The two sides must find a compromise or risk a collapse in talksby George Peretz / May 27, 2020 / Leave a comment
Last week saw the publication of the UK’s draft legal texts for a final future relationship agreement (or, rather, set of agreements) with the EU. The chasm between the parties is wide, including on the issues of state aid and procurement. Is there any hope for a compromise?
The starting point for any settlement negotiation is to try to work out what the real interests and concerns of the parties are, and whether there is a way in which the other side can meet those concerns and interests without sacrificing its own. You also need to look at the inconsistencies and anomalies in each party’s position, and each needs to have an honest assessment of its strengths and weaknesses, at least in private.
The EU’s position is best understood when it is appreciated that there is a dramatic asymmetry between the position of the UK outside (but next to) the EU, and that of member states. Both state aid control and fair and open procurement are in the structure of the EU treaties: they are fundamental aspects of the regime binding all member states. The state aid regime limits members’ ability to (for example) offer large bungs to footloose multinationals in return for locating in their territory, or to subsidise their widget exports so as to undercut other member states’ widget industries. The procurement regime requires countries to run open and fair procedures that stop them favouring local but less cost-effective firms.
But—critically—compliance with those regimes does not just benefit other member states—it also (incidentally but inevitably) helps a neighbouring state that has a huge volume of trade with the EU. If Germany cannot freely subsidise its car exports, that benefits UK car manufacturers as well as French ones: and if France has to operate fair and open procurement procedures, that benefits UK companies (or at least UK-owned companies operating in France) as well as German-owned ones. In contrast, after the end of transition, the UK will—subject to the Northern Ireland protocol—be able to subsidise as it likes and, subject to the WTO’s less far-reaching General Procurement Agreement (GPA) rules, be able to run procurement procedures that are less strict about fairness and openness.
Put another way, the reason why the UK is not loudly…