BREXIT - WHAT ARE THE KEY FLASHPOINTS AS EU-UK TRADE TALKS BEGIN?

The Guardian 1 March 2020 - article by Daniel Boffey and Jennifer Rankin in Brussels

© Provided by The Guardian Photograph: Stéphanie Lecocq/EPA 

Boris Johnson’s chief negotiator, David Frost, and his EU counterpart, Michel Barnier, will convene the first formal meeting for the negotiation of the future relationship between the UK and the EU on Monday afternoon. Negotiations start in Brussels but will alternate between the Belgian capital and London, with a deadline of 31 December 2020 bearing down on the two sides. Here are the key issues of contention, and the chances of them blowing the talks up in the months to follow:

Trade deal and the level playing field

EU: Both sides want a free-trade agreement with zero tariffs and zero quotas, ie no restrictions on the quantity of imports or exports. Then it gets complicated. The European Union says “zero-zero” is only available if the UK makes a legally binding pledge not to undercut European companies. That means following EU rules on state aid, which would stop the UK government from showering British companies with large subsidies. On social and employment law, environmental standards and tax, EU standards should be “a reference point”, meaning the government would have to match the spirit, if not the letter of the law, when the EU upgrades its regulations.

UK: The government states it will not agree “to any obligations for our laws to be aligned with the EU’s”. The British position for post-Brexit talks is sprinkled with references to trade agreements the EU has signed with Canada and Japan, to make the point that the EU is making unprecedented demands on the UK.

Fisheries

EU: Brussels, on the instigation of the eight EU member states whose fleet fish most in UK waters, has set out a maximalist position on fishing rights in the future. The negotiating mandate for Michel Barnier is scattered with the word “uphold”. The EU is effectively seeking the status quo, under which the historical fishing catches of the member states in British waters is respected. The EU’s leverage is in the link Brussels has made with the wider trade deal. Unless a mutually satisfactory agreement is found – and the political declaration sets 1 July as a soft deadline – the EU could block British fishers from selling their produce into the European market.

UK: The EU’s annual negotiation with Norway is the model being cited by the British government. London also insists that the issue is not part of the wider trade talks. This is an attempt to decouple the fish catch in UK waters from fish sales in EU markets. The UK rejects the EU’s “relative stability” principle within the common fisheries policy, which sets national shares based on the patterns of catch of the early 1970s. They want a lot more fish. EU vessels licensed to fish in UK waters would work under UK rules.

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THE EUROPEAN COURT OF JUSTICE'S ROLE IN DISPUTE SETTLEMENT

EU: The bloc is seeking a blockbuster agreement covering everything from trade to transport, foreign policy to fish. All disputes would be referred to an independent arbitration panel, which would issue binding rulings. But if there was a dispute about the interpretation of EU law, only the European court of justice would be able to answer the question. 

UK: Boris Johnson is aiming at a “comprehensive free trade agreement”, plus separate deals on fishing, security, transport and energy. The government does not want a single dispute resolution panel, but “appropriate governance arrangements” for different deals. For the trade agreement, the UK has not ruled out an independent panel – a standard feature of trade deals. But it fears the ECJ’s right to interpret EU law gives the Luxembourg court a role. That is unacceptable, the government insists: the ECJ cannot have any jurisdiction in the UK.

Financial services

EU: The emphasis of the EU’s position is on its power to make “equivalence decisions in their own interest”, in reference to the ability to cut off the City of London from the European market at whim. The EU allows actors in non-member states to provide services in its market on the basis that it judges the regulatory and supervisory environment of that foreign power to be in line with its own. Past evidence shows, however, that it is a stick that can be deployed by the EU to get what   it wants on other issues. The EU cut off investor access to the Swiss stock market when talks floundered on a wider renegotiation of its relationship with Switzerland.

UK: With financial services accounting for 6.9% of UK gross domestic product in 2018, maintaining access to European clients for the City of London is a big deal. And the City hates surprises. The UK needs to convince the financial services sector that it remains a predictable and stable environment in which to work. To that end, the government is seeking to cushion any equivalence withdrawal decisions in the future through “appropriate consultation and structured processes … to facilitate the enduring confidence which underpins trade in financial services.”

 Security

EU: The bloc is aiming for a “broad” and “comprehensive” agreement, but has warned that a non-EU country, outside the EU’s passport-free Schengen zone, cannot expect the close-knit arrangement of an EU member. The crime-fighting agreement would end immediately if the UK chose to quit the European convention on human rights.

UK: The British government has called for fast exchange of criminal records, DNA and fingerprints, as well as information sharing on criminal suspects, as it seeks to replicate existing EU databases and programmes. The UK is not seeking to join the EU police agency Europol, nor EU law enforcement agency Eurojust, but wants to work with both. The UK also wants to sign an extradition agreement to replace the European arrest warrant. But Boris Johnson’s government has not repeated Theresa May’s pledge to remain in the ECHR in an official document on post-Brexit ambitions. A government spokesperson said: “The UK remains committed to the European convention on human rights.”

Foreign policy and defence

EU: Brussels laid out plans for “ambitious, close and lasting” cooperation with a invitation to the UK to join its missions and operations on a case-by-case basis. The level of UK input into their leadership would depend on the level of British contribution. There would be structures for intelligence-sharing and involvement in joint defence research and innovation.

UK: The issue of defence cooperation does not emerge once in the UK’s negotiating mandate. And on foreign policy, the UK merely suggests “friendly dialogue and cooperation”. These areas “do not require an institutionalised relationship”, the paper adds. The UK is the pre-eminent actor in European defence in terms of intelligence and defence spending. It is not offering to give the EU anything before seeing how the trade talks develop.

Transport

EU: British lorry drivers would no longer have the same rights as their EU counterparts to deliver goods between EU member states, although they would be able to transport items between the UK and EU. However, this access would depend on the government maintaining EU-level standards on workers’ rights. In contrast, the UK wants British hauliers to be able to provide services without restrictions, which it acknowledges has no direct EU precedent, although it argues that some EU countries have similar bilateral treaties.

UK: British aviation companies should be able to operate flights between the UK and EU, without barriers. In an attempt to protect British Airways and its owner IAG, the UK argues against “unnecessary restrictions” on the nationality of who can control a British or EU airline. The EU stresses that the UK cannot have the same rights and benefits as an EU member state.

Science and research

EU: Brussels is playing hard to get. The UK is the third most popular country of destination for Erasmus students and its scientific hubs are a major driver of EU research programmes. Involvement will all come down to hard cash – of which the EU is decidedly short following the UK’s exit.

UK: The British government is equally coy and says it will “consider a relationship in line with non-EU member state participation” in key research programmes such as Horizon Europe, which brings together European scientists, Euratom Research and Training, and Copernicus, the programme for monitoring the Earth from space. The two sides will have to engage in a tough negotiation in terms of payments into the programmes and the level of leadership UK actors will have.