Off the back of the thread below, lots of people asked for one on services & financial services. So here it is. The deal is very thin in both areas, though that was expected. I don't think it amounts to making the deal unfair/unbalanced but it is a missed opportunity. 1/
First, we shouldn't look at this through the lens of UK having trade deficit with EU in goods & surplus in services. That is too simplistic. EU accounts for a large proportion of UK's goods trade so zero tariff zero quota is beneficial for UK as well for the EU. 2/
Similarly, having a very thin deal on services & financial services is also bad for EU. Belief in some quarters than business will simply move from UK to EU in these areas. But its not that simple. Will be costs & duplication while some business just won't make sense any more 3/
We also shouldn't forget that while services is the largest part of our economy, it is inherently much more domestically focused. Furthermore, the single market in services is less integrated than that in goods so there are already some non tariff barriers to contend with 4/
It is also important to remember how we got here. Services was ultimately deprioritised under the previous Govt Chequers approach. This was because the Govt was seeking frictionless trade in goods. 5/
Asking for an ambitious deal on services as well would have essentially amounted to asking for single market membership but without the same obligations. It wouldn't have flown (of course, it turned out the EU didn't like the approach even with that factored in). 6/
This meant the Political Declaration was drafted to be pretty basic on services. However, when new Govt came in, while it dropped the ambitious asks on goods it didn't correspondingly increase the asks on services. This was the real missed opportunity. It came over a year ago 6/
In terms of what the deal does on services, it is in line with precedents. Mutual recognition of professional qualifications is a good example. It feels like a missed opportunity as well, but at least it is drafted to allow for bilateral agreements between sectoral bodies 7/
Similarly, the mobility provisions are maybe marginally better than expected by allowing 90 days business travel out of 180 rather than 365. But there are lots & lots of reservations. The social security coordination is also better than expected which helps people move 8/
On financial services the deal is particularly thin, but the sector had been expecting & preparing for that for some time. The real questions is, what would have been needed to get a more ambitious deal here? 9/
Ultimately, it would have required committing to ongoing alignment of financial services rules with the EU without a say over them. Which just doesn't feel feasible for UK given size of financial services sector. 10/
I was always personally a fan of the Bank of England's mutual recognition type approach, but its been clear for years now that the EU isn't willing to countenance that kind of arrangement. 11/
In terms of the impact this will have, the day one impact has probably been less than expected, though there have been movements of assets & people from UK to EU. Bigger issue is how EU regulators approach this over time & seek to pull more into EU. 12/
Even then though, it won't be an existential threat to financial services in UK & I expect sector will continue to prosper. Indeed, globally the sector faces some big challenges & choices about how to operate post Covid-19 (in areas from real estate footprint to digitisation) 13/
It is also true of the wider services sector that it would have been difficult to reach a much deeper agreement without making a big shift on red lines such as free movement of people or aligning with regulations. 14/
Overall, deal could have pushed boundary more on services & FS. But it didn't largely due to major red lines of both sides. Not recent, but set over a year ago with decisions around the Political Declaration. Missed opportunity by both sides, maybe marginally more the UK 15/
They could have set a world leading framework here. But chose to prioritise other things. But when questioning whether more could have been done on services we should also be realistic about what else we would have deprioritised instead ENDS 16/

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More from @RaoulRuparel

30 Dec 20
On the day DUP voted against the deal, it is worth briefly remembering how, after voting for Brexit, they have managed to pretty much vote against every form of Brexit possible, go from kingmakers to irrelevant & harm their core cause. A true lesson in how not to do politics. 1/
As a reminder they had the offer under the previous govt at 3rd meaningful vote of entire UK in a customs union, with alignment on other areas & Stormont lock on new laws. As well as a wider econ package. They voted against it & were main reason it failed 2/
In the indicative votes process they then proceeded to vote against customs union & EEA. Often professing a desire for the sort of relationship which is now on offer in the FTA. 3/
Read 6 tweets
27 Dec 20
As many others I'm still working through the detail of the agreement & all the annexes. But some initial thoughts based on my first read & associated documents. My overriding feeling is that it is pretty much exactly as expected in many parts & largely a balanced deal. 1/
Overall it is the thin deal I expected. The main thing it provides for is zero tariff zero quota. This is important but only a small part of the changes/costs businesses face as a result of the UK leaving the EU. This is largely because it became a pretty defensive negotiation 2/
Both sides became focused on defending their key interests rather than on their offensive asks. The UK around limiting the obligations to which it signs up, the EU by ensuring integrity of the single market. I think both have largely achieved their defensive aims 3/
Read 11 tweets
21 Dec 20
Even at this late stage there is a deal to be struck in UK/EU talks. I've tried to set out a landing zone on fishing for @POLITICOEurope. With both sides facing immense health & economic challenges a deal is more important than ever. Here is my proposal 1/…
There look to be three big areas of disagreement on fish.

1) Length of transition to new quota shares
2) Exact mount by which EU quota in UK waters is reduced
3) What happens in future if EU quota falls further or access is changed

Let me take each in turn. 2/
On length of transition. UK wants 3 years, EU 7 years. 5 years seems a fair compromise. Allows both sides time to adjust. From UK perspective, UK fleets can build up in anticipation of new quota they know they'll get. Its also a lot longer than any other sector has to prepare 3/
Read 18 tweets
14 Dec 20
Not a huge amount to say on UK/EU future relationship talks. Small signs of progress, but still tricky details to be sorted. Instead a thread on the NI agreement reached last week, on which there has been surprisingly little discussion. A good outcome given the circumstances 1/
The agreement on implementing NI Protocol looks better for the UK than I expected in many ways. Of course, there are still lots of additional challenges for business, but it could have been a lot worse. 2/
First on at risk tariffs. The most important point here is that the UK Trader Scheme will not only remove tariffs if no FTA, but essentially remove rules of origin requirements for GB to NI traders in the scheme even with an FTA. 3/
Read 12 tweets
24 Nov 20
Having looked at the economic impact of Brexit & Covid a lot, this will probably turn out to be true but we can't know for sure now. It all depends on your assumptions about the long term scarring on our economy from Covid. (1/4)
Brexit presents a set of known permanent changes which incur costs. Covid & the response have a lot of huge short term economic costs, but many of these may prove to be temporary once things return to normal. But importantly that is not guaranteed. (2/4)
This is partly why the Government has unleashed unprecedented economic support, in order to avoid the short term impacts becoming longer term & viable parts of the economy being destroyed permanently. But we don't yet know how successful that has been or will be. (3/4)
Read 4 tweets
15 Nov 20
Ahead of a crucial week in Brexit talks, issue of level playing field (beyond state aid) has become a major obstacle to a deal. Especially around evolution/ratchet clauses. Both sides have got themselves into an ideological corner & are struggling to get out. Thread explaining 1/
The evolution/ratchet clause would mean that if both sides increased their levels of regulation in these areas (environmental, workers rights etc.) in the future this would become the new bar for non-regression. Helping to avoid a gap opening up between the two sides. 2/
Both sides have adopted very ideological positions when in reality this approach makes little difference in practice. On the UK side, the approach in the original EU draft suggests this evolution could only happen if both sides agreed. i.e. UK would have a veto. 3/
Read 11 tweets

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