Summary
EC negotiators are showing growing frustration at the lack of progress in EU/UK trade negotiations. The EU is looking for the UK to move beyond initial ‘red lines’, while the UK is looking for recognition of its sovereign right to determine its trade regulatory framework. Analysts suggest current positions risk lead to a ‘no-deal’ outcome by default. The urgency of ACP exporters assessing the real world implications of the UK’s departure from the EU customs union, with or without a deal, cannot be overstated. Similarly, the urgent need for ACP governments to launch a political initiative to ensure the implications for ACP exporters of the pending changes are acknowledged and addressed cannot be over stated.
Following the end of 7th round of EU/UK negotiations on Friday 21st August 2020, EC chief negotiator Barnier showed signs of growing frustration over the lack of progress in the EU trade negotiations (1). He expressed surprise that despite Prime Minister Johnsons talks of pushing negotiations to a conclusion by the end of July; in the most recent discussions it felt like ‘we were going backwards more than forwards’. He noted how in the key areas of future EU fisheries access to UK waters and ‘level playing field commitments’ (which include environmental standards, workers’ rights and state aid) ‘we have made no progress whatsoever.’ Progress in these areas, which would require a change in the UK position, is seen as essential if any agreement based on continued UK duty free-quota free access to the EU market is to be agreed (2).
Indeed, it is becoming apparent the areas of disagreement are multiplying, with a deadlock now faced on the issue of truck driver’s rights. Chief negotiator Barnier stressed how any future UK access to the EU haulage market would depend on the UK ‘accepting EU standards on hauliers working time and other regulations’ (2). Without an agreement British truckers will be unable ‘to pick up and drop off goods both inside EU countries, and between them’ (3). Chief negotiator Barnier highlighted how it was the UK itself which had decided to ‘lose the benefits of the single market’; implying the UK could not now turn around and ‘cherry pick’ which benefits of single market membership it still wished to retain after 1st January 2021 (2).
Overall at the end of the 7th round of negotiations, with only 132 days to go before the UK formally leaves the EU customs union and single market, chief negotiator Barnier expressed a lack of understanding as to ‘why we are wasting valuable time’. He observed there was now ‘the risk of not being able to ratify the treaty by the end of the year’ (4).
UK chief negotiator Frost while seeking to strike a more hopeful note acknowledged there were ‘significant areas’ to resolve if an agreement was to be concluded before the end of the year (2). However, he highlighted how while the EU took the view ‘talks could not substantially progress in any area until the UK backs down’, the UK government ‘will do no such thing.’ He maintains the EU’s current stance ‘makes it unnecessarily difficult to make progress’ (4).
Meanwhile at the 7th round of negotiations British officials submitted what was described as a ‘consolidated legal text’, which sought to merge existing UK and EU positions, placing emphasis on the need to move swiftly forward in the drafting of legal text if an agreement was to be achieved before the end of the year (2).
The EC showed a marked lack of enthusiasm for this ‘consolidated legal text’ maintaining that while it was ‘useful’ in understanding the UK position, it failed to demonstrate any understanding of the EU’s position on what are critical ‘red line’ issues (2).
According to politico.eu the EC believes it is in a stronger position in the negotiations than the UK, since the ‘Brexit talks have never been a negotiation between equals’, with EU officials holding the view the U.K. ‘desperately needs a deal’ and hence will be forced to ‘compromise sooner or later.’ Against this background politico.eu believing ‘Barnier’s chiding press conference comments and the refusal to engage substantively on other matters until the U.K. has backed down on state aid and fisheries can all be read simply as further means of applying pressure on London’ (4).
However the EC strategy is seen as highly risky, with it being held the EC does not have a good track record of reading the political situation in London. Politico.eu maintains ‘the risk for the EU is that they wait and wait for the U.K. to cave — until it’s too late for both sides’.
While trade flows across EU/UK border will inevitably face disruptions as a result of the UK’s withdrawal from the EU customs union and single market, even if a trades agreement is eventually concluded, a ‘no deal would be worse’, with this outcome also carrying ‘the risk of poisoning the well of U.K.-EU relations in the future’ (4).
According to Sam Lowe of the Centre for European Reform ‘a deal would avoid tariffs, unlock supplementary benefits, allow for EU and U.K. customs co-operation, ensure the Northern Ireland protocol is implemented sustainably and provide a platform on which to build a deeper relationship in the future.’ Failure to conclude a deal in contrast would give rise to a very different outcome (4).
