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24th Oct 2020

Insight

What to watch in EU-UK post-Brexit talks?

  • EU chief negotiator Michel Barnier contniues to head the bloc's negotiating team (Photo: European Parliament)

Britain and the EU formally kicked off talks on Monday (2 March) on how their relationship should be after Brexit.

Both sides entered negotiations talking tough, after the EU and the UK published their opening positions last week.

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EU chief negotiator Michel Barnier said last week the EU will not sign an agreement "at any price", while British cabinet office minister Michael Gove wrote in an op-ed over the weekend that the UK "will not trade away" its "newly-recovered sovereignty".

And it is not a good sign that there has been a deterioration of trust before talks began, as London said it might not carry out border checks on the Irish border, which has become the EU's new external border, and which was part of the divorce deal agreed last year.

Here are the key controversial issues of the negotiations:

Level playing field

Both sides want zero tariffs, zero quotas in the trade agreement.

But for that, the EU wants guarantees that the UK will not undercut European companies by lowering labour, environmental and tax standards or granting British companies generous state aid.

The starting position for the EU is to have the UK use EU rules as "reference points", and follow the evolution of those rules, while the UK does not want "any obligations for our laws to be aligned with the EU's."

The UK is arguing that the EU has made more generous offers to Canada and Japan in its trade deals with them. The EU says that the UK's proximity and large volume of trade makes this condition necessary.

Disputes

The EU wants one overarching deal, to avoid the constant negotiations on sectorial issues - such as is the case with Switzerland.

The UK wants a core trade deal, and then separate deals on fisheries, law-enforcement and judicial cooperation in criminal matters, transport, and energy.

This causes different scenarios in dispute settlement: the EU envisages an independent arbitration panel, which would issue binding rulings on the issues in the overall deal.

But the EU also insists that any interpretation of EU law would have to be done by the European Court of Justice (ECJ). That is a no go for London, which argues for different mechanisms to resolve disputes in those particular areas.

With regards to a trade deal the UK has not ruled out a panel, but has rejected any role for the ECJ, which, it argues, should not have jurisdiction in the UK.

Fish

While fishing bears little impact economically, it has major political significance both in the UK and in the EU, especially for countries such as France, and Spain, and it is expected to be one of the key hurdles in the discussions.

The questions will be the EU's access to British fishing waters, and British fishermen's' access to the EU market. The EU linked market access to continued access to British waters.

The EU also sees the a deal on fish as part of the trade agreement, and says it needs to be resolved by the end of June when the two sides assess the progress in talks.

London points to the EU's annual quota negotiations with Norway as a model, and also wants to decouple the issue from the wider trade deal.

Financial services

The EU allows access to its financial services market to non-EU members, if it deems the regulatory and supervisory rules are in line with those of its own.

EU countries, as a bloc, want to "take equivalence decisions in their own interest". with regards to the UK's financial services.

But the EU has used this granting "equivalence" before, to put pressure non EU member countries. In 2019, the EU commission decided not to renew the equivalence granted to Switzerland, over ongoing disagreements on a framework agreement guiding EU-Swiss relations.

The UK wants to make sure the EU does not abruptly decide to withdraw the equivalence decision, and seeks "appropriate consultation and structured processes" for such a withdrawal.

Timelines and structure

Talks among negotiators started on Monday and last until Thursday in Brussels. The next round in March will take place in London and then rounds will rotate between the two capitals every two to three weeks.

There will be 11 negotiating tables, meaning 11 issues - such as trade, level paying field, transportation, energy, fisheries, police cooperation.

A deal needs to come into force at the end of the year, when the transition period expires - which means EU rules and obligations will no longer apply to the UK.

EU officials are sceptical whether that can be done as trade talks usually take many years to conclude. British prime minister Boris Johnson has repeatedly ruled out any extension to the transition period, which it would have to request by July at the latest.

The agreement would have to be concluded by mid-October in time for the European Parliament to vote on the agreement struck between the two sides.

So far, there is no 'Plan B' drawn up on the EU side for a 'no-deal' at the end of the year. "We are entering talks as if we could finish them in time, and we will take stock in June," said one official.

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