EU-UK trade talks: where are we now?

Mon 18 May 2020
Posted by: Sam Pileggi
Trade News

Brexit tug of war

As the UK enters pivotal weeks for its trade negotiations with the EU, the Daily Update takes stock on their progress – or lack of it.

Trade talks with the US, started via video link on 5 May and involving more than 100 officials on either side, have proved a welcome media distraction for the Conservative government as it grapples with far thornier talks on the EU side.

A quick reminder of the EU’s importance as a trading partner for the UK: the EU bloc of 27 countries accounts for 43% of UK trade, while the US amounts to 15%. 

1.The current position

The UK left the EU at the end of January 2020 with a Withdrawal Agreement, allowing for a transition period out of the EU to end on 31 December 2020. While no longer a Member State, the UK is following most EU laws and abiding by Customs Union rules.
As the COVID-19 crisis began to accelerate, post-Brexit trade talks began in Brussels on 2 March, the UK side led by David Frost with Michel Barnier at the fore for the EU. 

2. ‘Too focused on tariffs’

More than two months on, however, observers describe the EU-UK trade negotiations as having hit a deadlock, with both sides describing the mood as ‘tetchy’.
Stumbling blocks include fishing rights and security. Frost has accused the EU of making excessive demands in return for a trade deal, the FT reports.

Barnier, in turn, has accused the UK of focusing too much on tariffs, and not enough on environmental and social protections.

One concession to the EU came on 12 May when the UK acknowledged a key point in the Withdrawal Agreement: that there would be customs checks on goods crossing from Great Britain into Northern Ireland.

3. No-deal still a possibility

Ireland’s minister for foreign affairs, Simon Coveney, told Irish broadcaster RTE on Sunday, 17 May that the risk of no-deal remained real.

If the UK leaves the Customs Union without a deal on 31 December, trade between the UK and EU would be subject to new taxes and trade barriers along World Trade Organization terms.

He added: “Until the UK changes its approach in the context of giving the EU assurance that they are not going to effectively deregulate their economy while expecting free access in the EU single market, I think we’re going to continue to be in real difficulty in these talks.”

4. Transition extension deadline is 1 July

A source of tension among civil servants within the UK’s negotiating team is the government’s refusal to seek a delay to the transition period’s scheduled end on 31 December 2020. 

The clock is ticking: PM Boris Johnson must ask for an extension no later than 1 July. 
The EU has indicated it would grant such an extension but the government has argued that any more delays, regardless of the disruption wrought by COVID-19, would “increase uncertainty while leaving the UK obliged to pay into the EU budget”.

Calls for the UK government to seek an extension have ranged from former cabinet secretary Gus O’Donnell to the International Monetary Fund.

“Clearly there has been much less time for negotiation than could ever have been anticipated,” O’Donnell said.

5. What’s next?

The next round of talks start on 1 July, with the UK calling for “a change in EU approach” and the EU responding likewise.

Later this week comes another UK concession to help lift the deadlock: the UK government will publish its draft negotiating proposals, which the EU’s remaining 27 states have been itching to view.