The EU Council meeting from the 15-16th October, which is now only 87 days away, is seen as the absolute deadline for an agreement. While informal discussions will continue throughout the remaining days of August the next official round of negotiations is only scheduled for 7th September 2020 (2), leaving very little time for resolving outstanding issues.
| Comment and Analysis Even if an EU/UK trade agreement is concluded before the end of the year, ACP exporters will still need to adjust to the new trade administration requirements arising from the establishment of the UK as a separate customs territory with its own regulatory regime. However, this process will be greatly complicated if there is no EU/UK agreement and the transition period ends in an atmosphere of mutual accusations of a lack of good faith.EU member states have given priority to concerted action in support of an EU wide Covid-19 recovery programme. A no-deal UK departure from EU trade arrangements and wider single market regulations from 1st January 2021 would be seen as needlessly compounding the problems of post Covid-19 recovery. In this context, the risk of poisoning the well of EU/UK relations throughout 2021 could become very high.This is important for ACP exporters, since without concerted action to address the Brexit related challenges along triangular supply chains, a current ACP export trade valued at around €1.5 billion could be undermined. This would occur at the worst possible time, when any reorientation of trade routes for serving the UK market is greatly complicated by the impact of the Covid-19 pandemic (see companion epamontoring.net article ‘Covid-19 Related Cancellation of Commercial Flights Beginning to Bite for ACP Horticulture Exports’, 17 April 2020). This prospect of a poisoning of the well of EU/UK relations suggests that wherever possible, ACP governments should seek to set in place policy initiatives which secure UK and EU action to address the challenges faced and facilitate the continued smooth functioning of triangular supply chains, before any collapse in the EU/UK negotiations. This will need to address issues of ongoing cooperation on phytosanitary import inspections for goods traded along triangular supply chains, recognition of safety and security declaration controls for triangularly traded goods, broader customs cooperation to establish ‘green light’ border clearance arrangements for triangularly traded goods which meet specific requirements, agreements on the future operation of shared infrastructure (Eurotunnel) and arrangements for the continued smooth functioning of EU/UK road haulage operators. Failure to address these issues could lead to serious cost escalations for onward trade along triangular supply chains and even a loss of value on consignments subject to a shortage of road haulage services, and border clearance or traffic congestion delays. Given the increased demands an acrimonious UK departure from the EU customs union and singe market would place on UK border control servicers, the systemic strains this could generate across the whole of the UK border control service could easily spill over to adversely affect the efficiency of cargo clearance at ports used for the direct export of ACP products to the UK market. Against this background it is incumbent upon all ACP exporters to assess the vulnerability of their current supply chains serving the UK market to the consequences of a no-deal UK departure from the EU customs union and single market. Early action, whether at the level of routes to market used or the supply contracts concluded, could prove of considerable value in enhancing the market position of ACP suppliers at what is a time of profound trade uncertainty (for details of supply contract issues see companion epamonitoring.net article ‘Tariff Treatment and Logistical Cost Uncertainties Generated by Stalled EU/UK Trade Negotiations Raises Problems in ACP Supply Contract Negotiations for Exports to the UK Market in 2021, 3 September 2020). |
Sources
(1) EC, ‘Post-Brexit deal between UK and EU seems unlikely, says Michel Barnier – video’ press conference 20th August
https://www.theguardian.com/politics/video/2020/aug/21/post-brexit-deal-between-uk-and-eu-seems-unlikely-says-michel-barnier-video
(2) Guardian, ‘Time wasting UK makes post Brexit deal unlikely says Barnier’, 21 August 2020
https://www.theguardian.com/politics/2020/aug/21/michel-barnier-brexit-time-wasting-uk-means-post-brexit-deal-unlikely-says-eu-chief-(3) MarketWatch , ‘UK and EU Brexit talks have stalled again – here’s why’, 20 August 2020
https://www.fpcfreshtalkdaily.co.uk/single-post/2020/08/20/UK-and-EU-Brexit-talks-have-stalled-again-%E2%80%93-here%E2%80%99s-why
(4) politico.eu, ‘Brexit talks head for October showdown (again)’, 21 August 2020
https://www.politico.eu/article/brexit-talks-stalemate-october-showdown-again/