The level playing field will be the defining fight of UK-EU trade negotiations

The two sides are miles apart on this fundamental issue

February 18, 2020
SOPA Images/SIPA USA/PA Images
SOPA Images/SIPA USA/PA Images

Beavertails. Mounties. Maple leaves. This is just some of the Canadiana admired in the UK—alongside Canada’s trade relationship with the European Union. Ministers have repeatedly set out their desire to use Canada as a model for the UK’s future trade arrangements with the EU.

But they failed to read the fine print in the EU’s original negotiating guidelines. This set out the conditions the UK must sign up to as a condition of its desired access to the EU’s market. Brussels wants to maintain a “level playing field” to prevent the UK rowing back on standards, gaining a competitive advantage and undermining the bloc’s ability to maintain its rules. This will become the defining fight of the trade negotiations, and if neither side moves, could mean the transition ends not just with no trade deal, but also no security cooperation—and an awful lot of mutual recrimination.

As EU Chief Negotiator Michel Barnier puts it, zero tariffs and zero quotas, the UK’s principal ask on goods trade, comes with a third zero: “zero dumping”—not necessarily in the normal sense of tipping a load of, say, below cost surplus steel into a market, but in the sense of unfair competition from a UK no longer bound by single market rules. Angela Merkel reminds us on a regular basis that after Brexit, the UK goes from being a member state to a third country competitor, and must not be allowed to undermine the EU from outside.

The EU has repeatedly insisted that while the UK can choose an off-the-shelf model from the “Barnier staircase,” the UK is not Canada. It is too big, too close geographically and too intertwined with the EU economy after 47 years of membership. Memo to Dominic Raab: the Channel is smaller than the Atlantic.

The new draft EU mandate, being battled over in Brussels in the run-up to adoption by member states at the end of the month, sets out the areas of concern. It requires the UK not to move back from the EU’s environment or labour standards in force at the end of the transition. It wants it to maintain transparency and cooperation on tax. And it wants the UK to continue to apply EU rules on state aid—forever. What is known as “dynamic alignment” would see the UK as an eternal EU rule-taker with no seat at the table. It points out that the Political Declaration the UK signed up to to get the deal over the line in the autumn committed both sides to “maintain” high standards based on existing commitments.

The government—at the moment—is having none of it. It prizes regulatory autonomy and thinks Brexit would be pointless without it, as David Frost, now lead negotiator, made clear in Brussels yesterday. But the UK is also at pains to make clear that doing things differently to fit UK circumstances does not mean a race to the bottom. In his Greenwich speech, the prime minister pointed out that “we are not leaving the EU to undermine European standards, we will not engage in any kind of dumping whether commercial, or social, or environmental,” confirming that his government does not intend to descend into what David Davis called a Mad Max dystopia or, more prosaically, Philip Hammond called Singapore-on-Thames.

But chummy assurances from British ministers are not enough for the EU. Ministers may change. Domestic economic pressures or external trade partners may force departures from those standards. So the EU wants them in a legally-binding treaty.

Theresa May had already conceded much of this—in the EU-UK customs arrangement she had in her “backstop,” she signed up to clauses committing to “non-regression” on environmental and social standards, and to alignment with the EU on state aid. She offered to include commitments on workers’ rights in her proposed withdrawal agreement bill. But those commitments disappeared along with the backstop, and the final version of Johnson’s withdrawal agreement bill went through parliament with no domestic commitments (although lawyers point out that he has signed up to quite a sweeping clause on any state aid that could affect trade with Northern Ireland).

That refusenik tactic makes sense in terms of the starting point for negotiations. The EU’s concerns about the level playing field are one of the UK’s potential negotiating cards. But in the summer or autumn ministers will probably have to make a choice: are they prepared to give the EU something more concrete than reliance on good intentions in return for the pretty minimalist trade deal they are seeking?

Or do they ditch the aspiration for beavertails and end up with a bunch of quokkas, in an “Australian-style” no deal?