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4 February 2020

What do we learn from the negotiating mandates published by the UK and the European Commission?

There are comparatively minor differences on fishing and the structure of the agreement but the big points of disagreement are rules and referees.

By Stephen Bush

The British government and the European Commission have published their negotiating mandates – via a written ministerial statement from the British and a memo from the EU – as the two sides prepare for a year of talks about the shape of the EU-UK free trade agreement.

The UK’s statement was accompanied by a speech from Boris Johnson, but you can safely ignore that: it was solely rhetorical and had little of any substance as far as policy is concerned. The real meat is in that written statement: what does it tell us about the areas of unity and disagreement going into these talks?

There is unity in terms of the outcome; both sides know that their combined preferences on regulation mean that they are looking for a barebones trade agreement with a security treaty on top. There are comparatively minor differences on fishing and the structure of the agreement (the EU wants a single association agreement, the UK wants multiple accords) but the big points of disagreement are rules and referees.

Rules: all trade agreements involve a measure of regulatory alignment, and the biggest one here is the requirement to maintain a level playing field after Brexit, particularly on state aid. The British government thinks that because it is asking for a trade agreement that would secure the same level of market access to the EU as is enjoyed by Canada, it shouldn’t have to sign up to a stronger set of level playing field provisions. From the perspective of the Commission and EU member states, because the UK is right on the EU’s doorstep, a Canada-style trade agreement would have to include tougher provisions on state aid and other level-playing field matters.

Referees: all trade agreements include a dispute mechanism in case one party or another is believed to be backsliding on its obligations. As far as the EU is concerned, that means a role for the European Court of Justice. But at the British end, the government wants to take the UK out of the domestic reach of the ECJ.

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In most trade talks, particularly between the regional hegemon and their near-neighbours, these disputes end one way: the bigger country or bloc gets 90 per cent of what it wants and the smaller one gets 10 per cent. You can see the landing zone for such a deal – on referees, one in which the ECJ has no purchase in UK domestic legislation but is in practice the ultimate arbiter in all trades disputes, and one in which the UK, which doesn’t even use all of the freedoms it has as an EU member on state aid, signs away powers that it has little appetite to exercise as far as the level playing field goes.

But there’s a big reason why that might not happen this time: frankly, what tends to force those compromises is the scale of the prize on offer. Because the UK is explicitly aiming to, as the written ministerial statement says, be outside both the customs union and the single market by the end of the year, the economic cost of a free trade agreement on the terms envisaged by both sides is not a great deal smaller than the economic cost of an exit on WTO terms.

The incentive to blink at the British end is considerably smaller than it was last year. Just because both sides are starting far closer together than they did in the last phase doesn’t necessarily mean that it will have the same ending.