Last reviewed 29 May 2020

There is no mention of the latest round of talks with the European Union among the three main stories for May on the Department for International Trade (DIT) website, and this is perhaps not surprising as press reports have indicated that little or no progress has been made. Paul Clarke examines the reasons for this and summarises the steps that the UK and the EU have taken.

No need to worry

The European Commission issued a statement, by its chief negotiator, which added to the growing sense that the negotiations have stalled. “We were, at last, able to initiate the beginnings of a dialogue on fisheries, even if our positions remain very far apart,” Michel Barnier reported. “That said, with the exception of some modest overtures, we failed to make any progress on any of the other more difficult topics.”

While the Government failed to issue a statement about the progress of the talks, its position was made clear by Cabinet Office Minister Michael Gove when he gave evidence to the House of Lords EU Select Committee. Even if the Union said it would “‘dearly love an extension”, he told peers, he could not imagine saying anything other than “no”. Businesses will be able to prepare in time, even with the ongoing COVID-19 crisis, he predicted, despite the fact that trade bodies such as the British International Freight Association (BIFA) have said that companies “have great reservations over whether they will have the capacity to handle the major changes to the UK’s trading relationship at the start of 2021, such as new customs documentation and procedures”.

What the UK wants, Mr Gove told the Committee, is simply a set of “off-the-peg agreements based on precedent”. In other words, the EU has previously agreed to all these points with other countries, so why not agree to them with the UK? However, Mr Barnier had already poured cold water on this idea when it was raised by the UK’s chief negotiator, David Frost. He had replied: “There is no automatic entitlement to any benefits that the EU may have offered or granted in other contexts and circumstances to other, often very different, partners.”

Quid pro quo

As the June deadline for extending the transition period looms ever closer, the two sides are therefore deadlocked. The UK argues that the EU is trying to force it into remaining tied to Single Market rules over which it will no longer have any control. The EU has responded that the UK is still cherry-picking, still wanting the benefits of close ties with the major trading bloc without wanting to conform to any of its rules. At the least, Mr Barnier has said, that would involve a commitment to upholding standards on state aid, competition, climate, tax and labour. “We are not going to bargain away our values for the sake of the British economy,” he warned. “It is not a nice to have, it is a must-have.”

Northern Ireland back in the spotlight

The problem of implementing an agreement in Northern Ireland that did not result in a hard border with the Republic, thus putting at risk the peace agreement, bedevilled the early stages of discussion between the UK and the Union. In particular it cost Theresa May her premiership as she failed to agree a deal that did not divide her party. When Boris Johnson took over, he announced that he had reached an agreement with the EU that did not involve new border checks. He then told the DUP (Democratic Unionist Party) that neither would it involve checks between Northern Ireland and the rest of the UK. This surprised experts who could not see how such a system could work.

The Cabinet Office has now published a paper setting out the Government’s approach to implementing the Northern Ireland Protocol which shows that it is not in fact possible and that new checks will be introduced. Available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/886289/2020-05-20_Command_Paper__UK_s_Approach_to_the_Northern_Ireland_Protocol-gov.uk.pdf, the paper explains that no tariffs will be paid on goods that move and remain within the UK customs territory. However, any processes on goods moving from Great Britain to Northern Ireland “will be kept to an absolute minimum”.

While the Protocol may seem like just another complicated piece in the Brexit jigsaw, the Northern Ireland Retail Consortium (NIRC) has calculated that making the customs declarations it requires could add between £21,000 and £79,000 to the cost of each lorry load of groceries bound for a supermarket in Northern Ireland.

Out but still in

As the UK moves closer to the possibility of leaving the EU with no deal in place on their future relationship, this month saw a reminder of one of the advantages that is still available during the transition period. The European Research Council (ERC) awarded 55 grants as part of the EU's research and innovation programme, Horizon 2020. Germany received nine of the grants, France and Italy were awarded three and four respectively but the clear winner — with 13 of the grants available — was the UK.

Stalemate or last minute deal?

With both sides accusing the other of intransigence, and with resources that would have been devoted to the possible deal having to be spent on dealing with the COVID-19 crisis, prospects of a deal look bleak. Meanwhile, Mr Gove continues to insist that “it's a difference of philosophies” and that the EU will eventually see that the UK is serious in its determination not to accept EU rules and standards (even if it does not necessarily want to diverge from them).

Prime Minister Boris Johnson and European Commission President Ursula von der Leyen are scheduled to meet in mid-June when they will have to decide if a further extension period is required. They could agree on a further two-year period, or decide that there is still time to conclude negotiations before the end of the year. Alternatively, Mr Johnson could say that there is little hope of further progress and that he is sticking by his commitment not to request an extension. In which case, the UK leaves the Union and the two sides revert to trading on what the Government euphemistically calls Australian terms. As Australia has no trade deal with the EU, this means operating under basic World Trade Organisation (WTO) rules.

Get ready for UKGT

Once the UK does leave the EU, it will need to replace the Common External Tariff (CET) with its own rules and the Department for International Trade (DIT) has accordingly prepared the UK Global Tariff (UKGT). International Trade Secretary Liz Truss said that this would be simpler, easier to use and a lower tariff regime than the EU’s CET. In its guide, available at https://www.gov.uk/guidance/uk-tariffs-from-1-january-2021, the DIT provides access to a UK Global Tariff tool which will enable traders to check the tariffs that will apply to goods they import from 1 January 2021.

Ms Truss argues that the publication of the UK Global Tariff (UKGT) means that there will be an increased incentive for other countries to come to the table in order to maintain or improve upon their preferential terms and conditions. Closer to home, however, the Road Haulage Association (RHA) has warned that the planned 10% tariff on new trucks will stall economic recovery.