UK Draft Brexit Treaty Exposes a Difficult Road Ahead

Brexit

UK Draft Brexit Treaty Exposes a Difficult Road Ahead

Commentary
Posted on: 20th May 2020
Anton Spisak
Policy Lead, Trade and Productivity

Negotiations over the UK’s long-term relationship with the European Union have in recent months been mired in mutual misunderstanding and mistrust. The scale of disagreement between the two sides was laid bare this week as the UK government has published its draft treaty, in what is the first time since the Brexit referendum in June 2016 that the British government has published a hard proposal for the future relationship, set out in legal terms.

Laid down on 723 pages, ten painstakingly detailed documents present the UK’s proposals for the future relationship with the EU across a number of areas, from a comprehensive trade treaty to side agreements on issues such as aviation, energy, and cooperation on law enforcement and security. In its essence, the UK’s text can be summarised as a neat replica of the EU’s own agreement with countries like Canada and Japan. Few, if any, deviations from precedent characterise the UK’s text.

Comparing the UK’s text with the EU’s exposes three key areas in which significant differences of view between the two sides exist.

First, there is disagreement over the infamous “level-playing field” – an EU term encompassing a set of rules aimed at preventing trade distortion and unfair discrimination of businesses in a scenario where the two sides continue trading without any tariffs or quotas. The EU has asked the UK to continue adhering to the bloc’s state aid rules and complying with the jurisdiction of the European Court of Justice in enforcing those rules. Alongside this, Brussels demands “common standards” on environmental and labour regulations. The UK’s proposal, in contrast, prioritises full autonomy over decisions on subsidies, competition, and environment and labour. This does not mean wholesale deregulation: the UK has agreed to maintain its existing levels of protection on environment and labour, but it is clear that it does not want to be bound by future EU rules.

The second area of contention is fisheries. While trade in fish products is a tiny part of overall trade between the UK and the EU – it accounts for 0.7% of the UK’s share of exports to the EU – it is emblematic of the desire to take back control. Here, the UK has proposed a short treaty of 12 pages, affirming its sovereign right to fully control access to its own waters, while Brussels wants more preferential access to the rich UK fishing grounds.

The third is governance of the future relationship. The EU has proposed a single treaty, governed by a common institutional framework and a dispute settlement mechanism, including a role for the ECJ in interpreting any questions of EU law that may arise in the future agreements. The UK’s proposal couldn’t be more different: it wants 10 standalone agreements, each with their own governance arrangements varying according to the level of cooperation.

One area starkly absent from the UK’s proposals is cooperation on foreign policy, where the British side appears to aim for a clean break from the EU’s structures, suggesting no mechanisms for continued cooperation or even dialogue. In a highly interconnected world, in which strategic alliances matter more than before, one would expect this to be an accidental omission. Yet, it seems like a deliberative act demonstrating the UK’s resoluteness in making its participation in any common European structures a thing of the past.

Yet, behind all the detail lies a more fundamental point: the two sides have a different underlying philosophy shaping their approach in negotiations. The EU stresses need to keep the UK close to its regulatory orbit if it is to have access to its market, with adherence to common standards and institutional structures. It uses its economic clout – access to the market of 440 million consumers – to keep the Brits in its sphere of regulatory influence. The UK, in contrast, puts a premium on a cleaner break from common EU structures, prepared to maintain free trade only insofar as it doesn’t constrain its ability to decide domestic regulatory policies. Even, as it appears, at the cost of exacerbating the looming recession with a new shock to supply chains and production.

If there is one thing that both sides have in common, it is their unwillingness to compromise on the intellectual validity of their first-order principles. That this has led to mutual misunderstanding is hardly surprising.

So, what does this tell us about the likelihood of a deal? At present, the British and European draft treaties show that their respective positions are irreconcilable. This doesn’t imply that there is no landing zone for a compromise: agreement is possible, with sensible solutions to the three main areas of disagreement, but that would require trade-offs. A deal is impossible if both sides keep their zero-sum mentality and claims to philosophical superiority.

However many pages of detailed text the two sides exchange, technical negotiations cannot lead to decisive progress unless either side changes tack. At present, neither has the political mandate for that. Unlocking agreement will require political, not just technical, discussions between London and Brussels.

The June summit is said to be a decisive moment in the talks. As things stand, it will be a moment of disappointment. If the UK and the EU are serious about agreeing a deal by December, when the transition period ends, the summit will be the time to put aside grand principles and start looking for a sensible compromise.

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