Brexit Negotiations: Endgame

You’d be forgiven for thinking that Brexit been paused in the midst of the COVID-19 crisis. It hasn’t and you might have noticed that Brexit has been making the headlines again. Like most of us working from home, Brexit negotiating teams have also had to make do with using video conferencing technology. They’ve managed to convene four rounds of negotiations, which is an impressive feat in itself but negotiating over video conference hasn’t been ideal and progress has been slow. It was clear that both sides had reached their limits when there was an angry exchange of letters between Chief Negotiators David Frost and Michel Barnier back in May.

Last week Boris Johnson took part in a high-level summit with the three EU Presidents. Reportedly the atmosphere of the meeting was positive and there was agreement to intensify the trade talks. Apart from Johnson’s call to put a “tiger in the tank”, the meeting was notable for not making any progress on the key areas of divergence. Moreover, Johnson ruled out an extension of the transition period, due to end on 31 December 2020, and also urged the EU to reach an agreement by July.

Both sides will now enter a period of intense negotiations and the next five weeks will be critical to see if there will a major breakthrough. Reaching an agreement by July is highly ambitious (perhaps unprecedented would be a more accurate description) and there will be a stocktake in August to assess progress. October could be a more realistic date to reach some sort of an agreement but leaves very little wriggle room, as the EU has warned that 31 October is the final date by which an agreement needs to be struck to give enough time for EU national governments and parliaments to ratify the deal. So, while we have six months until the end of the transition period, we only have four months to reach a deal.

Four key sticking points
The gap between the UK and EU on key areas of divergence remain large. These highly charged topics - level-playing field, fisheries, law and judicial cooperation, and governance - will require compromise to reach a deal.

Firstly, fisheries has an outsized political significance for both sides compared to its economic contribution.

Secondly, level playing field is about fair competition and the insistence that non-members cannot have the same benefits as EU Member States without the obligations. There is a concern from the EU that in the future there could be a race to the bottom in areas such the environment, labour, taxation and state aid.

Thirdly, concerns over law and judicial cooperation are rooted in the EU’s paranoia that the UK will, in the future, derogate from its commitments to the European Convention of Human Rights (ECHR).

Finally, on governance the EU wants a role for the ECJ as the final arbiter of Union law, but the UK has firmly rejected this saying that this was the key point of Brexit. Also, the UK has proposed a series of mini deals, each with its own governance structure, in something akin to the Swiss model. The EU has no appetite to replicate the Swiss arrangement, however, arguing that it will lead to duplication and inefficiencies.

Further complicating matters is the EU’s insistence on parallelism – that progress across all files must be even – a negotiating technique designed to avoid undue pressure on areas where an agreement has not yet been reached.

Deal or no deal
Public polling appears to give Johnson some latitude on whether to extend the transition period, especially in light of COVID-19, but he has firmly ruled this out. Although his thinking seems to be largely driven by ideological reasons, there is an attempt to use the ticking clock to focus EU minds on reaching a deal. There is some logic behind this. Whilst we may think that Brexit is the defining issue of the country, it is not at the top of the EU agenda. This is partly due to Brexit fatigue, but EU Member Countries are also much more preoccupied by the debate over the COVID-19 recovery fund, budgets and migration. Johnson’s strategy is high risk and instead of reducing a no deal outcome it may in fact increase it. Whether this fixed deadline will come back to haunt Johnson remains to be seen. Rumours float around Westminster that the Brexit purists are pursuing a no-deal outcome and believe that any negative economic effects would be buried within the wider COVID-19 economic fallout. Let’s hope that is not the case, as a no-deal outcome would compound the economic malaise we are now facing.

Data adequacy
EU stakeholders have been keen to point out that the question of data adequacy is a unilateral decision for the EU. In theory this should be a technical process, but given the existing politics it will be difficult to unpick the adequacy decision from the wider trade deal. An important, but complicating factor is the UK’s approach to seek a single adequacy decision for both civil dataflows and law & security dataflows. The decision then hinges on the EU’s view towards the UK’s intelligence sharing practices, and the fear that the UK could renounce the ECHR in the future. These fears are not unfounded, with a number of Conservative MPs and Johnson’s top advisor Dominic Cummings having made their dislike of the ECHR public.

It’s worth emphasising that on 1 January 2021, after the UK leaves the Single Market and Customs Union, the trading relationship between the UK and EU will be different with or without a deal. It certainly won’t be business as usual and these risks should not be underestimated.