After short summer break, post #Brexit trade talks with EU have resumed. Don’t expect breakthroughs this week BUT do sit up and pay attention from now on. Remember those Brexiteer promises? If a deal is to be struck this autumn, compromises are inevitable - on both sides /1
Details matter. On UK truckers rights to work across EU, on chemicals, on cooperation to fight crime. State aid remains a big sticking point. Important for EU bc it doesn’t want to grant UK tariff and quota free access to single mkt IF /2
UK gov can prop up businesses at will, giving them a competitive advantage over EU companies in their own (single) market. On other hand, from UK gov perspective: wasn’t #Brexit about taking back control (ie not being attached to EU regulations)? Also gov repeats key priority /3
Is the levelling up agenda .. Funding parts of UKthat traditionally have suffered to bring them more into line with wealthier parts of country .. Put aside argument as to where all the money is to come from, the policy could be compromised if curbed by EU limits on spending YET/4
EU insists if there’s no agreement on state aid, there’ll be no trade deal at all. Brussels says the UK still hasn’t officially presented its post #Brexit state aid regime. EU says there can be no compromise on an unknown quantity.. And time is running out /5
Making a compromise on state aid is a political decision. For now, much of Europe is still on holiday and/or fighting covid fires. Boris Johnson is busy with exam chaos too. Compromise CAN be found. But likely to be last-minute, if at all. October-time. EU really wants a deal /6
Partly to protect its businesses. Also for geo-political reasons. It’s concerned re Russia+China..And Washington is unpredictable. This, thinks EU, isn’t the time to fall out with close friend GB BUT EU keenness for deal, however thin, really doesn’t mean deal at any price /7
France is jumpy that the EU’s chief negotiator may be so keen to be seen to get a deal done with UK this autumn that he ‘could be tempted to give away too much’. Merkel repeats over and over that EU will agree nothing that could damage the single market /8
Knock-on effects of failure to progress also shouldn’t be underestimated. France likely to drag heels over taking action on bilat deal w UK over migrants in Channel till it’s satisfied a post #Brexit tradedeal is going in what it views as acceptable direction NB fishing rights /9
Ditto EU decision on equivalence for UK financial services - of huge importance to UK and a parallel discussion to trade talks BUT EU won’t rush to make its (unilateral) decision before EU-UK agreement reached over key trade deal concerns eg state aid /10
NB Important to note that even if a deal is reached, this is far from the friction-free trade with EU that Theresa May initially promised. This would not be “smooth” status quo. There will be customs checks and lorry parks and complications travelling to the EU with pets BUT /11
Arguably better to have a deal than not have one. It means customs officers are working together -and this should help the smooth implementation of the Irish Protocol (the agreement that replace Irish Backstop in the Withdrawal Agreement). Having deal in place means no tariffs/12
And opens door to EU+UK working together in future on other aspects of their relationship - eg health cover for UK citizens when in EU, eg R&D etc. Also if no deal and UK trades on WTO terms, that doesnt help much when comes to services which make up backbone of U.K. economy /13
Brussels expects prominent Brexiters eg Ian Duncan Smith +David Davis to say if the deal is going to be thin anyway, then better for UK to make no compromises eg over state aid and make clean break with no deal. EU thinks a deal is still more likely than no deal. But only just/14
EU believes PM wants deal and needs to show he can make one - esp after controversy surrounding government’s initial handling of covid and over exams chaos. Brussels thinks PM’s comfortable parliamentary majority means he can make compromises and still get deal ratified BUT /15
Politics of compromise shouldn’t be underestimated. The trade deal with EU is very public. While all trade deals involve some relinquishing of ‘control’ and making some compromises, we won’t know till very last minute, I suspect, how much the PM or EU will be willing to bend /16
