Andrew Grice / Jul 2020
A month is a long time in UK-EU negotiations. Four weeks ago, the mood in London and Brussels was pessimistic about reaching a trade deal before Boris Johnson’s self-imposed deadline of 31 December.
Some UK ministers seemed resigned to what they called an “Australian-style deal” --trading with the EU on World Trade Organisation terms. Backbench Tory Brexiteers predicted with some relish that the economic hit would be “buried” by the chilling economic effect of coronavirus.
But the atmospherics improved after Boris Johnson’s video call with Ursula von der Leyen on 15 June, which agreed an accelerated timetable. Optimism about a deal has risen. British ministers say that, after a period of sabre-rattling and “talking past each other,” both sides are engaging in substantive negotiations.
The switch from virtual to face-to-face talks last week was bound to help. This week David Frost, the UK’s chief negotiator, hosted an informal working dinner at Downing Street with Michel Barnier, his EU counterpart. Cue lots of quips about fish being on the menu; they ate halibut.
However, the more upbeat mood music has not yet been matched by any firm evidence of a breakthrough, and well-documented stumbling blocks remain. The UK baulks at a level playing field on state aid, labour and environmental regulations; the EU’s demands for a long-term fisheries deal and a role for the European Court of Justice in policing an agreement.
British ministers claim the EU is displaying signs of flexibility on the ECJ and fisheries because the 1 July deadline for a formal extension to the transitional period has passed. One way to square the circle on regulation might be a deal allowing the EU to impose tariffs if the UK diverged from the level playing field rules. The idea has been officially denied in London but might resurface.
There are reasons why Johnson wants to go the extra mile for a deal. His allies calculate that an agreement is in their best interests. While they are bullish about the UK’s ability to cope with a no-deal scenario, they believe that piling more pain and disruption on to already struggling UK firms would be politically as well as economically risky. Business groups have begun to lobby against no deal. Despite Johnson’s huge Commons majority of 80, he cannot afford to alienate his new working class supporters in the North and Midlands or their Tory MPs, who worry their local businesses would be hit hard by no deal, undermining the Government's attempts to limit a rise in unemployment.
An agreement would deny space to the Labour Opposition, revitalised under its new leader Sir Keir Starmer. He has been at pains to avoid the Brexit issue, and has no intention of reminding working class Leavers he was the architect of Labour’s election pledge of another referendum. But a looming no deal cliff edge would hand Starmer an opportunity to appeal to the country on economic rather than EU policy.
There might also be a rather cynical reason why Team Boris is talking up the prospects of a deal now: if there is not enough progress to its liking, it can pull the plug on the talks and at least say it tried hard for an agreement. A walkout cannot be entirely ruled out, with the finger of blame pointed at the EU – a familiar feeling for Brussels.
Johnson sees no reason why an agreement cannot be struck by the end of September, so business on both sides of the channel has certainty about the regime from 1 January. Frost certainly has an incentive for a quick deal. He has won a surprise promotion to national security adviser and is due to take up the post at the end of August. This is unlikely to provide much leverage with the EU; Barnier insists the real deadline is 31 October, to give EU institutions time to ratify an agreement.
Although an unofficial extension would be legally problematic, some in London and Brussels expect talks to go up to the wire, perhaps with Angela Merkel brokering a last-minute deal wearing Germany’s hat as the EU’s rotating presidency. The 31 December deadline might be fudged by an implementation period. As Merkel’s mantra goes: “when there’s a will, there’s a way.”