By Chris Horseman and Iana Dreyer
The battleground has finally been set out for this year’s free trade agreement talks between the United Kingdom and the European Union, with the publication on Thursday of the UK’s official mandate for the negotiations. Political signals point to a major crisis in the process in a few month’s time as the two sides take deeply diverging approaches on political and regulatory issues, despite convergence of views in many rather more technical trade areas.
The British negotiating mandate, officially referred to as the UK’s ‘approach to negotiations’, contains no big surprises. Britain’s line in its upcoming negotiations with its continental neighbour had been well trailed in advance, and it relentlessly reinforces the core message that the UK seeks nothing more than a Canada-style FTA with the EU, albeit with various embellishments in certain sectors.
The corollary of this approach – that Britain rejects any form of regulatory alignment that could be interpreted as ‘ceding control to Brussels’ – is also explicitly spelt out in the document.
It’s already clear that this will represent one of the biggest stumbling blocks for the EU, which emphasised the need for the UK to establish a regulatory ‘level playing field’ in its own mandate released on Tuesday.
But analysis of some of the detail shows that while the EU and UK positions are fairly close to each other in some areas, there are others where big political and technical problems will arise.
Threat to walk away
It is not common for FTA mandates to open with a statement of the circumstances under which the party in question will walk away from the talks and abandon the whole process – but the fact that the UK’s document does just that emphasises the uniquely fraught political context under which these negotiations will proceed.
“Whatever happens, the Government will not negotiate any arrangement in which the UK does not have control of its own laws and political life. That means that we will not agree to any obligations for our laws to be aligned with the EU’s, or for the EU’s institutions, including the Court of Justice, to have any jurisdiction in the UK,” the documents reads.
“The Government will work hard to agree arrangements on these lines. However, if it is not possible to negotiate a satisfactory outcome, then the trading relationship with the EU will rest on the 2019 Withdrawal Agreement and will look similar to Australia’s,” it goes on – reprising London’s evocation of an ‘Australia-style deal’ as the currently-preferred euphemism for ‘no-deal’.
The mandate also spells out formally that the UK will not request any extension to the current transition period, and says that its aim is to formalise an agreement by September.
Once again this is accompanied by a threat to walk away from the talks and “focus solely on continuing domestic preparations to exit the transition period in an orderly fashion” if things do not look promising by the time of the EU-UK summit scheduled for June.
But in a sign that the UK may in fact be prepared to look for a ‘bare-bones’ deal this year, with other elements possibly following later, the document specifies that by June it will assess “whether good progress has been possible on the least controversial areas of the negotiations.”
But beyond the political rhetoric – what is the UK proposing?
Trade in goods
As expected, the UK is advocating zero-duty, zero-tariff trade in all goods. Perhaps by way of emphasising that the ‘sacred cows’ of EU agricultural policy should not be exempt from this principle, the UK goes out of its way to specify that this also applies to any special agricultural safeguards.
However, there would be provision for trade remedies for dumped or subsidised goods, “or surges of imports of goods” – the latter point seemingly undermining the stance against agricultural safeguards.
Rules of origin
As a country whose export manufacturing base is heavily dependent on imported raw materials (especially machinery, cars, and food products), the UK is understandably anxious to establish a comprehensive agreement on rules of origin, which it says should be similar to those in the EU-Japan FTA. It also advocates agreement on ‘diagonal cumulation’ between shared third-country trading partners – something on which the EU’s own position paper is silent.
Technical barriers to trade
The UK’s basic stance is to advocate a TBT chapter that aligns with best practice in recent EU FTAs – again, both CETA and JEEPA are cited as examples. But Britain also wants a string of annexes to cover specific sectors – chemicals, medicines, motor vehicles and parts, and organic food products.
Sanitary and phytosanitary measures
The UK has tried to avoid holding itself to ransom in an area where its commitments in any future UK-US FTA might conflict with what the EU is asking for.
The mandate states that the UK will “maintain a robust SPS regime reflecting our existing high standards,” and repeatedly cites CETA and the EU-New Zealand veterinary agreement as benchmarks. The EU’s mandate in this area makes specific reference to upholding the application of the EU’s precautionary principle – but the UK says nothing on this subject.
Customs and trade facilitation
The UK document says nothing at all about Northern Ireland in this context, given that this question is addressed, albeit imperfectly, in the EU-UK Withdrawal Agreement. But Britain’s core objective will be to find ways of minimising delays at the border associated with customs clearance, “acknowledging the practical constraints of ‘roll-on roll-off’ trade”.
The UK’s basic stance calls for “balanced and reciprocal market access”, with “substantial sectoral coverage and cover[ing] all four modes of supply.” It does not explicitly advocate a negative list approach – although this is perhaps implied by its reference to “limited, justified carve-outs”.
The prospect of comprehensive Mode 4 provisions is welcomed, on the assumption that such provisions are “consistent with the UK’s recently announced points-based immigration system”.
But the UK believes the FTA should include “a pathway for the mutual recognition of professional qualifications, underpinned by regulatory cooperation” – something which the EU may be reluctant to agree to. Even more ambitiously, the UK document calls for a deal on audio-visual services, a sector which the EU has already identified as being off the table.
For financial services, a key UK industry, the two sides have already committed to making an assessment on the ‘equivalence’ of each other’s regulatory regimes by the end of June.
On top of this, the UK further calls for “legally binding obligations on market access and fair competition, in line with recent CETA precedent.”
A key issue here is obtaining declaration of ‘adequacy’ of each other’s data protection systems. This process is separate from the FTA negotiations, and each side aims to conclude its assessment by June.
