In the UK 

UK PM Boris Johnson delivered his ‘next stages’ speech this week, outlining his expectations for the forthcoming Brexit negotiation phase II. As widely anticipated, Johnson said that: 

• While the UK intends to maintain high standards for trade voluntarily, it will reject EU demands to sign into law a commitment to maintaining so-called ‘level playing field’ standards covering labour laws, environmental regulations and state aid. He said “There is no need for a free-trade agreement to involve accepting EU rules on competition policy, subsidies, social protection, the environment or anything similar. The UK will maintain the highest standards in these areas… without the compulsion of a treaty.” 

• The UK wants a Canada-style free trade agreement with the EU. However, if the EU will not accept a Canada-style deal on the UK’s terms, the UK will seek an ‘Australia-style’ deal, also previously described as a ‘managed hard-Brexit’ or the ‘WTO option’ [N.B. the EU does not have a trade deal with Australia]. Johnson said “the choice is emphatically not ‘deal or no- deal’. The question is whether we agree a trading relationship with the EU comparable to Canada’s – or more like Australia’s.” 

• The Government wants a smooth and unobtrusive mechanism for resolving disputes in a trade deal, without involving the European Court of Justice. 

The speech was attended by around 75 individuals representing different businesses. However, the CBI, the British Chambers of Commerce and the Institute for Directors were excluded from attending the event. His aides explained that the groups were deliberately not invited because “they are not doing their duty to prepare their members for the upcoming realities” of a Canada-style free trade deal, adding that “they are still lobbying” the Government to break promises it made in the General Election. They further said that unless the CBI and the other groups wake up to this new reality, they will simply be bypassed by Number 10 in favour of direct communication with individual companies. 

In Brussels 

EU Chief Brexit Negotiator Michel Barnier presented a draft EU mandate for the next phase of the negotiations, saying that EU has an “exceptional offer” for London. However, he made it clear that there are conditions the UK must meet: One is maintaining a level playing field with the EU over the long term; the other is that a free-trade agreement must also include a deal on fisheries. 

https://ec.europa.eu/info/sites/info/files/communication-annex-negotiating-directives.pdf

In short, the EU guidelines include a comprehensive proposal for negotiating directives, which defines the scope and terms of the EU’s desired future partnership. They cover all areas of interest outlined in the Political Declaration: trade and economic cooperation (including aviation and aviation safety), law enforcement and judicial cooperation in criminal matters, foreign policy, security and defence, participation in Union programmes and thematic areas of cooperation. 

As expected, the guidelines reiterate that the UK’s access to the single market will hinge on alignment with the EU, stating that “Given the Union and the United Kingdom’s geographic proximity and economic interdependence, the envisaged partnership must ensure open and fair competition, encompassing robust commitments to ensure a level playing field”. It adds that the future agreement 

“should uphold the common high standards in the areas of State aid, competition, state-owned enterprises, social and employment standards, environmental standards, climate change, and relevant tax matters”. 

A useful Q&A document prepared by the Commission on the draft negotiating directives for a new partnership with the UK is also available: 

https://ec.europa.eu/commission/presscorner/detail/en/qanda_20_179

Next steps 

The Commission’s mandate will now need to be approved by EU Member States, which is likely to happen at the next EU summit on 20 February. Negotiations will then start soon after. The two parties will have until 30 June to decide whether an extension to the transition period is needed. While the UK has so far ruled out an extension, the EU can also request one. In addition, while the UK legislation does not currently provide for an extension it could be amended to permit one. If no extension is agreed, however, negotiations are likely to last until the end of October, with the ratification process expected to take place in November. The transition period would end on 31 December 2020. Negotiation on the outstanding issues will continue from 1 January 2021 onwards. 

OTHER POLITICAL ACTIVITIES 

• Chancellor Sajid Javid will use his Budget next month to launch a “Brexit red tape challenge”, inviting members of the public to propose ways in which the UK might diverge from the EU rule book. 

• The UK Department for International Trade (DIT) has launched a public consultation on its new “Global Tariff Policy”, which will apply to goods imported into the UK from 1 January 2021, once the post-Brexit transition period has ended. The Global Tariff Policy will apply to all imports unless an exception, such as a free trade arrangement or tariff suspension, applies. The public consultation is open from 7 February until 5 March 2020, and interested parties can respond online – https://ditresearch.eu.qualtrics.com/jfe/form/SV_bEHzM2oowBNQ7Rz 

• International Trade Secretary Liz Truss has said in a statement setting out the UK’s approach to trade deals with non-EU nations that, in all future trade negotiations, the Government “will not compromise on our high environmental protection, animal welfare and food standards.” She added that the Government aims “to secure free trade agreements with countries covering 80% of UK trade within the next three years” and that US, Japan, Australia and New Zealand will be a “key priority”. Setting out the Government’s plans for a US-UK trade deal, Truss said that “The FTA will secure comprehensive, far-reaching and mutually beneficial tariff reductions (taking into account sensitive UK products) which will increase access to the US market for UK businesses, and lower prices and increase choice for UK consumers. The FTA will aim to remove measures that currently restrict UK trade and to prevent their imposition in future, while upholding the safety and quality of products on the UK market”. 

• More than three million EU citizens and their family members have applied to secure their rights in the UK after Brexit, in what the government has called a “milestone” in its EU settlement scheme. The figure, announced by the Home Office on Thursday, was reached less than a year after the scheme launched in March last year, and means that more than 80% of the estimated 3.6m EU citizens resident in the UK have applied to stay. 

• A leaked copy of a draft resolution from the European Parliament’s newly formed EU-UK co- ordination group suggests that the UK should pledge to match European standards on workers’ rights, environmental protection and state aid, when the EU updates its rulebook. The draft seen by the Guardian states that “a level playing field” should be guaranteed “through robust commitments” and “with a view to dynamic alignment”, listing competition, social and labour standards, environment and UN climate goals, and consumer protection. The resolution will be put to vote next week. While the European parliament cannot bind EU governments to accept a more demanding “dynamic alignment” stance, its position may prove influential, especially as the European Parliament will have to ratify the final deal at the end of the year.