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The UK-EU talks: deal or no deal?

The summer deadline is not all it seems. But is the Northern Ireland Protocol the real deal?

There are four schools of thought on the state of EU-UK negotiations for life after the transition period ends on 31 December.

The first is that Michel Barnier’s team is requiring British acquiescence to a level of compliance with EU regulations and the Common Fisheries Policy that would make a mockery of Britain’s ability to pass itself off as an independent sovereign state. The talks are therefore doomed and the UK will trade on WTO terms from New Year’s Day.

The second school of thought is that this is all shadow boxing and a deal will be done at the eleventh hour because the one vital area of agreement is the acceptance that no deal involves mutual harm. The UK will be handed a diversionary achievement (perhaps on fishing) to conceal its capitulation elsewhere. We may achieve victory at sea. But at the cost of defeat on land.

The third school is an optimistic one. It hopes Brussels will see the wisdom of Britain’s position and offer an Free Trade Agreement (FTA) similar to the deals it has given Canada and Japan.

The fourth school maintains that we are looking at the wrong set of negotiations. It is actually the parallel discussions of the Joint Committee on implementing the Northern Ireland Protocol that is where the critical decisions will be taken. Unless a successfully concluded FTA negotiated by Barnier and Frost supersedes and replaces the Protocol, Britain will get Brussels by the back door. Or, more accurately, the Irish Sea.

On Wednesday, the UK’s chief negotiator, David Frost, and the chancellor of the Duchy of Lancaster, Michael Gove, submitted themselves to lengthy questioning from the House of Commons select committee on future relations with the EU. Then on Thursday they performed all over again to the equivalent House of Lords committee. What did they tell us to give us a steer on which of the four possible outcomes is the most likely?

The over-arching message from Frost (lead vocals) and Gove (backing vocals and laptop) was that a deal remained not only desirable but very much possible. But in almost every area in which they faced questions, their answers highlighted that the gulf between the UK and EU negotiating teams has scarcely moved since the talks began. Given that there is only supposed to be another full month before the cut-off date, the terms for a breakthrough would have to be pile-driven through the eye of a needle. As Gove put it to Labour’s Barry Sheerman, “it’s not a difficulty of technical detail, the technical detail on both sides is well understood. It’s a difference in political position.” In other words, the division is on fundamentals.

Question after question revealed how far apart the rival negotiating teams remain. On financial services, it was clear that neither Frost nor Gove were up-to-snuff on the implications of no deal. “The broad retail, wholesale, banking sector would be affected” conceded Gove, without articulating how, before offering the reassurance that if the EU wanted to harm the City of London it would be a giant act of self-harm towards European equities’ holders. When the former chancellor of the exchequer, Lord Lamont, and the Lib Dem peer, Lord Sharkey, asked about the future for clearing houses, Frost and Gove could do no more than promise to write to them on the matter.

On other unresolved issues, there was more clarity, but no greater hope. Barnier is dismissing British proposals for mutual recognition of professional qualifications as the UK seeking “favourable market access.” The EU prefers the mechanisms it agreed in existing FTAs that it has with other countries – which have so far resulted in not a single qualification being recognised by the EU.

On law and order, the EU was demanding that criminal data was a matter only for the European Court of Justice – a sticking point which could lengthen the 15 minutes it currently takes to access crime-scene data on either side of the English Channel to four months. Nor was the EU content to accept that the UK would be remaining a signatory to the European Convention on Human Rights (ECHR). Instead, explained Frost, the EU was demanding that “our domestic implementation must be subject to their supervision” and that if they found fault they could collapse the joint provisions for law and order co-operation. All of which was a bit rich given that the EU is not itself signed-up to the ECHR (the EU has been discussing joining it since the 1970s but has always discovered reasons for not quite doing so).

The province could be the tail that wags the British dog

An enlightening exchange was prompted by the Conservative peer, Baroness Couttie, and the Lib Dem, Lord Oates, on the EU’s proposed non-regression clauses from EU standards. This introduces a ratchet-effect. For example, if the UK adopted a higher standard than the EU, the UK would not be allowed to subsequently lower its standard to the EU level. The UK would be “locked-in” at that higher level. Who would assess these levels? If Barnier gets his way there would be no mutual recognition, merely the supremacy of the European Court of Justice. As Frost made clear, such an “unbalanced arbitration” would be “wholly novel.”

