Trade negotiation between the UK and the EU
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 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. For this and other reasons, a transition period after Brexit day was defined to allow those negotiations. The transition period started on the 1st of 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. The British government has declared that it will not apply for any such extension. In addition, it clarified the only kind of trade deal the UK is interested is in, if any, is a Canadian style trade deal, as documented in Michel Barnier's "staircase" slide.
According to an French government adviser speaking to journalist Pierre Briançon of Politico.eu, the sides have different approaches of this trade deal negotiation:
- "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.
Negotiator teams
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, who received his negotiating mandate from the European Council on 25 February 2020.
UK trade with the rest of the EU before Brexit
The rest of the EU was the UK's largest trading partner before Brexit: In 2018, the bloc made up 45% of UK exports and 53% of UK imports. 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.For the EU27, the UK is its second largest export market, and third largest import market.
Chronology
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.The draft EU negotiating position was published on 3 February.
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..
European mandate was published on 25 February 2020, while UK's mandate was published on 27 February 2020.
Ten rounds are planned every three weeks, alternately in Brussels and in London.
March 2020
The first official meeting was scheduled for the afternoon of the Monday 2 March 2020. The Guardian anticipated that the 'flash-points' would be "the level playing field', fisheries, dispute resolution, financial services, security and law enforcement, foreign policy and defence, cross-border transport, science and research". In addition, the EU expressed its concern that the UK had not begun any work to implement the in the Withdrawal Agreement and that UK Government appeared to be backsliding on the obligations it had entered into.It was expected that the first rounds deals with regulatory standards and fisheries. 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.
The first round of talks concluded on 5 March 2020. Barnier reported 'grave differences' between the sides, citing in particular the UK's reluctance to commit formally to continued participation in the European Convention on Human Rights as a serious obstacle to security and criminal intelligence cooperation.
The second round, due to take place in mid-March, was postponed due to the 2020 coronavirus pandemic in Europe. Both sides have been exploring alternative ways to continue discussions, including if possible the use of video conferences. On 13 March 2020, the draft of the Commission's proposals were circulated to national governments for comment; it was then published on 18 March.
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. 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. 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".
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April 2020
In April, against a background of the UK's and member states' preoccupation with managing the rapidly escalating coronavirus emergency, 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." Preliminary negotiations resumed on 15 April, limited to agreeing the phasing of subsequent negotiations to end in June 2020.. The following day, UK lead negotiator Frost reiterated his Government's position that the end date will not be changed: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. Briefing journalists at the end of the week, Barnier expressed disappointment and frustration at the lack of progress made. 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". 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". The Financial Times summarised the week's negotiations as "serv to underline that the UK and the EU are seeking to negotiate fundamentally different projects".
May 2020
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 in the withdrawal agreement. The withdrawal agreement specifies that Northern Ireland will continue to follow European single market rules on agricultural and manufactured goods.On 15 May, the May round of trade negotiations ended in acrimony, with each side blaming the other for lack of progress. While these talks were in progress, responsible Cabinet Minister Michael Gove raised the question of whether an agreement based on quotas and tariffs might be a better option but EU sources dismissed the idea of agreeing terms in the time available. On 19 May, the UK Government published its draft text for the deal.
In late May, The Guardian reported that the Fisheries Committee of the European Parliament had "threatened that it would veto any deal that did not include a 'balanced agreement' on fishinq quotas".
June 2020
The early June round of negotiations again ended with 'no significant progress' but, the Financial Times reported, "afterwards both sides showed fresh signs of a willingness to compromise to get a deal". The EU side indicated 'flexibility' over application of its State aid rules and the UK did likewise over accepting some tariffs.In late June, German Chancellor Angela Merkel suggested that prospects for mutual compromise were receding and those for a no-deal Brexit were increasing.
The month ended with the expiry of the deadline for the UK to request an extension to the transition period. No such request was made.
July 2020
Face-to-face negotiations beginning 29 June and due to run to 3 July broke up in acrimony on 2 July, with no progress being made. Earlier that week, senior British industrialists warned Prime Minister Johnson of "hugely damaging consequences of a 'no-deal Brexit'".A further round of negotiations ending 23 July was again deemed fruitless by both parties, with the prospect of "no deal" deemed increasingly likely but not inevitable.
Main topics
Regulatory alignment
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.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.
The issue of regulatory alignment is that the EU believes that the UK would need to 'closely shadow' EU regulations to permit 'unfettered' trade in goods and services, while the UK declares that it will not do so. The Withdrawal Agreement recognises that standards in Great Britain will diverge in many respects from those in the EU, with being accorded to Northern Ireland to keep open the Irish border.
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. President of the European Commission, Ursula von der Leyen, observed that zero tariffs and quotas requires the UK to commit to 'zero dumping'.
Fisheries issue
The fishing sector in the UK has 22,000 jobs related to fish processing, 6,036 UK-registered vessel, and 11,961 fishermen. In the British economy, the fishing sector has a value of £784 million. In comparison, financial services have a value of £132 billion. Despite being a little proportion of the economy, fishery is of high importance to both the UK and coastal EU states nearby. 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.The EU has a common fisheries policy, which allows EU fishers access to waters of every other EU member state, outside the first 12 nautical miles from the coast. 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. Under CPF, catch quotas are allocated for species individually, and distribute among the member states, who in turn distribute them to fishers. 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.
The EU has linked negotiations on fishing policy to trade talks, while the UK wishes to keep them apart. 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.
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.
Dispute resolution and the European Court of Justice
The European Union expects a comprehensive trade agreement that covers trade, transport, foreign policy and fishing. Consequently, it believes, resolution of any dispute related to the interpretation of EU law could only be determined by the European Court of Justice.The United Kingdom aims to obtain a 'comprehensive free trade agreement' 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.
Financial services
The EU-Canada deal does not contain financial passporting. Also, the 'Most favoured nation' clause in CETA requires that every privilege given to the UK must also have to be given to Canada.It is assumed a deal containing financial services cannot be negotiated in less than two years.
Financial services makes up 6.9% of UK 2018 GDP.
The EU considers that it is alone allowed to establish its equivalence decisions 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. In June 2020, Michel Barnier said that the EU "will only grant equivalences in those areas where it is clearly in the interest of the EU: of our financial stability, our investors and our consumers," describing as unacceptable many the UK's proposals.
Security and law enforcement
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. In April 2020, the UK's request to retain access to Europol and Schengen Information System databases met a frosty reception, especially in Germany.Expected benefits
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.Draft legal and treaty texts
On the 20th of March 2020, the European Union released a full Draft CFTA Legal text outlining details of the UK - EU Comprehensive Free Trade Agreement they would like to see.On the 19th May 2020, the United Kingdom released a full Draft CFTA Legal text outlining details of the UK - EU Comprehensive Free Trade Agreement they would like to see.