Brexit, Data transfers, GDPR, Michel Barnier, Negotiating

Saying things in such a way that make a deal impossible


When I started to write this piece yesterday, I opened it with the following paragraph:

As I write this on Saturday, October 17, I have no idea whether there will be a trade deal between the EU and the UK. I do not know if talks between the two on such a deal are genuinely over. It is not clear if the discussions between the two lead negotiators, Frost and Barnier, scheduled for London this week, will actually go ahead or remain cancelled, after Frost told Barnier on Friday night not to bother turning up unless he had a new offer to make to the UK.

The next morning, Sunday, I read Michael Gove’s article in the Sunday Times. In it Gove accuses the European Union of trying to ‘tie our hands indefinitely’ as he claims the UK has ‘no choice’ but to prepare for a no trade deal split from the bloc at the end of the year.

Borrowing a term from Star Trek he said Brussels was trying to ‘keep us in their tractor beam’.

‘Unless the EU makes a fundamental change, we’ll leave on Australian-style terms trading on WTO rules. It is not my preferred destination, and there will be turbulence en route. I am not blasé about the challenges, but if the choice is between arrangements that tie our hands indefinitely, or where we can shape our own future, then that’s no choice at all.’ 

He suggested the EU had broken its word by failing to offer the UK a Canada-style agreement.

‘The terms on which Canada and the EU waive tariffs on each other’s goods is all we seek. That’s what the EU said it would offer us but at the eleventh hour it seems the bloc won’t take yes for an answer.’

Now, whether or not there will be a deal between the EU and the UK, I still do not know. But I do know this: sometimes, in negotiations, you can say things in such a way that you make a deal impossible.

We could be close to that point, if not already beyond it. We shall see in the coming days.  However, no matter what happens, keep this in mind.

The agreement that is currently being discussed between the EU and the UK will be worth no more than about 10% of what customs union and single market membership delivered to the UK. It is little more than an agreement on tariff-free and quota-free trade in goods between the two. This is not unimportant and would certainly make trade between the UK and Northern Ireland, which will be in both the UK’s and the EU’s custom zone, a lot easier to manage.

But even with a deal, trade in goods will still face new obstacles and customs barriers, with businesses needing to employ about 50,000 customs agents just to handle the new paperwork. It has been estimated that around 230 million new forms will need to be filled out every year to meet regulatory requirements. Mega lorry parks are being built across the UK to hold the backlog of trucks that will be lining up to cross the new UK/EU border as customs formalities put an end to frictionless trade. (here)

As we have written before, when you build borders then both people and goods need permission to cross those borders and permission always brings delay. Customs officials or border police having an off-day can cause chaos. A tetchy exchange with just one driver can see kilometre-long queues rapidly building up.

Further, the deal under discussion will have nothing to say about services. Currently, the UK has a trade surplus of about £85bn annually with the EU. A great amount of this will now be at risk.

What happened during the past week to seemingly bring the talks to the point of collapse? Or, was there always going to come a time where a collapse was inevitable? Were Brexit ambitions beyond what the EU could accommodate?

In the summer UK Prime Minister, Boris Johnson, set the October 15 meeting of the EU heads of government as the deadline by which time the contours of a deal should have been agreed between the two sides. Otherwise, he would walk away and begin preparing for a “no-deal” exit on January 1 next.

I think it is fair to say that the EU’s response to Johnson’s deadline was “whatever”. It made it clear that it was not going to be bounced in any way by a unilateral deadline imposed by one of the parties. For the EU the real deadline has always been late October/early November, to allow time for the text of any deal to be “legally scrubbed”, translated into all necessary languages and be approved by Member States and the EU Parliament.

Coming into last week Johnson’s team was pushing hard for the negotiations to be intensified, and for legal texts on each of the issues, “chapters” in the jargon, to be put on the table and negotiated to finality. Closing a “chapter” meant that the chapter had been agreed. The EU, on the other hand, wanted to keep all “chapters” open until such time as an overall agreement had been reached. This would keep the ability to leverage one chapter again another in play. Nothing would be agreed until everything was agreed.

Three big issues remained outstanding: fisheries; level-playing field (LPF); and governance, including the ability of either party to take rapid retaliatory measures if it believed the other side had broken the agreement.

Let’s leave fish aside. It is easy to understand fish and fishing waters. You can see them, count them, and divide them. Of course, the politics of fish make cutting a deal on fish fraught, but not undoable. Who catches what fish and where, who sells what to whom, and introducing change over time are variables that can be arranged and rearranged to make a deal possible. As RTE’s Tony Connolly notes:

Britain will have to be able to show its fishermen can catch more fish, the EU will want to show that the losses will have been marginal. That’s a simple bargain, but it will be devilishly hard to strike.

It has always seemed to me that the real problem standing in the way of an agreement is the “level playing field” conditions that the EU is insisting on as the price of tariff-free and quota-free trade. Because this goes to the very heart of what Brexit is about, the right of the UK to be different from the EU.

Today, during the transition period, all UK trade regulations are exactly in line with EU regulations because of the UK’s 45-year membership of the EU. UK regulations are EU regulations. But the driving force behind Brexit is the desire on the part of Brexiteers to diverge from EU regulations and standards, which they see as holding the UK back.

For example, two years ago, Dominic Cummings, who is now Boris Johnson’s chief advisor, described the EU’s General Data Protection Regulation (GDPR) as “horrific”.

“One of the many advantages of Brexit is we will soon be able to bin such idiotic laws,” Cummings wrote. “We will be able to navigate between America’s poor protection of privacy and the EU’s hostility to technology and entrepreneurs.”