However, the UK government will also seek commitments on market access and regulatory governance of digital trade, with the aim of providing “a clear and predictable basis upon which business can invest.”
Britain also stresses the need to keep the language in this chapter flexible enough to deal with dynamic developments in multi- and plurilateral fora, such as the ongoing WTO talks on e-commerce.
Intellectual property and geographical indications
Here, the EU’s cherished system of geographical indications is the main area of contention. Protection of existing GIs is already provided for within the Withdrawal Agreement, but the FTA negotiations need to set out a route for dealing with future registrations.
The UK senses an opportunity to gain political leverage over the EU on GIs, and is also mindful of the GI-sceptic stance of other putative trade partners such as the US. It is therefore casually dismissive of the EU system – “There are different ways of proceeding on Geographical Indications” – and says it will keep its approach under review “as negotiations with the EU and other trading partners progress.”
Trade and Sustainable Development, Labour, and Environment
Notwithstanding its resistance to any level playing field provisions, the UK is happy to commit to core provisions in these areas. However, it states that, In line with precedent such as CETA, JEEPA and EU-South Korea, these provisions should not be subject to the Agreement’s dispute resolution mechanism.”
This will be a side agreement to the main FTA, but because of its political sensitivity – and the fact that the EU-UK Political Declaration calls for a deal to be done by the end of June – this may well become a serious banana skin in the overall process.
The UK wants a framework for annual negotiations with the EU over access to its waters – unlike the EU, which wants something as close as possible to the status quo to be maintained.
Britain also states that “it will no longer accept the ‘relative stability’ mechanism for sharing fishing quotas, which is outdated, based on historical fishing activity from the 1970s.” However, the relative stability concept is the cornerstone of EU fishing quota allocations between member states, and forcibly removing this principle from fisheries which account for close to 15% of all EU catches would force the EU into a fundamental internal policy review – which it would much prefer to avoid.
The EU’s primary leverage in this area is to threaten to reimpose tariffs on UK fish exports to the EU if there is no specific deal on fisheries – by taking seafood products out of the scope of any general zero-tariff agreement.
Other protocols to the main agreement, meanwhile, would cover law enforcement and judicial cooperation, aviation, energy, and nuclear safety.
The UK is making an ambitious ask in the haulage sector, where Britain wants UK and EU road transport operators to be “entitled to provide services to, from and through each other’s territories with no quantitative restrictions”.
This is contradicted by the EU mandate, which says that “third country operators … should not be granted the same level of rights and benefits as those enjoyed by Union road haulage operators.”
Here Britain cannot rely on CETA or Japan EPA precedents, where this area is not covered. Precedents set by EU relations on road haulage with neighbours are the real precedent. Ukraine and Turkey, respectively in a deep FTA and a customs union with the EU, only benefit from unilaterally conceded EU quotas.
The EU has signed an agreement with Switzerland on road haulage and rail transport which enjoins Switzerland to apply the EU ‘acquis’ not least on the issue of social rights for workers.
The UK’s argument, that its geographical proximity to the EU makes this a special case, is a rational one. However, it is on precisely these same grounds of geographical proximity that the EU is arguing its case for regulatory level playing field commitments, which will make this a particularly politically-charged battleground when the negotiations get under way.
The UK is also asking for a comprehensive arrangement on civil aviation – again European FTAs offer no precedent here. If one takes EU precedents, then one must rely on bilateral aviation agreements with countries such as the United States. These do not remove restrictive EU rules on the nationality of owners of aviation companies – yet the UK is asking for their removal. An existing comprehensive civil aviation agreement with Switzerland involves Bern’s wholesale acceptance of the EU’s rule-book in that area.
Trade and the overall balance of the envisaged future EU UK partnership
A final note on the overall balance of the agreement. Both sides envisage the trade agreement to be part of a wider ‘partnership’. The model the EU has relied on is its Association Agreement, a political agreement that encompasses wide areas of cooperation and a trade agreement as a ‘pillar’. The UK’s mandate is actually silent on the overall architecture of the agreement.
A striking difference between the two sides is the fact that the EU is envisaging a partnership with Britain in the area of defence. The UK mandate does not mention defence anywhere.
In the area of police and security cooperation, however, it makes extensive demands on cooperation and exchange of information among law enforcement authorities. These in turn would be difficult for the EU to accept if it does not have sufficient guarantees from Britain on its compliance with ECHR human rights norms and data privacy.
Many commentators have pointed out that the EU, with its ‘level playing field’ demands made to Britain in its own negotiation mandate, might be overbearing and risking provoking a no-deal outcome. The British government for its part has accused the EU of trampling on the UK’s sovereignty requests and that Britain is humbly asking for nothing more than a ‘plain vanilla’ FTA.
Today’s mandate shows that in fact the UK UK too wants something more than just a plain vanilla Canada or Japanese style FTA.
Piet Eeckhout, a Belgian EU law professor at University College London, points to many contradictions on both sides and to coming dangers for the negotiations.
In an extensive Twitter thread, Eeckhout argued that the UK has basically reneged on commitments taken in the Political Declaration flanking the Withdrawal Agreement with the EU in the areas of state aid and the level playing field, to which a whole paragraph was dedicated. “The Political Declaration…is an essential element of the Article 50 Withdrawal Process”.
Eeckhout has also severly critised the EU’s approach to the negotiations with Britain. In a recent blog post Eeckhout wrote: “The EU too, insists on the right to regulate – that is the right to introduce new regulations that diverge. And it is seriously difficult to reconcile this right with stringent alignment by the UK, for surely the UK must also have the right to regulate, and to diverge.”
The scene is set for a politically very tense negotiation that portends an inevitable crisis and readjustment – or failure – in a few months.