Is a Brexit deal within reach?

20 June 2020

9:00 AM

20 June 2020

9:00 AM

Trade talks between the UK and the EU are in a better place than they have been at any point since they started back in March. Now, in one way this is not impressive — the diplomatic equivalent of being the tallest mountain in Holland. For the first three months of these negotiation both sides were bullish, restating their maximalist positions, and coronavirus forced the negotiations online, making diplomacy and quiet compromise trickier. But now an intensive series of talks have been agreed, some of which will be face to face. Both sides appear to be in earnest about trying to break the deadlock.

The British side is, privately, far more optimistic than it has been at any previous point in the negotiation. It’s not that there was any great breakthrough in the call between Boris Johnson and three of the EU’s presidents on Monday, but given that the new schedule of talks had already been agreed, no one was expecting that. What did encourage London was the positive tone, and the lack of spin the EU side put on the meeting afterwards.

A further source of encouragement in No. 10 is that the talks on the implementation of the withdrawal agreement are proceeding relatively smoothly. Last week’s meeting of the Joint Committee, which is overseeing the implementation of the Northern Ireland protocol among other things, passed out without incident. One No. 10 source tells me that it has been a ‘lot less tumultuous and problematic than people said it would be’. Even some of the DUP’s worries about the agreement are becoming less pronounced. Northern Irish sources say that the EU’s demand for a Belfast office from which it would monitor the implementation of the protocol, something that many Unionists would have loathed, has now been quietly dropped.

The EU now accepts that the UK really won’t extend the transition period beyond the end of this year — and this is a big step forward. As one close Johnson ally puts it: ‘The no-extension thing is finally believed and that is contributing to some movement.’

If there is not going to be an extension to the transition, then the two sides have to reach an agreement to avoid having to trade on World Trade Organisation terms from next year onwards. This makes the UK-EU negotiation quite unlike any other. In normal trade talks, if the two sides fail to strike a deal, things simply carry on as they are. This means that there is often not much urgency to negotiations, and they tend to drag on. But if the UK and the EU can’t agree by December, then there will be tariffs and considerable disruption. The clock is ticking for both sides.

There are some small signs of movement from the EU. Chief negotiator Michel Barnier has indicated a willingness to drop the demand that the UK continue to follow EU rules on state aid in perpetuity. He is also prepared to move position on the vital subject of fish. The EU had wanted the status quo to continue but there is now a growing acceptance that this isn’t realistic, even if the coastal member states are still reluctant to accept this. These small shifts show that the Commission now understands there must be genuine negotiation. The UK side believes that this means increasing the frequency of the talks will be worthwhile in a way it simply wouldn’t have been in March.

There are still obstacles to a deal. The Barnier move on state aid only makes the issue as unacceptable to the UK side as the rest of the EU’s level playing field demands — which are that the UK can’t diverge from current EU standards on social and environmental matters. The EU also remains focused on other business. For instance, Angela Merkel regards fixing the EU budget issue as a greater priority for the German presidency than sorting a Brexit trade deal.

Whether a deal can be done probably depends most of all on Emmanuel Macron. France has taken the hardest line of any major member state so far, including on fishing. If the French position moves, then the EU centre of gravity on the issue will. Interestingly, Macron is to visit London this week, and will have talks with the Prime Minister.

And it’s not just the EU that must compromise. The UK knows it will have to move to get a deal. Michael Gove has already said that the UK would be prepared to accept tariffs rather than agree to what the EU wants on the level playing field. The EU has dismissed this offer, saying there simply isn’t time to go through the tariff schedule line by line working out what should have what tariff on it.

But the UK offer does open up a potential compromise. A deal could declare that the UK has the sovereign right to move away from the EU’s level playing field should it so choose. But if it did, the EU would have the right to impose tariffs on UK goods. This would allow both sides to claim satisfaction. Johnson could say that the UK has the right to chart its own course without being bound by EU rules, while Brussels can point out that it has the tools to respond to any UK attempt to undercut it.

There is something of a precedent for this in the Northern Ireland protocol. It says that if the UK does not bring in a new EU act that falls within the scope of the protocol then the EU is entitled ‘to take appropriate remedial measures’.

There are signs that the UK is getting keener on a deal. In his statement on moving the Department for International Development into the Foreign Office, Johnson made it clear that this will lead to more UK aid being spent in Ukraine and the western Balkans. This was an implicit offer to use the UK’s sizable development budget to help stabilise the European neighbourhood.

The acceleration of these trade talks is a sensible move, come what may. If the two sides are unable to reach an agreement, it would be preferable to find that out in August, instead of at the end of the year. But if a deal can be done, the earlier it is agreed the better, as that will give businesses more time to prepare for the new arrangements.

Johnson has long been more confident than most that a deal could be done, but now he’s not the only optimist in government.

Got something to add? Join the discussion and comment below. - James Forsyth and the FT’s Peter Foster on the acceleration of the Brexit trade talks.

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