With the COVID-19 pandemic continuing to occupy the national psyche, Brexit has largely fallen off the news agenda in the past few months.
However, the question of the UK’s future relationship with the European Union remains as important as ever, and it will be a critical factor as the British economy looks to recover from the deepest recession since records started in 1955.
So, which events have led us toward the current Brexit negotiations, what is the current state of play in these discussions and what are the prospects for a future trading relationship with the EU?
Let's find out.
How did we get here?
When the UK formally left the European Union on 31st January 2019, it entered a transition period in which it remains in both the EU’s customs union and the single market. In essence, this means that the UK currently retains many benefits of EU membership, such as freedom of movement and continues to follow EU rules and regulations, but no longer has a voice in how these laws are made.
The current transition period is due to expire at the end of this year and therefore negotiations are currently taking place to determine the UK’s future relationship with the EU. The overarching principles of this future relationship have already been outlined in an agreement known as the ‘Political Declaration’ which sets out how the UK will cooperate with the EU on a range of issues such as international trade, security policy and regulatory alignment. However, since this brief agreement is not legally binding, it merely provides direction to the current negotiations between the UK and the EU.
The current state of play
Since March, formal negotiations have been taking place in London and Brussels between the British government and the European Commission to agree a post-Brexit trade deal. So far, there have been eight official rounds of negotiations aimed at cementing the future UK-EU relationship.
Going into the negotiations, Boris Johnson has consistently called for a ‘Canada-style’ free trade agreement with the EU. This would entail the UK having a looser trading relationship with the EU, under which more tariffs and restrictions would be placed on goods and services traded between the EU and the UK. The British government argues, however, that such a trade deal would reduce the obligations on the UK to apply certain EU laws and regulations at the end of the transition period.
The EU, led in negotiations by Michel Barnier, have instead endorsed the continuation of a closer trading relationship as opposed to the Canada-style trade deal proposed by the British government. A key concern for EU negotiators is the prospect of a future UK economy based on lower regulatory standards which could potentially harm the competitiveness of businesses within the EU’s single market. Therefore, the European Commission has pushed for a regulatory ‘level playing field’ under which the UK would continue to follow certain EU regulations regarding issues such as workers’ rights, environmental protections, and the ability for the UK government to provide subsidies for businesses.
Whilst some progress has been made, negotiations have so far been fraught with difficulties. Negotiators had signalled a deadline at the end of July for an agreement to be concluded, yet nearly two months later such an agreement appears elusive.
There remains two major sticking points which are preventing a deal from being reached at this stage:
Firstly, fishing rights are a source of considerable disagreement between the two parties. British negotiators want access for UK fishermen to sell their goods in the EU’s single market, but the EU consequently demands access to British waters for its fishing vessels. Although fishing accounts for only 0.1% of the UK economy, the idea of reclaiming fishing rights for British fishermen played a significant role in the Brexit referendum and continues to be an emotive issue for some coastal communities.
Secondly, and perhaps more crucially, the EU insists that a future trade deal is conditional on the British government accepting a ‘level playing field’ in which UK remains closely aligned to certain EU regulations, such as those focusing on environmental protections and workers’ rights. However, there is particular disagreement over the role of government in providing financial assistance to businesses, known as state aid. The British government wishes to have the freedom to wield state aid without what it views as restrictive EU rules, whereas the EU is concerned this could undercut EU businesses.
What's on the horizon?
The ongoing Brexit negotiations can be viewed as a race against time to conclude an agreement before the current transition period expires at the end of the year. The British government has consistently stated that it will not seek an extension to the period, meaning a risk of a no-deal Brexit if an agreement is not reached in the next few months. Like many aspects of daily life, COVID-19 has impacted negotiations between the UK and the EU, preventing face-to-face meetings at the height of the pandemic and diverting political attention away from Brexit.
Relations between London and Brussels have recently taken a turn for the worse after the British government announced potential plans to rewrite parts of the Brexit ‘withdrawal agreement’ signed in January. The government itself admitted that these plans, concerning the movement of goods between Northern Ireland and the rest of the UK, would constitute a breach of both the withdrawal agreement and international law.
Top EU policymakers have voiced their discontent with the UK’s plans and demanded that its proposed measures on Northern Ireland are withdrawn. This souring of relations will undoubtedly impact the prospect of any future trade deal being reached. With a continued stalemate in trade negotiations, this new confrontation may be one obstacle too many.
Realistically, an agreement must be reached before the end of October so that it can be fully ratified by both sides before the current transition period expires on 31st December. It remains to be seen if the two parties can meet this deadline to avoid a no-deal Brexit.