Trade Deal Talks Between the UK and EU at a loggerhead, little chance of an agreement before October

Summary

• EU feels the UK is retracting on the assurances given for trade negotiations before Brexit
• With no headway yet, Johnson’s dream of concluding a deal with the EU by this summer seems unlikely
• There is a difference of opinion between the two sides on matters related to state aid, environment standards, data sharing, and more
• A scenario of no trade deal would mean a permanent 5 percent GDP loss for the UK

Michel Barnier, Chief Negotiator at the European Union Task Force for the Preparation and Conduct of the Negotiations with the United Kingdom, had recently said that UK is retracting on the assurances it gave while leaving the EU, and no headway has been made since the beginning of the negotiations. He has instead called for a political push from Britain’s PM Boris Johnson and Ursula von der Leyen , the European Commission President, to restart talks. Reportedly, a high-level political summit with the two, leading their respective side, is likely to take place by mid-June this year.

A deal on the fishing industry had been on the cards, with a June 30 deadline, which is likely to be missed, since no consensus has emerged between the two sides yet, despite four rounds of talks already concluded. Britain claimed the EU demands as aggressive.

If this deal had gone through, Barnier and his UK counterpart David Frost were to meet in July this year to move to the next level, which does not seem plausible now. Sweden, Poland, Germany, Belgium, Italy, France, Spain, Portugal, Netherlands and Denmark would have been the main beneficiaries of the fisheries deal from the EU side, if it went through. Johnson’s dream of concluding a trade and security deal with the EU by this summer, now seems unattainable, at least by that time.

Under the existing circumstances, the United Kingdom is allowed to request for an extension, but it is unlikely as Boris Johnson has said many times that he will not take recourse to this measure.

As a background, the United Kingdom had left EU in January this year and continues to be in a transitional arrangement till the end of this year for formulating a mutually beneficial trade deal, but no significant progress has been made so far.

On the disagreement front

Experts believe that a narrow trade deal might be on the cards by November this year. There is a difference of opinion between the two sides on many fronts, from the amount of state aid to environment standards and data sharing, to mention a few.

The UK does not wish to compromise on its side and wants all the benefits for itself, which is doesn’t look fair, according to Stefaan De Rynck, Senior advisor to Barnier. It wants free movement for service industry workers but does not reciprocate the same for EU country nationals, he added. He expressed his surprise on the UK still wanting to carry on having access to EU passenger records.

The fishing debates

European dependence on British waters is more than the other way round, with their vessels fishing around 6 times more in UK waters, giving an upper hand to Britain in the fishing negotiations.

EU wants to follow the common fisheries policy (CFP) from this year-end, where total allowable catch figures will be annually negotiated by the two parties, based on 1970 records.

British fishing sectors feel that prevailing distribution is unfair and French fishermen get more than four-fifths of the English Channel quota. UK wants a new relationship for fishing with the EU, on the lines of its agreement with Norway, which is based on a zonal attachment level.

David Frost has said that incorporating external factors such as the effect on coastal communities will ensure equitable distribution, but Barnier has been unable to come up with related suggestions.

Fishing is a particularly sensitive subject in France, where the community depends heavily on the UK waters. To gather support from his fishing community peers, French foreign Minister Jean-Yves Le Drian has promised them preferential trade access.

A double whammy with the outbreak of coronavirus

It can’t be denied that amidst these corona times, an island nation like Britain would have been hard- pressed for the supply of essentials, especially food items, had it not been flowing smoothly through the European Union countries. Any major supply chain disruption could have easily triggered big unrest across the nation. Britain’s frontiers remained open for freight and still have not applied the 14-day quarantine rule to the hauling goods, which has been a great saver. This huge dependence on EU for free trade, at least for food, indicates the nation’s dire necessity to strike free trade agreements with it, for its own good.

We do not know when the Covid-19 pandemic ends, but we do know that the transition period of Brexit ends in December 2020. The tough question is if the UK is prepared for higher duties and tariffs on its imports, and favourable treatment getting withdrawn for its exports? If it’s a case of no-deal Brexit, UK will be conducting trade and commerce with EU countries as per the World Trade Organisation (WTO) rules, which impose higher trade barriers than now. More than 50 percent of British cars are exported to the EU, for instance. Will the already struggling auto industry be able to face another blow? That needs to be seriously pondered over. Estimates suggest that a no-deal Brexit translates into a permanent 5 percent GDP loss for the nation.

Having run out of stockpiles of critical medicines to fight the corona pandemic, the UK drug makers fear that they may not be able to build it back if Britain fails to strike a trade deal with the EU post- Brexit, and treating patients will become difficult. Companies fear a disruption of supply chains by the end of this December when transition period comes to an end. The demand for critical care medicines has risen sharply due to the spread of coronavirus in the UK. At the same time, supply bottlenecks have emerged in the form of national and border lockdowns, freight flight restrictions, closed production, and ban on exports.

With rigid attitudes on both sides, pressurized by respective industry lobbies from each front, it seems unlikely that a successful trade deal can be expected by the end of this year. With a heavy dependence on the EU for imports and exports, it is yet to be seen if a corona-struck British economy will be able to withstand a high trade barrier setback.