EU capitals take harder attitude towards UK

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Few EU leaders expected much to emerge from last week’s round of EU-UK trade talks, but the mood in Brussels in the subsequent days has become pretty despondent

Officials and diplomats here say they are confronting twin realities that will make a damaging no-deal outcome at the end of the year tougher to avert. 

First, the attitude towards the UK is hardening within many EU capitals. London’s refusal last week to budge on the points of key concern to the EU is seen less as a reflection of negotiating tactics and brinkmanship, but rather an “ideological” attachment to notions of British economic and regulatory sovereignty. 

This kind of purism leaves little scope for the compromises the EU sees as being needed to forge a trade agreement — particularly in the realm of “level playing field” provisions aimed at restricting the two sides’ ability to undercut each other. 

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The second is the cold logic of a timetable that the UK cemented by its decision to rule out an extension to its post-Brexit transition period. Parallels with this time last year, where there was a last-minute dash for a withdrawal deal between the two sides, do not hold water given how much unfinished work lies ahead today. 

“If we don’t see movement in the next three or four weeks a deal will not be possible,” said one senior EU diplomat. In many EU capitals, including Berlin and Paris, “the position is toughening”.

The stand-off in last week’s round over rules on state subsidies and fishing rights could, of course, still prove to be a reflection of UK gamesmanship aimed at running down the clock and forcing last-minute concessions by the EU. 

But there is currently little circumstantial evidence to support the case for the optimists. UK prime minister Boris Johnson appears not to have engaged intellectually with the trade-offs, despite his claims earlier this summer to be ready to do a deal. 

As a result, David Frost, the UK negotiator, has proved unable or unwilling to broker compromises on the big sticking points, asking instead for the EU to come back to those areas later. 

Member states continue to back Michel Barnier’s insistence on dealing with all the topics — both nettlesome and straightforward — in parallel rather than leaving the difficult things to the last minute. Officials say they have encountered no pressure from capitals for the EU’s chief Brexit negotiator to buckle to Britain. 

Emmanuel Macron, the French president, will for example have little appetite to go to French fishermen clobbered by a bad last-minute deal on fish and explain why he has simultaneously given their UK competitors ready access to EU markets. 

Recent articles in the UK press, including a Times piece suggesting Number 10 regards a hard exit from the transition period as a “doddle”, have not gone unnoticed in Brussels, which is fully prepared to see a no-deal outcome.

“They are driven by the ideological side of the Tory party, not the pragmatic wing, and that is why it is so risky now,” said one senior EU official. “Member states are aware that this guy is toying with the idea of no deal and they are taking it seriously.”

No one is ruling out an improvement in the negotiating climate when talks reconvene on September 7, and the UK side continues to insist it wants a deal. Mr Johnson proved happy to flirt with a no-deal this time last year, before largely folding to EU demands over Northern Ireland late in the day. 

But if this is the approach, he is leaving things very late indeed. The vast bulk of the withdrawal agreement text was in place well before last October’s sprint for an accord over Northern Ireland. This time the two sides are not yet into joint drafting — something that ideally would have been under way throughout the summer. 

The EU will want to have the bulk of the trade agreement settled by the time it convenes for a summit on October 15, with only a few details left to hammer out afterwards. This will involve intensive work by lawyers on a highly complex agreement that could run to as many as 700 pages, as well as translation into watertight terminology in 23 languages. The European Parliament will need to have the text in hand by the start of November at the latest if it is to have time to scrutinise it ahead of ratification before the end of 2020. 

While Mr Johnson called for more “oomph” in the discussions in July, there has since been no evidence of a change of pace on the ground. “Pretty soon either some political things have to happen,” said the EU official, “or we are simply heading towards no deal — by accident, or lack of political will.”

Please keep your feedback coming to [email protected]. Peter Foster returns next week.

Brexit in numbers

The risk of the UK and Brussels failing to strike a trade deal does not appear to be troubling the currency markets

The pound has rebounded from the battering it suffered in March at the height of the coronavirus-induced market panic, and has been hovering close to its highest point of the year just above $1.31 against the dollar. 

As Eva Szalay reports, the options market that companies and investors use to hedge against losses or to profit from exchange-rate shifts suggests sterling faces no big risks in the next six months, even as the clock ticks down to December 31, when the post-Brexit transition period expires. 

Further reading

Von der Leyen confronts trade policy deficit as Phil Hogan resigns
The departure of the EU trade chief is a significant blow for the commission president. His exit comes as the commission attempts to broker a compromise in its fractious relationship with the US over state support for Airbus and Boeing, while also navigating upheaval within the World Trade Organization and the Brexit trade talks. (Jim Brunsden and Sam Fleming, FT)

The risk of a no-deal Brexit is rising, and that’s no bad thing
If the UK wants to make at least a limited success of Brexit, it should exploit the many high-tech opportunities the EU has missed and still misses. A well-managed Brexit means accepting short-term costs for long-term gain. (Wolfgang Münchau, FT)

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