Brexit News, Member News

Vulcan Insight: Post-Brexit Negotiations: Divergences Remain

With less than 6 months until the United Kingdom is due to leave the European Union’s economic remit, “serious divergences” between the two parties remain.

Spurred on by the limited progress so far and Prime Minister Boris Johnson’s official confirmation that the UK would, in fact, not request an extension to the transition period beyond the end of the year, chief negotiators Michel Barnier and David Frost agreed at the beginning of June to “intensify” negotiations, in person, on a restricted number of sensitive topics.

However, with the first such restricted session having taken place this week, the talks seem to have broken down early, according to a Michel Barnier statement, over continued “serious divergences.” In a highly unusual manner, this week’s talk broke up Thursday without the planned Friday stocktaking meeting by the two chief negotiators after negotiators “covered all the ground they set out to discuss” according to the UK’s Downing Street.

This week’s developments further underline the deep divisions between the UK and EU approaches to the negotiations and limitations in their negotiating mandates. Difficulties in reaching agreements, even sectoral ones, were highlighted earlier this week when Mr. Barnier updated an industry group on the state of play on financial services.

While the EU proposes a substantial chapter on financial services as part of an overarching free trade agreement to provide UK operators with legal certainty and non-discrimination in the EU, the UK government seeks to “go much further” with proposals that are “unacceptable.”

According to the EU’s chief negotiator, the UK government still refuses to accept the consequences of its decision to leave the European Union’s legal and economic framework as it seeks to restrict and influence the European Commission’s regulatory and decision-making autonomy. Specifically, the UK government is seeking to “have co-decision power on the EU’s equivalence process, especially over withdrawal decisions,” a demand that is unacceptable not just to the European Commission, but also the Council and the European Parliament.

Of the 28 questionnaires for assessing the UK’s financial services for equivalence, which the Commission sent to the UK government earlier this year, the Commission has so far only received 4 responses.

Mr. Barnier also added that the UK government, as in other fields, continues to want to cherry pick rules and regulations to circumvent EU third-country rules to make it as easy for UK-based businesses to continue operating within the EU with minimal operations and/or staff based in the EU.

In light of the stalled negotiations and the clock ticking, the European Commission and Member States are increasingly stepping up their no-deal preparations. At a press conference marking the beginning of the German Presidency of the Council of the EU on Thursday, Chancellor Merkel reiterated the call to prepare and insulate businesses and economies from a potential EU-UK trade relationship based on WTO rules.

Heeding that call, it emerged on Friday that the Irish Government reached a draft agreement with the European Commission on the barrier free transport of agri-food and live animals through the UK landbridge once the UK has left the Single Market.

Under the draft agreement, Irish food exports would be allowed to enter EU ports through “green lanes” when arriving from a UK port without the requirement for added in-port sanitary and phytosanitary (SPS) checks. Under regular EU rules, any agri-food and live animals entering the EU would have to undergo stringent SPS checks adding costs, time delays and regulatory barriers and potential discrimination against Irish exporters.

Compliments of Vulcan Consulting – a member of the EACCNY.