A clear UK position puts Brussels under pressure in the EU / UK trade negotiations

Early September, after the holidays, is when Brussels resumes business. Early on the agenda is whether the EU’s leadership abandons their negotiating strategy for a post-Brexit trade deal, as British PM Boris Johnson ups the pressure.

So far the EU’s negotiators have insisted that the UK must submit to unequal treatment in the relationship (for example, in regulatory policy, state support of industry and dispute resolution) if the UK is to retain some level of trade privilege above World Trade Organisation (WTO) minima.   

This seems to be based on the belief that, first, Brussels must be seen to ‘win’ the negotiation and, secondly, that internal doubts and divisions make a British capitulation inevitable.  

Boris won’t have it – and he is sounding a lot more credible than his predecessor Theresa May ever managed.  Even the strapline is good:  give us a Canada-style free trade agreement (FTA),  but we’ll be almost as happy with an Australian one (for the avoidance of doubt, Australia trades with the EU without an FTA, on WTO terms).

Boris says, should the talks fail, that:

“We will of course always be ready to talk to our EU friends even in these circumstances.  Our door will never be closed and we will trade as friends and partners – but without a free trade agreement.”

It’s novel for the British to be issuing ultimata in these negotiations, but there is a first time for everything and now seems to be the right time.  The London-based Daily Telegraph thinks it knows the UK’s demands. They boil down to the principle that the UK needs the same freedom of policy action as any other sovereign state and therefore the EU relationship must be one of reciprocity.

On this basis, the UK’s main demands seem almost deceptively straightforward.

• On trade, the UK is offering a level playing field in areas such as regulatory policy and state support to industry in return for tariff and quota-free access, but based on current world trading arrangements.  (The EU insists that the level of access requires the playing field to be marked up according to its own more detailed and idiosyncratic definition.)
• The UK also wants to tie the EU into a mechanism for recognising the equivalence of the UK’s regulation of financial services. (Europe would much prefer the discretion to change this at will, but the UK fears this could be used as a cudgel, as was seen in previous EU negotiations with Swiss authorities.)
• On governance of the relationship, the UK would prefer bespoke mechanisms for each issue to separate out disputes (whereas the EU is steering for a single resolution mechanism which would look more like a permanent negotiation and make it easier to bring all outstanding issues into play).
• And on the ever-vexing question of fishing, the UK seems prepared to concede a measure of EU fishing rights in UK waters pro tem but on a basis which will give the UK a strong hand in future renegotiations.

Other issues like extradition, illegal migration, cabotage, product testing recognition, security cooperation, healthcare and student exchange are also important, and at least one side says they need to be resolved now, but could most probably be dealt with – or not – later.

Assuming the British position is being briefed out correctly and is firm on the principles, but with room to move on the details, there is scope for an objectively good deal from Europe’s perspective.  It would be something which looks like the current Canadian FTA but most likely broader in scope and with more of those regulatory and institutional elaborations beloved by European negotiators.  But Britain will be seen to have prevailed in its insistence on the principle of reciprocity.

If this is not achieved, the UK looks set for a bracing move to a WTO trading posture which would accelerate its move into the more open global trading (and one hopes regulatory) environment which Johnson’s government seeks.   And the EU will be left figuring how to reconcile this with its commitment to keep the Irish border open and when it might get the £30 billion the UK promised to pay (as part of a free trade package) under last year’s withdrawal agreement.

Either of these outcomes looks satisfactory from the Brexiteer point of view.