As the UK and EU gear up for intensive trade negotiations in March, the temperature is already rising. Just this week Boris Johnson’s most senior Europe adviser and lead negotiator, David Frost, delivered an unflinching message to his EU counterparts. Echoing previous statements by cabinet ministers such as Michael Gove and former chancellor Sajid Javid, Frost reiterated the government’s unwillingness to be bound by EU labour, social, environmental and fiscal norms in the future, even as the EU insists this will be the price for the kind of trade deal – zero tariffs, zero quotas – the government seeks.
And today, home secretary Priti Patel has fleshed out plans for a new immigration regime that will come into effect at the end of this year, when free movement of labour ends. At its heart, the system is designed to significantly reduce low-skilled immigration from the EU (by 140,000 per year). There is even chatter in Whitehall circles of introducing a fingerprint system for EU workers in the future.
This come on top of a robust No 10 media operation, which claimed yesterday that the EU’s demands on regulatory alignment reflect a backtracking of promises it made to negotiate a “Canada-style” free trade agreement. In fact, the EU hasn’t backtracked: it always argued that Canada-style levels of market access would require stricter adherence to EU regulations than those applied to Canada.
These substantive gaps between the two sides were to be expected at this stage of negotiations. The problem is that they will be aggravated by two related factors: the limited time available to do the deal, as well as the EU’s lack of focus and its competing priorities. Both increase the risk of a bad deal, or of no deal whatsoever.
The time constraint primarily flows from Johnson’s unwillingness to extend the transition period beyond this year. The most important reason for this is the government’s desire to loudly signal it has “taken back control”. Another reason is money. Any extension to the transition period would mean continued UK contributions to the EU budget, as the £39bn payment negotiated as part of the UK’s exit package only covers the government until the end of this year. The optics of negotiating how many more billions to send to Brussels wouldn’t be easy for Johnson, regardless of the 80-seat majority he now commands.
The UK’s unwillingness to extend the transition suggests that the government has 10 months – from March to December – to strike a deal. In fact, the window will be much tighter: probably four months, from July to October. This is because whatever deal is negotiated will require ratification at the end of the year. Even if member states’ national parliaments don’t have to sign off on the initial deal, there will still be an approval process that involves EU leaders, the European parliament and the House of Commons which will eat up quite some time.
Then there is the problem of focus – or lack thereof. The EU is currently in the process of finalising the negotiating mandate that will inform its position in the upcoming talks. But EU capitals haven’t been able to agree among themselves what their negotiating priorities should be. Some member states want to focus on goods and fish; others on social security, aviation, data, security and foreign policy as well. That means there will be a substantial number of parallel tracks at the outset – some well-placed officials suggest 10-15 being negotiated at the same time. With little focus, senior EU officials worry that only limited progress will be made.
This diluted negotiating process will only be rectified on 18-19 June, when EU leaders meet in Brussels to take stock of negotiations. It’s at this point that they will have a reckoning with reality, and probably agree to focus their discussions on a few key areas – trade in goods and the governance framework for UK-EU relations being the most likely candidates. But four important months will have been lost.
The final problem, which is outside the government’s control but should have been factored into its thinking, concerns EU politics. Senior EU officials are currently trying to agree the union’s budget blueprint and spending priorities through to 2028. EU leaders will meet in Brussels tomorrow to try and thrash out a deal. But they remain far apart, so agreement is only likely closer to summer or in the second half of the year. This is where leaders’ time, energy and political capital will be spent. The EU will also be attempting to negotiate more stringent 2030 climate targets, a mini-trade deal with the US, host a summit with China, and advance its plans for “digital sovereignty”. Trade talks with the UK, while important, are a distraction – “a pain in the neck”, in the words of one of the EU principals who will be on the frontlines in the negotiations.
As Germany will chair the EU’s presidency from July to December, when the deal will have to be done, senior UK officials were hoping that Angela Merkel would use Berlin’s influence in Brussels to force a degree of pragmatism into the EU’s negotiating position. But with the resignation of her preferred successor, Annegret Kramp-Karrenbauer, Merkel’s political standing and authority have been dented, and her ability to meaningfully influence the outcome of UK-EU talks seriously compromised.
Gaps in policy, limited time, a lack of focus and a distracted EU paint a daunting picture as negotiators embark on a process to define the future relationship. The omens don’t look promising.
• Mujtaba Rahman is the managing director for Europe at Eurasia Group, a political risk research and consulting firm
