Tuesday, July 07, 2020

Europe's next big gamble - that Boris Johnson will blink first

May 18. 2020
Michel Barnier, chief negotiator for the European Union (EU), speaks during a news conference following the first round of Brexit trade talks in Brussels, Belgium, on March 5, 2020. MUST CREDIT: Bloomberg photo by Geert Vanden Wijngaert.
Michel Barnier, chief negotiator for the European Union (EU), speaks during a news conference following the first round of Brexit trade talks in Brussels, Belgium, on March 5, 2020. MUST CREDIT: Bloomberg photo by Geert Vanden Wijngaert.
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By Syndication Washington Post, Bloomberg · Ian Wishart · BUSINESS, WORLD, US-GLOBAL-MARKETS, EUROPE 

The European Union is betting that British Prime Minister Boris Johnson wants a trade deal so much he will compromise to get one.

With talks between the two sides locked in a stalemate and the chances of agreement before a key summit in June looking slim, EU officials say they see no reason to change tack. When chief negotiator Michel Barnier warned on Friday that an agreement may be impossible to reach, his comment was as much to do with putting pressure on the U.K. to back down as it was about signaling an imminent collapse of the talks, they said.

"To make progress in this negotiation -- if it is still the U.K.'s intention to strike a deal with the EU -- the U.K. will have to be more realistic," Barnier said. "It will have to change strategy."

EU officials are aware that is a big ask for a government led by a group of politicians who not only supported Brexit but also think Johnson's predecessor, Theresa May, gave away far too much in her negotiations over the country's exit. But the bloc is still betting that the closer the U.K. gets to the end of the transition period on Dec. 31, the more likely it is to back down.

It's no small gamble, all the more so because the U.K. is expecting the EU to be the first to concede ground. Speaking to the BBC on Sunday, Cabinet Office Minister Michael Gove urged the EU to "show just a little bit of their fabled flexibility" in the negotiations. One official, speaking on condition of anonymity after last week's round of talks, characterized the process now as a game of chicken.

Barnier's team has restricted room for maneuver because it is limited by the mandate it has been given by the bloc's 27 governments. U.K. officials say that for the stalemate to be broken, Barnier needs new guidance that will enable him to become more flexible. That, however, would require the unanimous agreement of the EU's national leaders - an outcome that isn't certain.

There is no plan to seek a change to the mandate, and the EU will continue pushing for the U.K. to meet its demands in full, one official in Brussels said. The EU won't give up on the talks and, for now, its strategy is to sit tight, he said. That indicates Brussels doesn't expect progress before June's scheduled stocktaking summit - or immediately afterward.

While the U.K. merely wants a trade deal with Europe, the bloc wants a whole lot more, and that goes to the heart of the problem. The EU wants a wide-ranging agreement covering many policy areas from law-enforcement to aviation rules - and it wants a single way of governing the entire deal. This would also involve the European Court of Justice, something to which the U.K. is opposed.

The bloc insists that the proximity of the U.K. and the size of its economy means the country must accept certain conditions bolted onto the trade deal. This would see it sign up to various European standards in areas such as workers' rights, the environment and state aid.

The U.K. has rejected these "level playing field" conditions, saying they don't fit with its new position as an independent nation - but the EU expects Britain will have little choice but to capitulate if it wants to reach an accord.

The U.K. is also demanding an upfront agreement on EU fishing boats' access to British waters. The bloc is pushing for something close to the status quo in which the seas around the U.K. are divvied up between European countries. With control of fisheries a totemic issue in the Brexit campaign, it's not something Britain will give up without a fight.

Here, though, Barnier signaled that a compromise could be found after the U.K. delivered its detailed position paper on fishing earlier this month. Privately, some EU officials concede the bloc's demands are untenable. The U.K. has indicated it is prepared to grant EU boats annual quotas, as Norway does today. But a deal on this issue would still require the bloc to make a large concession on an issue that France in particular feels strongly about.

From the outset, the EU has warned that the Dec. 31 deadline doesn't leave enough time to negotiate a trade deal. Canada took seven years to reach an accord with Brussels. During last week's talks, EU negotiators were still trying to persuade their British counterparts to consider extending the timetable, officials said.

But Johnson has ruled out doing that, and U.K. officials say they are confident enough time remains to get the slimmed-down deal they're looking for and that the pressure of a deadline will help get the result they want.

If the stalemate continues, there will come a point where Britain publicly starts preparing to end the transition period without a trade deal -- an outcome that would trigger the return of tariffs and quotas -- in order to bring some certainty to the future, a U.K. official said.

The two sides are nowhere near that point yet, the official said. Both sides know there's still some way to go before either has to blink.As the pandemic hits African economies, Libya's southern border is getting busier and the alarm bell is ringing in European capitals. 


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