynamic alignment – which means that the EU legislates and the UK adopts and transposes, like Norway – but something softer. “A system for two adults”, in the words of one official involved in the talks.
However, the bigger conclusion for me is not where the EU mandate landed – a slight toughening from the European Commission’s original proposal – but where it could have landed. And what this tells us about the EU’s internal political dynamic in phase 2.
The French wanted a dynamic alignment on all of it. They lost the argument, but I suspect they knew they would. What they have won, however, is arguably far more important. The recognition that they will be the toughest, most important critic to bring on board in this round of talks.
Frankly, in light of the tough UK messaging, especially the ambiguity Number 10 has fostered around the implementation of the Irish Protocol, I am surprised Paris didn’t win more support from EU capitals over the mandate.
Indeed, senior EU officials tell me they purposely chose to leave some wiggle room for Michel Barnier to manoeuvre and do a deal. But the EU still doesn’t feel they actually know what the UK Government’s bottom line really is. There are, remarkably, no back channels with David Frost — Boris Johnson’s new Chief Brexit Negotiator.
So no ground has been prepared in private; all officials in Brussels can go off are public statements. Michael Gove’s statement in the Commons (yesterday) which will draw attention to the mandate the UK Government won in December’s election as basis for UK's stance – not last year’s deal – is a case in point.
“We will not accept nor agree to any obligations where our laws are aligned with the EU or the EU’s institutions"— BBC Politics (@BBCPolitics) February 27, 2020
The government is outlining its strategy for post-Brexit talks
On fishing – “we will not link access to our waters to access to EU markets”https://t.co/w5JWjBOx9Z pic.twitter.com/IhSNKjb24E
HOWEVER, the biggest problem – greater than the slightly tougher EU mandate, Emmanuel Macron’s position, or the poor information flows between key UK and EU officials – is time, which in some ways will undermine the EU’s leverage and increases the risks of a serious miscalculation.
Because senior EU officials concede that it will be impossible to agree internally among the 27 which UK sectors and/or products should be hit with retaliatory EU tariffs if the UK doesn’t comply with the EU’s Level Playing Field demands. There is simply no time to have a line-by-line tariff negotiation.
“It would take six years, not six months”, one central figure tells me. It would undermine EU unity. There has been no discussion on this and likely won’t be. All senior officials I spoke to agreed with this point: you cannot end up with some Level Playing Field and some tariffs. It is very binary.
SO EITHER there is an agreement on the EU’s broad terms, where there is room to fudge in some areas (e.g. regulatory coherence isn’t a dynamic alignment) but not in others (e.g. state aid), and the UK will be granted zero/zero access OR there won’t be a deal. The messy middle doesn’t exist.
Has Number 10 calculated that the threat of EU tariffs isn’t credible? Perhaps the Government also thinks the economic impact of the Coronavirus will make the EU27 more reluctant about no-deal? Italy looks likely to tip into recession. Does this EU27 tariff constraint reinforce the UK Government’s hard line?
Of course, EU officials push back against this view, arguing that the qualitative step change in nature of the UK-EU relationship will happen at the end of this year when the UK exits the transition period; the question of tariffs/quotas is simply one of degree. The major damage is already done.
But surely the fact that the difference between a zero/zero deal and WTO terms is only one of degree will only increase the risk of a no-deal – either by accident (if the UK Government/the EU miscalculate) or by design (if the UK Government cannot pay the EU’s Level Playing Field price; or if the EU decides it cannot risk the integrity of its market).
It is clear that the UK has done itself some serious reputational damage in key EU capitals given its approach. The EU side thinks the UK Government has yet to fully realise it won’t have the capacity to set standards. If it chooses not to align with the EU, that is ideological. But the UK will have to align with someone, e.g. the United States, who will be much tougher.
“Unless the UK wants to be like North Korea, but even they align to China!” says one senior EU official. “Our offer is genuine, based on shared values.”
But the people I spoke with aren’t holding their breath that the UK will take it.
Tweets posted on 28 February 2020 by @Mij_Europe.
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🗳️ Michael Gove