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Deal or No Deal: does the EU need the UK?

Written by Comment, Current Affairs

Behind the towering figure of the coronavirus pandemic, the Brexit trade deal talks loiter in the shadows. But now with only six months remaining until the UK crashes out of the EU, hopes of a wide-ranging UK-EU agreement are vanishing. Both parties must get their act together, or risk falling from the plane without a parachute.

Fishing has been a hotly debated topic since the referendum campaign. In particular, the Common Fisheries Policy represents a major sticking point. Under existing laws, the UK and the EU share fishing access. EU vessels, therefore, have the right to fish in UK waters, an issue which has been highly contentious for some. The UK believes that since they have a relatively large fishing zone compared to its continental neighbours, fishing benefits skew in the EU’s favour.

The UK has consistently advocated that this issue be split off from the main agreement, publishing a separate draft for the Fisheries Framework Agreement. Boris Johnson himself touched on the issue in a written statement to Parliament in February. In it, he stated “the UK will become an independent coastal state by the end of 2020 and any agreement must reflect this reality”. 

The EU has maintained a desire to uphold existing reciprocal access to waters. As such, it is not prepared to de-link the fisheries negotiations from the free trade deal. France’s Minister of Europe and Foreign Affairs, Jean-Yves Le Drain, has been especially vocal about the need to form a comprehensive agreement. Overall, fishing is only a relatively small part of Europe’s economy, providing 180 000 jobs, which may eventually allow the EU to compromise its position.

Differing stances toward ensuring a level playing field pose another major stumbling block in negotiations. The idea is that the UK and EU will both be bound to a common agreement, ensuring that neither side has an unfair advantage in the market. For example, this prevents either party from reducing labour or environmental standards to gain an advantage. 

The EU is extremely keen on this plan. The UK, however, has repeatedly said it will not accept measures that go beyond a typical comprehensive trade agreement. Instead, the UK is willing to agree to a watered-down ‘non-regressive trade deal’. As such, the UK will not weaken its standards to gain a competitive advantage but will not be obliged to raise their standards if the EU does. However, the EU looks unwilling to budge. It insists that geographical proximity, volume of trade, and economic interconnectedness necessitate a special agreement, including a level playing field. 

Moving on to the matter of governance, The UK wants a suite of agreements, with individual treaty texts for each area. This means separate treaties for fisheries, for free trade, for air transport, and so on. The EU is instead looking for a comprehensive partnership overseen by a joint UK-EU governing body. The EU also wants the Court of Justice of the European Union (CJEU) intervening if a concept of EU law needs interpretation. 

The role of EU law itself is surrounded in question marks, especially concerning security matters. The UK is proposing a separate agreement which first and foremost must not constrain the autonomy of the UK’s legal system in any way. It also should not provide any role for the CJEU, either in resolving UK-EU disputes or specifying how the UK should protect and enforce human rights. Essentially, this translates to a complete divorce from EU law. Once again, the EU holds the opposite position. Michel Barnier has consistently asserted that the EU wants the UK’s adherence to the European Convention of Human Rights to be part of the final deal.

Many other issues still exist of course: a Commons briefing paper summarising both sides’ negotiating positions contains 18 different potential flare points. This includes the four major ones just covered. All this ineffective pushing and shoving between both sides raises an important question: does the EU need the UK? 

On the one hand, the UK is one of the largest economies in Europe, and a hub for financial services and academia. If the EU and UK remained closely aligned through an agreed future relationship framework, the EU could retain its political and economic clout across the world. They would be able to draw on the vast number of customers and businesses in the UK without the potential costs of redrawing business plans and distribution networks.

Many businesses across the EU and the UK use ‘just in time’ production lines, where frictionless trade is essential. Thus seen, keeping both camps aligned – both in terms of a level playing field and trade policy – is critical for many European and British businesses. In 2018, the UK exported £291bn worth of goods to other EU members, which represented 45% of all UK exports. They imported £357bn worth of goods, which represented 52.6% of all UK imports. The UK has a trade deficit in the EU of £66bn. That is to say more money from imports goes to the EU than money than exports comes out of the EU. In terms of direct contribution, the UK’s net contribution to the EU in 2018 is £8.9bn, a quite significant chunk of the EU budget.

On the other hand, a UK-free EU could focus on deepening the single market, single currency, and general ethos of Europe as an ever-closer union. The ‘ever-closer union’ concept was set out in the original 1957 EEC treaty; in the eyes of many, the UK never subscribed to the idea.

All the rest of us can do is speculate. Brexit has taken a supporting role behind the coronavirus in this year’s horror film, but it is time to take centre stage. As it stands, with just under six months remaining, both sides are hurtling towards a lose-lose. Michel Barnier and David Frost must inject some meaning into these meandering talks, or watch failure become a reality. In these unusual times, only one thing remains certain: the clock is ticking.

Last modified: 11th July 2020

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