03 Mar 2020
This week, the EU and UK are set to start negotiating their future relationship. But what is the UK’s negotiating standpoint, and what does it mean for negotiations going forward?
Since Johnson’s trade deal speech, the Government has published a much more substantive document entitled – The Future Relationship with the EU: The UK’s Approach to Negotiations, which fleshes out some of the underdeveloped details from last time around.
The document is broken up into three main parts.
1: The comprehensive free trade agreement
2: Other agreements
3: Technical and other processes beyond the scope of future negotiations
First things first… the UK is not looking for a closer relationship with the EU as some would like. Making it clear that the UK will no longer be part of the EU single market or the EU customs union, with the Government asserting that the vision for the United Kingdom’s future with the European Union has already been set out successfully in the manifesto on which the Government was elected. At the heart of the negotiations, is a comprehensive free trade agreement along the lines of the free trade agreements already set by the EU in recent years with Canada and other friendly countries. If the Government is unable to negotiate a satisfactory outcome, it will attempt to mimic the EU relationship with Australia.
Australia has traded with the EU via a partnership, and in 2018, negotiations for a free trade agreement between Australia and the EU opened up: but as yet, no formal structure or agreement has been concluded. In effect, their relationship is pretty basic, and is based on the core blocks of WTO rules. This, however, is something we’ve heard before in Johnson’s Greenwich speech, and elsewhere.
What’s immediately striking, is that the document goes above and beyond what we already know. In the first instance, the Government notes that the political declaration remains the basis for the agreement. The new document observes that every area does not need to be incorporated into a treaty. Many policy areas are for the UK Government to determine within a framework of broader friendly dialogue and cooperation. They do not require an institutionalised relationship.
What comes next is quite significant and requires a bit of back-story.
Negotiations are set to be conducted in rounds. With the political declaration laying down the groundwork for a high-level meeting to take stock of progress, with the aim of agreeing actions to move forward in negotiations on the future relationship. So far so good!
What the UK Government has now said is, if at this June meeting a broad outline of an agreement which could be rapidly finalised by September has not been agreed, the Government will need to decide whether the UK’s attention should move away from the negotiations and focus solely on continuing domestic preparations to exit the transition period in an orderly fashion. In other words, if an agreement is not in place by June, The Government would consider walking away from negotiations.
Without getting too technical - what is the Government looking for in the bulk of the comprehensive free trade agreement, i.e. what are the predominant economic parts of this agreement?
When it comes to goods, they’re looking for liberalised market access, ensuring that there are no tariffs, fees, charges and quantitative restrictions on trade in manufactured and agricultural goods. As well as ensuring streamlined customs arrangements covering all trade in goods. Minimising the administrative burden on traders. And when it comes to services, the Government is looking at achieving a balanced and reciprocal market access. They will cover a substantial section of sectors in the UK and the EU.
The document goes further as well. Delving into other agreements to supplement the comprehensive free trade agreement, notably; agreements on fisheries, aviation, energy, mobility and social security, participation and union programs, nuclear cooperation, law enforcement and judicial cooperation, asylum and illegal migration, and security of information.
With this document, we now have a much clearer picture of what the UK actually wants from negotiations. Whether they get everything they want is another matter entirely. With the EU stating on several occasions that a Canada style free trade deal will be incompatible with the UK’s close geographical position.
This is going to be a tough negotiation also. The US and the UK on the whole probably want different things. Agreements on commercial agreements for example may prove slightly easier but looking at a fully-fledged free trade agreement is an entirely different ballgame as it would need to pass through Congress first. The US is also about to enter a presidential election, so its highly likely Congress will not pass it in the midst of all that. It will probably turn out to be relatively small – but just enough for Donald Trump to say, “Look, I did something with the UK.”
Headlines will likely read “UK and US Make Trade Agreement,” when in reality the actual significance to an increase in GDP is estimated to be in the region of 0.4%.