Artwork for FTWeekend Comment - issue dated 06.06.20
© Jonathan McHugh 2020

The writer is a senior fellow at Harvard University and advises the UK Department of Health and Social Care

We are nearing the final act in the Brexit drama and the language is not one of happy endings. Michel Barnier, the EU’s negotiator, is exasperated at what he sees as British ad-libbing. But if Brussels keeps on sticking to the same old script, it risks pushing the UK back towards no deal, which would do needless damage to both Britain and the EU at a time of extreme economic vulnerability.

In the shadow of coronavirus, patience is short and bandwidth is limited, with Mr Barnier announcing “no significant progress” and regretting the UK’s refusal to keep the clock ticking. Many assumed that Prime Minister Boris Johnson would request an extension, rather than try to handle a pandemic and a trade negotiation at the same time. Brussels officials had hoped to keep the UK on the hook for further financial contributions. But any doubt that the December deadline is real has now been dispelled, by both cabinet office minister Michael Gove and the governor of the Bank of England.

I do not detect some secret desire on the part of ministers to take Britain over the cliff under the cover of Covid-19. While there are still a few diehard MPs who see “no deal” as totemic, and damn the economic consequences, many more fear the impact of a failure to get a free trade deal. Analysis suggests that a no-deal Brexit would be most harmful in the North West and West Midlands, places already hard hit by coronavirus. One recent poll found two-thirds of voters and 49 per cent of Leave voters wanting a longer transition period, so that government can focus on coronavirus. Failure to reach a deal would not go unnoticed by British voters, and the government knows it.

There may not be much point in extending, however, if it simply prolongs the paralysis. It’s not possible to advance thinking on London’s position as a global financial centre, for example, until an equivalence regime is agreed (or not). EU leaders are increasingly distracted by other issues — and that will continue.

The “skinny FTA” sought by UK chief negotiator David Frost is more complicated than he asserts — it requests much deeper access to the single market than for Canada or Japan — but equally is not so vast that it can be impossible to conclude in six months.

With the fourth round of negotiations now ended, the two sides are far apart. I wouldn’t be surprised if the UK ends up throwing the fishing industry overboard, as bait for other things. But, fundamentally, the EU wants a single agreement to cover everything, overseen by a rigorous governance regime and a commitment to level-playing-field standards on employment, environment and state aid.

Spooked by how nimbly Switzerland has played its hand over many years, it is wary of the UK desire for multiple agreements with individual oversight arrangements.

A fudge may still be possible on level-playing-field provisions. Brussels wants the common standards to be EU-specific and tied to sanctions, and London wants a looser interpretation. On state aid, Mr Barnier’s mandate is simply too rigid.

Brussels is understandably concerned that Mr Johnson is seeking to prop up British companies to a much greater extent than any of his predecessors, and build a strong research and science base emulating the successful Darpa defence programmes pioneered by the US in the 1960s. But to demand that a sovereign state adopt EU state aid rules in perpetuity, overseen by a foreign court, seems aggressive and unrealistic — not least when only a month ago, German judges challenged the principle of European Court of Justice supremacy.

Moreover, Covid-19 is changing the picture. Member states are asking for more flexibility to bail out companies affected by coronavirus; Austria is asking for an end to the state aid regime altogether. It seems unlikely that the EU will ever return to quite the purity of the rules it had before the crisis. It would be wrong to insist that a satellite state abides by rules which may no longer hold within the union.

The denouement of this whole sorry story is marred by act one having opened with the wrong script. Neither side started off, four years ago, asking the right question: what kind of new, constructive relationship do we want between the EU and an independent UK? Brussels was in shock, having been assured by apologetic British diplomats that the country would not vote to leave.

Its initial willingness to be flexible was wasted by Theresa May who failed to work out what she wanted, then changed her mind, and didn’t engage effectively with other leaders, who retrenched to a rigid view of the existing treaties. What should have been an open, honest and constructive set of talks was dominated by mistrust. Taking umbrage now seems to have become the default on both sides, with some rhetoric from both Mr Barnier and Mr Frost designed to irritate.

The pandemic has made it starkly obvious why both sides must calm down. Renewed concerns about China’s ambitions make it imperative to retain the security and intelligence alliance. The economic gulf between Europe’s north and south is set to widen as Italy, Greece and Portugal struggle under enormous debt and high borrowing costs. To lose the €94bn trade surplus in goods with the UK would only add insult to those injuries.

It’s now time for both sides to kiss and make up. And to craft a better ending — but that depends largely on Brussels being willing to flex the script.

Letter in response to this column:

Britain should accept the EU has upper hand on Brexit talks / From Thomas Cole, Head of Policy, People’s Vote 2017-19, Former EU Negotiator 2012-16, St Albans, Hertfordshire, UK

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