“Intensive” trade talks back on but EU red lines remain

pic from M Barnier: Twitter

Johnson’s deadlines come and go like ships that pass in the night. There have been so many that the rules of supply and demand have reduced them to the political equivalent of junk bonds – worthless. The passing of the latest one last week was another sure sign that Johnson is not willing for the UK to exit the transition period without a deal.

I think we now know for certain there will be a thin, highly asymmetric trade agreement at some point in the next few weeks, and probably an extended implementation period after 1 January.

The UK mandate published in February this year said “the government would hope that, by [June], the broad outline of an agreement would be clear and be capable of being rapidly finalised by September”.

Well, summer turned to autumn with various other deadlines being pushed back and back, until the EU Summit on 15 October became the ultimate one. If there was no agreement by then, Britain would walk away. Before each occasion, Johnson or Gove would remind us gravely that unless we get an agreement, Britain would leave without one and “prosper” on disastrous World Trade Organization (WTO) terms.

The EU27 issued a provocative statement last Thursday and by Friday the talks were “over” according to a Downing Street source (that we all know was a Mr D Cummings).  Yet they are set to restart today and to intensify, with weary negotiators on both sides toiling away seven days a week from now on.

Most importantly perhaps, note that Downing Street has not offered a new deadline.

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We and the EU know why Britain did not walk away. Leaving without a deal would mean political annihilation and is therefore impossible. Gove has said as much himself – although not recently. His time as Cabinet Office minister can only have reinforced that view. Trade organisations have told him repeatedly how bad things would be.

But leaving with a deal is still going to be highly disruptive. Heinz and Tesla confirmed this week that there are simply not enough customs agents to handle the increased load of form-filling. These are big organisations that have actually done some preparatory work, so pity the thousands of small and medium-sized enterprises that have done little or nothing, and do not yet realise what awaits them.

The leaders of 40 food and drink associations have warned Johnson that companies are planning to pull out of Northern Ireland because of the cost of doing post-Brexit business across the Irish sea border.

In the midst of all this, a tweet by James Forsyth of The Spectator, Cummings’ chosen conduit into the real world, gives an insight into the childlike level of thinking in Downing Street.

Johnson looks like a pantomime villain telling the Eurocrat audience, with a smile painted on his face, that leaving on Australian terms is no problem. Unfortunately, a cast of wide-eyed captains of British industry are ranged behind him shouting, “Oh yes it is!”. The commission is not stupid and they can read daily newspaper reports, like the one from Tesco’s chairperson warning of food shortages.

Barnier’s speech to a plenary session of the European Parliament yesterday morning made it clear that EU redlines remain in place. He told MEPs the need “for a true level playing field framework will remain a fundamental requirement of the Union” and the governance of any treaty must be “comprehensive” and contain a “binding dispute settlement mechanism, with an effective sanctions system – this mechanism that can be used by both parties”.

He raised the issue of the UK internal market bill, which he said was the reason “we must be more vigilant”. And on fishing he offered the familiar refrain about a “lasting, fair and equitable solution for fishermen on both sides”.

The UK government then released its own statement welcoming Barnier’s words, in the way a particularly curmudgeonly aristocrat who has fallen on hard times might do after an apparent slight.

The two sides also jointly released a ten-point set of organising principles, which are no more than a few agreed rules for how the talks should proceed. It quite clear there is as yet no consolidated legal text. The principles include:

“This next and final phase of the negotiations will in principle be on the basis of each side’s legal texts while a common approach is found, unless lead negotiators in an individual workstream agree that a different approach is more appropriate.

“Lead negotiators in each of the workstreams should move as quickly as possible to a read through of both texts, with a view to identification of areas of convergence, which could be expressed either in a two/three-column table or consolidated texts depending on which tool lead negotiators deem most appropriate”. [our emphasis]

It goes on to say a small “joint secretariat” will be established to hold a master consolidated text – so we know that such a document does not even exist at present. Let us be clear, the legal texts can only come after an agreement in principle, and in key areas we still do not have that, or anything like it.

While Barnier and the EU have appeared to give ground and backed off their demand that the UK alone needs to compromise, his speech yesterday made it clear that nothing substantial has changed.

The sticking points will take time and political will to settle. Every passing day brings the end of the transition period ever closer and reveals the lack of planning and preparation on the UK side, increasing the pressure on a government struggling to cope with the second coronavirus wave.

There is little risk of leaving without a deal. And the closer we get to the wire, the more difficult it would be for the government to deliver such a massive shock to a nation already heading for a long economic winter.

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