09 Jun 2020

The fourth round of technical Brexit negotiations concluded Friday, with no sign of any meaningful breakthroughs on the four core issues which have plagued the talks over recent weeks. As we expected, both sides emerged from the negotiations Friday criticising the other for not compromising on fishing access, level-playing field commitments, police and defence cooperation, and on the governance of the overall agreement. Striking an increasingly impatient tone, Chief EU negotiator, Michel Barnier, blamed the UK of 'backtracking' on its obligations within the Withdrawal Agreement and Political Declaration. He stated that the onus was now squarely on the UK to return to the negotiations in a manner that was more consistent with the overall framework agreed between the two sides last year. On the other hand, while acknowledging that time was quickly passing by, UK officials continued to insist that a deal was ‘still very much possible’, the UK’s asks of the EU were based ‘on very reasonable demands’, and that it was, in fact, the EU’s inability to demonstrate flexibility beyond its initial negotiating mandate that was hampering the chances of any breakthrough.

As we cover below, it is likely the June Stocktake meeting will not be the seminal moment we had hoped it would be. Instead, we expect both sides will simply agree to intensify talks over the summer to now try to conclude a narrow FTA text by the end of September. It is likely that we will also start to see the more pragmatic EU leaders such as Angela Merkel more publicly call for a deal to be concluded, alongside statements by central authorities such as the Bank of England recommending an increase in no-deal planning. As we signalled following the third round of talks,  late-October is now widely touted as the final deadline for any agreement to be concluded, and then be ratified and adopted by national and regional parliaments,  in time for it to have effect by the end of the transition period –just six months away.

As always, we remind members that you can find our member notes on other UK and European political developments here. If you have colleagues who would like to receive similar updates in the future, please email europe@theia.org.

 

Another week, another round of talks, another failure to achieve meaningful progress

As expected, the fourth round of negotiations on the future EU-UK relationship did not yield any substantive progress last week, with the chief negotiators Michel Barnier and David Frost leaving it up to political leaders – UK Prime Minister Boris Johnson, European Commission President Ursula von der Leyen, and Council President Charles Michel – to try and resolve the conflicts in positions that have dominated talks over the past two months. With a de facto deadline of 31 October to now conclude any agreement, both sides acknowledged the talks would have to 'intensify significantly' over the summer if any agreement is to be reached in time. It is evident negotiations will now go right up to the line, with firms now unlikely to get any real certainty about the final political outcome until potentially late-October or early November.

Despite not making much progress elsewhere in the negotiations last week, Barnier and Frost did agree to adjust the format of the negotiations to try to secure an agreement over the summer, including in-person meetings as soon as July. However, it is yet to be seen whether the reformatting of the talks alone will deliver the substantive gains necessary to reach an agreement on time. In his post-talks press conference, Barnier stated that 'the delay was not about format, not about COVID, but about substance'. So expect more talks in July, but unless political leaders agree to change the tone and substance of negotiations, little actual change in the end outcome as we move into August.

Critically, the EU now considers that the UK has substantively changed its position from that agreed within the Political Declaration in 2019. Referencing specific paragraphs on level-playing field obligations, nuclear cooperation, and defence and foreign policy matters, Barnier explained that 'in every area the UK had backtracked from the agreed commitments’, clearly beginning to outline the case that any failure in the coming months will be because of the UK. Noting that 'round after round the UK was trying to distance itself from this common basis', and rejecting outright the UK approach to propose similar arrangements to those included in CETA and the EU's agreement with Japan, Barnier made clear that the Political Declaration was (for the EU at least) still 'the only valid reference, the only relevant precedent' in these negotiations. Barnier even noted that the Political Declaration was 'available to read in every language, including English', suggesting that UK officials should 'engage in some weekend reading'.

This may all sound like the risk of a no-deal is intensifying rapidly, but all is not lost. Based on the approach to negotiations to date, the fact that both sides are insisting loudly that their red lines will never fade (on all issues linked to national sovereignty for the UK; on all issues linked to the single market for the EU) may actually be a way of reassuring domestic audiences that their interests will be protected, while both sides privately consider what compromises they're prepared to make. We continue to believe that a deal is more likely than not. However, with the outcome of the June Stocktake meeting being essentially ‘we need more time’, the UK’s refusal to extend the transition period is going to remain a key point of tension in the talks. With political leaders on both sides still grappling with the economic, social, and health implications of COVID-19, we should expect to see messaging about the need to prepare for a no-deal increase in response to prolonged political uncertainty about whether a deal is both possible, and achievable, within the time remaining.

 

Wasnt June meant to be the 'make it or break it moment'? When can we expect to see equivalence arrangements concluded?

Although initially billed as a critical moment in the Brexit negotiations, it's now clear that the June Stocktake meeting is going to have a  far lesser impact on the overall Brexit negotiations than first expected earlier this year. Given the delays in the talks caused by COVID-19 and the negotiating teams being unable to meet in person, it is now likely that both sides will simply agree to ‘kick the can’ and continue technical discussions beyond June in the hope of a breakthrough later in July or August. Neither side will be willing to break away from the negotiations and engage fully with no-deal preparations with UK Secretary of Health, Matt Hancock, noting Friday evening ‘a deal based on the UK’s very reasonable demands is entirely possible’ in the time remaining.

Consistent with the mantra that dominated the first phase of the talks that 'nothing is agreed until everything is agreed', we expect that the legal acts underpinning any equivalence arrangements between the UK and the EU won't be made until much later this year. On the requirement to have reached an agreement on fishing access by June, Barnier noted it seemed evident no agreement would be reached by the end of the month, suggesting any similar agreement concerning financial services may be delayed despite both the FCA and ESMA appearing to be in the final stages of the technical assessment process. We also note previous statements by European Vice President Dombrovskis that the Commission expected to make equivalence decisions about the UK ‘in line with the timeline for the overall agreement’.

 

Next steps

 Assuming that the two sides agree to continue with the negotiations after the stocktake meeting, the next series of negotiations will take place from the beginning of July, with negotiators potentially meeting in person. In the meantime, Michel Barnier will be busy debriefing Member States, Council President Charles Michel and European Parliament President David Sassoli on the outcome of the negotiations and discuss any possible room for manoeuvre within the mandate produced earlier this year. A date has yet to be set for the stocktake meeting, but it is expected to be scheduled for the end of June, after the European Council meeting on the 19th and a Parliament plenary session earlier that week.