Trade negotiations – choppy waters or plain sailing ahead?

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The UK’s determination to do a deal by 31 December 2020 will influence how the EU positions itself during the talks. Given the extremely tight timeframe this deadline creates, the EU anticipates that only a limited trade deal will be possible, if at all. Much will depend on maintaining the unity of the 27 member states that held throughout the first stage of Brexit.

As the EU repeatedly stated during that initial phase, protecting the integrity of the single market is paramount. It will do everything it can to prevent the UK from obtaining a competitive advantage as it seeks divergence from EU rules and standards. In particular, the EU insists that the UK should continue to abide by existing state aid rules which set strict parameters on the extent to which governments can subsidise businesses. In response to any failure by the UK to adhere to such rules, the EU could seek to limit the UK’s access to the single market or introducing trade tariffs.

There’s also a strong determination in the EU that the UK should not be seen to benefit from Brexit. It does not want existing member states to question the worth of retaining their membership. The advantages of remaining inside the tent must be made clear.

However, the ties that continue to bind the UK and EU are obvious. Continued frictionless trade, security cooperation and defence are primary objectives for both parties. The handling of the issue of freedom of movement in the negotiations ahead will be key to achieving this. The UK is seeking a free trade deal modelled on that which Canada has secured with the EU. Failing that, it would opt for a relationship similar to that between Australia and the EU, with no overarching free trade agreement but several side agreements instead.

The UK has been told repeatedly by the EU that it cannot ‘have it’s cake and eat it’ when it comes to Brexit. This also applies to the apparent dichotomy between frictionless trade and regulatory divergence.

Even before the talks have formally begun, the first major point of contention has been identified – fisheries. Access to waters and quotas of fish that can be caught are currently stipulated by the Common Fisheries Policy (CFP). But what arrangement will follow when the transition period ends and the CFP no longer applies to the UK? How smoothly this aspect of the talks proceed might give us an indication of the ultimate success of the wider negotiations.

And then there’s the matter of how to resolve any disputes that may arise from any trade deal that is struck. The EU wants those rulings to be made by the European Court of Justice (ECJ) but the UK is determined that the ECJ should no longer continue to have jurisdiction of UK laws.

So, will it be choppy waters or plain sailing ahead? Either way, Brexit negotiations will continue to make waves for a while yet.