Brexit Update 7th February 2020

By February 28, 2020 Brexit Updates

UK Update

Please… we really want to trade with EU.

Under the stunning murals of James Thornhill which cover the Painted Hall at the Royal Maritime Museum in Greenwich, yet in front of a bland, blue banner proposing to unleash Britain’s potential, Boris Johnson set out his vision for the 11 months of trade negotiations which are soon to commence with the EU.

Through the tone of his speech, and others to date, it is undoubtable that Mr Johnson is attempting to muster up an atmosphere of positivity and optimism for the negotiation period ahead. By doing so, Johnson may succeed in distracting the public from scrutinising the finer details of his Brexit negotiations. His patriotic and global speech repeated his campaign pledge of uniting and levelling up the country and again dispelled Jeremy Corbyn’s electoral stance that the NHS was on the table in future trade deals.

The focus of the speech championed free trade. The Prime Minister fought the corner of Adam Smith’s invisible Hand and David Ricardo’s theory of comparative advantage declaring that “the more freely goods cross borders, the less likely it is that troops will ever cross borders”. He set out an optimistic ambition to arouse a new era of global free trade by holding multiple negotiations at once listing countries including Japan, Australia, New Zealand on top of deals with the EU and America. Whilst he didn’t provide any hard evidence to suggest a deal with the US wouldn’t be troubled by tariffs, the Prime Minister cast aside the doubters and avoided engaging with the security concerns that have become prevalent around Huawei.

Talking directly about future relations with the EU, Johnson attempted to make it clear that any negotiations would not result in a reduction of standards. To bolster his position, he cited the UK’s flexible working rights, longer maternity leave, higher than average minimum wage, animal welfare and progress on cutting carbon emissions. Casting aside potential confusion over whether Britain wanted a Swiss, Turkish or Norway option, Johnson reiterated the UK’s wish for a “comprehensive free trade agreement, similar to Canada’s.” This refers to the EU’s Comprehensive Economic and Trade Agreement (Ceta) which came into force in 2017. However, whilst press releases have focused on a ‘zero-tariff, zero-quota’ deal, Ceta doesn’t eradicate all tariffs and quotas. It also doesn’t confront services and more specifically financial services, a sector which contributes £132 billion to the UK economy, equivalent to 6.9% of total economic output and 3.1% of jobs in the UK.

Consequently, an arrangement equivalent to Ceta may not be many people’s ideal position for the UK, but even that is not guaranteed. Mr Johnson himself openly accepts that this negotiation may not be successful but refuses to conclude that ‘no deal’ would be the result and instead insists an Australian style agreement would be the result. However, as highlighted by both the media, who questioned the Prime Minister at the end of the conference and by Mr Hogan, the European Commissioner for Trade, there is no single trade agreement between the EU and Australia. Mr Johnson’s phrasing should therefore be viewed as political spin rather than an establishing trading position with the EU.

EU Update

Live and (EU) Direct-ive

On Monday, Michel Barnier outlined the EU’s directives for a trade deal with the UK, which will need to be discussed and agreed upon by the EU27 by 25th February for negotiations to begin. He emphasised that the EU is prepared to negotiate an ambitious deal with the UK but that this agreement will have “conditions”, with the most important being to ensure a level playing field between the UK and EU. This can be seen as an attempt to apply pressure to Boris Johnson who has frequently championed the dealignment of regulations from the EU.

It is likely that the negotiations will face significant hurdles once they begin towards the end of February. It is clear that the EU has concerns about how the UK will structure its post-Brexit regulations, with potential for the UK to become a global competitor to the EU with what it sees as an unfair advantage. It is then likely that there will be a request for conditions on certain standards, which has already pre-emptively been rejected by Johnson who has stated that “there is no need for a free-trade agreement to involve accepting EU rules on competition policy”. Additionally, there have already been disagreements over access to fishing waters and the role of the Court of the Justice of the European Union during the future relationship. This increases concerns over the time limit to have the agreement in place and initiated before the end of the transition period in December 2020.

For now, both the EU and UK are standing firm on their red lines for the agreement. It remains to be seen whether there will be any movement on this once the negotiations start later this month. One thing is clear that both speeches from Boris Johnson and Michel Barnier outlined that there are significant steps that both sides will have to take to come to a compromise.

Upcoming Key Dates

  • March: Future relationship talks begin.
  • 4th April: Result of the Labour Leadership Contest.
  • 31st December: End of the transition period

 

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