Stephen Booth is Acting Director of Open Europe.
The Prime Minister returns from his festive break faced with a lively start to 2020. Today, his government will start the process of steering the EU Withdrawal Agreement through parliament. A comfortable majority means this will be largely a formality ahead of the UK’s departure at the end of January.
On Wednesday, Downing Street will host Ursula von der Leyen, the new European Commission President, for her first official visit to the UK, and Michel Barnier, who will continue his role as the EU’s chief Brexit negotiator. This will be an important opportunity for both sides to put down markers for the formal negotiations on the future UK-EU relationship that will only begin formally once the transition period commences in February.
There are unlikely to be any major surprises at this stage. The Political Declaration establishes a series of nominal deadlines, which are likely to see the substantive talks concertinaed towards the second half of 2020. As with the Article 50 negotiations, we can expect the first few weeks and months to be dominated by haggling over the process and for the parties’ initial positions to be staked out and briefed against.
The UK has already ruled out extending the transition beyond the end of the year. However, the EU might well wait until after the formal deadline to ask for such an extension passes on 1st July before it seriously engages with the 31st December 2020 deadline for trade talks. Indeed, Phil Hogan, the EU Trade Commissioner, speculated just last week that Johnson might drop his pledge.
Meanwhile, in parallel to the trade negotiation, there is the matter of bilaterally agreeing fishing rights (by 1st July 2020), and the EU is committed to taking unilateral decisions to determine UK equivalence arrangements for financial services (end of June 2020) and data (end of December 2020). It may ultimately suit both sides for all these issues to be bundled up together at the end of the year.
Reaching a deal in 11 months will be challenging, but not impossible. The tight timescale will narrow the options for both sides, and is likely to point towards a looser economic relationship. If more time is required to ratify and implement a deal, there may well be options available to the UK and EU to smooth over any potential cliff edges.
We know that the UK is likely to seek Canada-style zero-tariff access along with zero-quota trade in goods and, in return, the EU is likely to demand the UK signs up to “level playing field” obligations to ensure fair competition on issues such as environmental and social standards and state aid.
Technical negotiations over the rules of origin framework will be important in determining how effectively UK and EU businesses can actually take advantage of tariff-free trade, and the exact details of level playing field commitments will matter for the UK’s ability to diverge from EU rules in future.
The extent to which UK exporters are able to align unilaterally with EU regulation as against being bound to do so by treaty is also likely to be a source of contention. EU demands for access to UK fishing waters, a key priority for some member states, will be controversial. Finally, there will need to be overarching provisions on the governance and implementation of the agreement.
Together, these six issues – market access, rules of origin, level playing field, regulatory alignment, fishing, and governance – are likely to form the building blocks of a UK-EU deal. Implementation of the Northern Ireland Protocol will be another important issue to address over the next 12 months. However, other issues such as services could be subject to very limited provisions at this stage or be left for future negotiations.
Of course, one of the reasons for the short timetable is that Downing Street is keen to talk about things other than Brexit, such as investment in public services and the regions, reforming the machinery of government, and implementing a new immigration regime. Events in Iran have also seen to that.
The backdrop of a potentially major international crisis with Iran reminds us that, whether we like it or not, some of the choices we make about our relationships following Brexit, particularly with the major players such as the EU and/or the US, are likely to be as much about international relations as they are about trade.
At the weekend, the Sunday Times reported on differences of opinion within Cabinet about whether the government should open trade negotiations with the US in parallel with the EU talks, in order to increase leverage with Brussels. It is certainly important that the UK considers its trade interests in the round before finalising terms with the EU and there is good reason to think that the UK can make significant progress on trade deals with economies such as Australia and New Zealand in the coming year.
However, the UK has always sought to strike a delicate transatlantic balance and, given the current circumstances, any strategy that either the US or the EU perceived as being played against one another would be very high risk indeed.
The Franco-German approach to Iran has long been at odds with that of the Trump administration and, rightly or wrongly, many in the EU regard the 2015 Iranian nuclear deal as its first major foreign policy achievement. The UK has consistently spoken up in favour of the Iran deal despite the US’s withdrawal, and it is significant that the UK this week joined France and Germany in a statement calling for a de-escalation of tensions in the region.
Transatlantic divergence is not only limited to foreign policy. US tariffs to be levied in retaliation against France’s digital services tax on the likes of Google and Amazon threaten to spill-over into a low-level trade war.
Equally, there is a strong logic that suggests closer relations with the US should play a role in the UK’s economic rebalancing away from the EU. This will be a delicate tightrope to navigate and Britain will need to tread very carefully.