Progress made ahead of UK-EU Summit
Part of a series of monthly updates in which UK Trade and Business Commission Expert Adviser David Henig brings updates and analysis on the evolving trade relations between the UK and EU.
Times have changed in UK-EU relations. Negotiators from London and Brussels appear to have been in a negotiating “tunnel” in early April, and the outside world didn’t notice. In amidst the closer cooperation may even be a certain amount of joint briefing designed to suggest how both sides are fighting for their interests on difficult topics, such as fish, to be triumphantly announced as being solved at the May 19 Summit.
Progress made
Those involved in UK-EU talks on both sides privately acknowledge better atmospherics and some progress. There is a reasonable level of confidence of a package of summit announcements that centres on a defence and security agreement. This will include something on irregular migration as befits Labour’s focus on this issue.
At the heart of the trade agenda will be progress on Labour’s manifesto commitment of a food and drink agreement to reduce or eliminate checks between UK and the EU, which will also do the same for products going from Great Britain to Northern Ireland. Full negotiations are expected to be given the go-ahead, to commence by the Autumn once the European Commission has a mandate from Member States.
Talks will also be launched on the EU’s top priority of a possibly renamed youth mobility scheme, and on linking Emissions Trading Schemes. This will avoid Carbon Border Adjustment Mechanism charges soon to be introduced, an ask of industry on both sides. Some sort of UK commitment on fishing rights is also expected.
Undoubtedly this package would not have been agreed by the previous UK governments. How these commitments will be presented is uncertain, but quite possibly there will be a joint document similar to the “Common Undertaking” that underpinned the most recent EU-Switzerland talks, which in turn led to an agreement in just 14 months. Progress on this and perhaps the review of the Trade and Cooperation Agreement could be reported to a summit next year.
Opportunities and challenges remain
Whether this package counts as a sufficiently meaningful reset is open to question. While UK alignment with EU food and drink rules will be positive, it delivers very little of the potential 2% GDP growth available from more comprehensive regulatory alignment. Perhaps it can best be seen as a reasonable first step that should be accompanied by a plan to go further within respective red lines.
Agreeing such a wider vision and plan for the future would certainly be substantial progress, but it is unclear whether both sides will go so far. To do so would however respond to President Trump’s attacks on Europe and trade by committing to progressively deepening the UK-EU relationship. New political dialogues on issues such as future regulation, global trade, and economic security would be a part, as would the UK joining European schemes and agencies such as the Pan-Euro-Med Rules of Origin zone.
Laying out such a future pathway would also help address a criticism the UK government may face that it has offered up too much and received rather limited concessions in return. Accepting the EU’s asks on youth mobility and fish in return for a food and drink agreement that follows the Brussels high-alignment approach runs the risk of leaving the UK with little to offer in future negotiating rounds. Some of this was an almost inevitable follow-on to previous governments poisoning relations, but current Ministers have arguably also not publicly put forward a sufficiently persuasive vision to the EU.
Tied to this is the potential for rather difficult negotiations around details to follow. UK stakeholders including the Food and Drink Federation and National Farmers Union have concerns about some EU food and drink regulations that would be part of the agreement. There will be a need for the government to explain how exceptions could be negotiated, and what the process will be for influencing regulations before adoption. Typically such agreements take some years to negotiate because of the number of specific issues to be resolved.
Linkage of Emissions Trading Schemes will raise similar challenges of the UK appearing to be a rule taker. These would be best addressed by ensuring an overall package that demonstrates both sides showing respect for the asks of the other. Given the importance of the UK-EU relationship to Europe as a whole, establishing a broad range of structures to support this seems entirely reasonable.
Preparing for a final push
Looming large in the background is President Trump, and while it does not currently seem that UK-US talks are inhibiting those with the EU, this requires continued care from the government. Improved engagement does not remove suspicions that grew during the Brexit years, just as the US threats do not immediately mean changes to the way the EU operates. While Member States and MEPs are broadly positive towards the UK, this is somewhat provisional.
Stakeholders on both sides are helping the final push ahead of the summit, sometimes working together. Progress on energy has come in large part thanks to a concerted joint push, and more recently a number of organisations put forward a common view on Mutual Recognition of Conformity Assessments. The UK government is expected to follow its usual approach of seeking business support for the summit outcome.
As previously, the Commission is slightly more downbeat than an optimistic UK government about the chances of a meaningful trade outcome from the summit. That said, there is clearly significant common ground on the main elements to be agreed. With a further political push on all sides this could yet be seen as a substantive reset package.