In these and a wide range of other areas the inescapable reality is that the EU wants an FTA in which it continues to make and interpret the rules governing the UK, whereas the UK wants a Canada-style FTA which comes without such strings attached. The established timeline suggests that one side is going to have to admit it has been bluffing all along or there will be no deal.

But whilst the focus will be on whether the Frost-Barnier brinkmanship resolves itself, there is a parallel negotiation of vital importance not only to Northern Ireland but to how the special arrangements for trade with the province could be the tail that wags the British dog.

Back in October 2019, Boris Johnson removed Theresa May’s “backstop” and successfully negotiated the Withdrawal Agreement’s re-worded Protocol. It stipulated that – unless replaced in the meantime by an FTA – after the transition period ends the border between Northern Ireland and the Republic of Ireland will remain open. However, in that eventuality the UK would be trading under WTO terms and thus the Irish border could be abused by British companies supposedly shipping goods to Northern Ireland which would actually be destined for the Irish Republic (and thus the EU single market) without paying the necessary duties. The Protocol stipulates that arrangements to prevent EU compliance-dodging would have to apply to all goods entering Northern Ireland from Great Britain which were conceivably “at risk” of crossing the open border into the Irish Republic. That is a wide-cast net.

The Withdrawal Agreement established an EU-UK Joint Committee to determine what would (and would not) agree the measures to monitor that cross-border risk. The UK government will reimburse British companies trading into Northern Ireland who are inconvenienced by duties in this way, but much of the compliance and checking procedures are yet to be confirmed. Before the general election, Boris Johnson assured Ulster businesspeople that the new system would not involve paperwork. But in saying this he was confusing what he wants with what will be.

The Joint Committee is co-chaired by Michael Gove and the European Commission vice-president, Maroš Šefčovič, a former member of the Czechoslovak communist party who last year unsuccessfully stood in Slovakia’s presidential election as a left-wing populist. Gove and Šefčovič only had their first (virtual) meeting at the end of March. Discussions about the future relationship have scarcely begun.

The summer cut-off point is actually about as unbridgeable as the river Thames

All of which made Thursday’s select committee question from Lord Cavendish interesting. “Is the government going to hold the EU to its commitments under Article 184” of the Withdrawal Agreement Cavendish asked, “to work on alternatives to supersede the Protocol in the context of FTA talks, to ensure they do not become permanent?” To this Gove gave an instinctive one word answer, “absolutely.”

Article 184 commits both parties to “best endeavours” to find agreement. In confirming that the FTA talks include getting rid of the Protocol, Gove was making a significant commitment and upon which he will now find himself asked to provide updates. But with what might the British be proposing to replace the Protocol? Is there any sign of strategic planning on this issue? And aren’t we almost out of time in any case?

This brings us to one of the “big reveals” of these two days of select committee hearings. It transpires that the supposedly immutable summer cut-off point is, when push comes to shove, actually about as unbridgeable as the river Thames.

Detecting signs that the EU might give ground on the preservation of the Common Fisheries Policy, Frost indicated that a fisheries agreement could not only be determined separately from the FTA but concluded much later in the year. Might the FTA follow suit? Whilst the problems of stretching the FTA negotiations into the autumn would leave businesses (as well as the contracting parties) very little time to prepare for implementation on 1 January, the idea that this was somehow impossible was quietly dropped by Frost and Gove. This does not mean that the transition period will be extended (which the British have repeatedly refused to countenance) but that the flexibility on getting everything ready before 31 December will be found. A deadline (even if in the autumn rather than summer) will still provide benefits that a transition extension would squander. As Gove rhapsodised:

“Before I married my wife, I was enjoying all the time I spent with her. And she said, ‘this is all very well Michael but you’ve got to decide by next week whether you want to marry me or not. And if you don’t decide by that time then I’m afraid it’s going to be someone else.’ I realised then that I was missing out on perhaps the greatest pleasure, achievement, the love of my life, and I resolved internally to meet that deadline and consummate, no sorry, celebrate, that union. It seems to me that deadlines can make sure that minds are concentrated.”

Perhaps. But the future Mrs Gove had indicated there was an attractive deal on the table. Is Monsieur Barnier in the mood to woo? Sealing that deal may call upon another of Michael Gove’s inner strengths. As he had confided to MPs the previous day, “I am a fan of Aberdeen and Queen’s Park Rangers. So I am a natural optimist.”

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