In line with this view, the recently published paper on the UK government’s digital strategy pledged to remove “legal barriers (real and perceived)” to data use, encourage international sharing and deliver a “radical transformation of how the government understands and unlocks the value of its own data”.

Comments like this will feed into the EU’s decision on whether or not to grant the UK a “data adequacy decision”. Data adequacy is not negotiated. It is unilaterally decided on by the EU.

But that is not the point I want to make here. Cummings’s comments, and the language in the digital strategy paper, make it clear that after Jan 1st next, the UK intends to pull away from EU standards and travel its own road. If this is true of data, it is also true when it comes to other regulations. Otherwise, why leave the EU?

The issue for the EU is this. It will only offer the UK tariff-free and quota-free access to the single market for goods if it can be certain that the goods being placed on the EU market are manufactured to EU standards and are not being unfairly subsidized (“state aid”). In trade negotiations with other countries moving towards regulatory alignment between the parties is key to reaching an agreement.

But, what do you do when you are already in alignment with the other party but their stated intention is to diverge in the future? To become different from you because that way they believe they can gain competitive advantage.

At the best of times, this would be a difficult issue to resolve. But it is compounded when there is a complete absence of trust between the parties. The EU’s already thin trust in the Johnson government was badly shaken by the Internal Market Bill (IMB) some of whose provisions give UK ministers the power to override clauses in the EU/UK Withdrawal Agreement, only signed in late 2019.

This is particularly the case when it comes to the Irish Protocol attached to that agreement. All the more so when a government minister admitted in the Commons that aspects of the Bill deliberately broke international law.

UK government spokespersons have said that the Bill was necessary to counter an alleged EU threat to block UK food exports, including from Great Britain to Northern Ireland. However, commentators have suggested that the real reason for the Bill was that Johnson did not realise at the time what he was agreeing to when he signed the Withdrawal Agreement and was desperately trying to find a way to unpick it. Buyers remorse writ large.

Whatever the reason, the Bill was seen by the EU as breaking faith. If Johnson was prepared to disregard an agreement signed less than a year ago what guarantee could the EU have that, once tariff-free and quota-free terms were agreed, the UK would not move to tear up the rule-book?

For the UK the issue would appear to be this. If it has to abide by the EU rule-book to put goods on the EU market then what is the point of Brexit? To be caught in the EU’s “tractor beam”, as Gove puts it. Especially as its exporters will have to go through all those extra customs and regulatory formalities to do so? Brexit simply makes it very much harder to do what can now be done with the minimum of formality. What rational economic actor increases costs for no discernible gain?

Against this background, the EU Council (heads of government) came to the following conclusions at their meeting on Thursday, October 15:

  1. The European Council recalls that the transition period will end on 31 December 2020 and notes with concern that progress on the key issues of interest to the Union is still not sufficient for an agreement to be reached.
  2. The European Council reaffirms the Union’s determination to have as close as possible a partnership with the United Kingdom on the basis of the negotiating directives of 25 February 2020, while respecting the previously agreed European Council guidelines, as well as statements and declarations, notably those of 25 November 2018, in particular as regards the level playing field, governance and fisheries.
  3. Against this background, the European Council invites the Unionʼs chief negotiator to continue negotiations in the coming weeks, and calls on the UK to make the necessary moves to make an agreement possible.
  4. As regards the Internal Market Bill tabled by the UK government, the European Council recalls that the Withdrawal Agreement and its Protocols must be fully and timely implemented.

If there was a deal to be done than the UK had to “make the necessary moves to make an agreement possible.” In other words, if you want access to our market, here are our terms. UK negotiator, David Frost, took to Twitter to reply:

Also surprised by suggestion that to get an agreement all future moves must come from UK. It’s an unusual approach to conducting a negotiation.

Actually, it is not an “unusual approach” to negotiations. How often have readers of this Briefing been involved in negotiations where the other side accuses you of “refusing to negotiate” because you simply will not accept what they are demanding? “I demand a €1,000 a week pay rise. I am prepared to offer you €50, maximum. So, you are refusing to negotiate.” You get the picture.

EU leaders said that Barnier and his team were prepared to travel to London on Monday, October 19 to continue discussions. However, Boris Johnson in a recorded TV clip said that there was little point in continuing the talks unless the EU fundamentally changed its position and Frost later on Friday told Barnier “not to bother” coming to London unless he had new proposals to make.

On Friday afternoon, French President, Emmanuel Macros, put the EU position bluntly:

“On Brexit, the British have greater need of an agreement than the EU. The Europeans are ready to pursue the negotiations. Our conditions are clear and well known. From now on, it is for the UK to choose if it wishes to have an agreement or not”.

Will meetings between the UK and the EU go ahead during the coming week? Frost and Barnier are to talk on Monday by phone to see if there is a basis for discussions. Following the exchanges between the two sides during recent days one party or the other is going to have to give ground for a meeting to happen. It is unlikely that the EU will bend itself out of shape to meet the demands of the current UK government. Johnson, Gove, and Frost may have said too much to leave themselves any room for manoeuvre.

But in negotiations, never say never. But don’t hold your breath either. As Ivan Rogers, Britain’s former EU ambassador, told the Guardian, about what might happen after a no-deal exit on January 1 next:

“The [EU] aim would be to force the British side back to the table. But as LPF conditionality would still be on the table for any negotiation after a no deal, I find it hard to see how Johnson could go back to the table when the terms from the other side were clearly unchanged. He is now boxed in. No deal has, for many years, been a substantial risk – not least because, for so many on the right, it was always the objective, and the ‘only true’ Brexit. If we go that route, it is in the EU’s strategic interests to make it rough. And they would.”