Trade talks take time and we don’t have any. What now in negotiations with Europe?

The only eureka moment typically expected during a second round of trade talks is negotiators’ realisation that addressing vast amounts of detail and bridging fundamental differences will take rather longer than the original optimism of politicians implied. Last week’s downbeat statements from the respective EU and UK chief Brexit negotiators, Michel Barnier and David Frost, thus came as little surprise to those with previous experience. Crucially however, the usual solution—for talks to just take longer, probably several more years—is currently being ruled out.

Assuming the UK government continues to maintain 31^st December 2020 as the deadline for ending the transition period, and thus alignment with EU regulations and trade, then big decisions must be taken this year. These will determine the rules applying to around 50 per cent of our external trade as well as internal flows between Great Britain and Northern Ireland. They will cover access to UK fishing waters and EU financial services markets. They will shape our international relations for years to come. Yet ministers are still barely discussing these fundamental issues.

There are good reasons why trade talks take time. The World Trade Organisation provides a common baseline of tariffs and rules for access to other countries’ markets for goods and services. Granting access beyond that, such as removing all tariffs, counts as preferential treatment and is therefore subject to extra terms and conditions. Discussions typically cover issues such as what constitutes a domestically-produced good eligible for zero tariffs (criteria called rules of origin), making sure that trade is fair (level playing-field rules such as on environmental, labour or government subsidies), streamlined customs procedures, and related issues such as the terms for data transfer or mutual access to fishing waters.

The aim of such preferential trade talks is to ensure your country’s businesses have the access they need to the other market, while ensuring the access you grant is perceived to be fair by domestic interests. The other party will have its own version, and a deal balances these interests. Based on respective positions, the early rounds of talks focus on identifying areas of common ground and divergence, steadily building agreement on easier areas acceptable to all domestic interests, before leaving politicians to broker a final deal on the most difficult issues. Assuming sufficient time.

Most countries have precedents for what they seek and can offer, based on extensive domestic consultation and practice. The UK is currently unique among developed countries in starting from scratch, and fairly unusual in not worrying too much about most domestic stakeholders.

On top of this, UK-EU talks were already unprecedented in that they will lead to greater trade barriers compared to the current situation. More so in not being based on a mutual scoping exercise, merely a political declaration to which neither side is fully committed. The production of early draft text by both sides, ahead of identifying common ground, was also novel. It appears so far to have simply amplified differences. Then there is an existing treaty which already determines the trade rules for one part of the UK, namely Northern Ireland.

The consequences of all of this become clear in decisions the UK government must make. There are many pieces to the jigsaw, including the UK-EU deal but also Great Britain-Northern Ireland trade, fishing, a potential UK-US trade deal, UK farmers and UK businesses.

They can’t fit together perfectly. Greater trade barriers between the UK and EU will mean greater trade barriers between Great Britain and Northern Ireland, unless the UK breaches the treaty already signed in the previous round of negotiations. Doing this would however probably end the chances of a UK-US trade deal. Alternatively, prioritising UK-US trade probably means customs controls in Belfast and unhappy farmers, as food standards are relaxed to benefit US food exporters. Protecting UK fishing fleets by refusing EU access to waters, and UK farmers by not conceding on US agricultural demands, would probably leave the UK with no major trade deals at the end of the transition period and for some years beyond, breaking pledges from the 2019 Conservative manifesto.

Without a transition extension, the government faces many decisions this year, while simultaneously needing to prepare ports and regulatory agencies across the UK for the changes.

There is little incentive for the EU to help us. They want a UK trade deal, but not at any cost. It has to be in keeping with what they see as their domestic politics, which means access to UK waters and strict level playing-field conditions. The EU does not intend to concede its international reputation as a tough negotiator. The outrageous triumph in the Withdrawal Agreement, in getting its two main asks—to prevent a land border on the island of Ireland and protect its beloved Geographical Indications for foods from particular regions—while letting the UK believe it had won, means the pressure is off. They are prepared to wait, something of an EU core skill. They think the UK will be back one day, even if it looks like walking away now.

The UK is on the other hand, in international terms, an unknown quantity—a novice starting out, talking big but with no track record. Other countries are watching us carefully. We have until the end of June to take the first big decisions, that being the deadline for agreeing an extension according to the withdrawal treaty, the target for an agreement on fisheries, and when the UK government has said that without sufficient progress it may walk away from EU talks.

Given the backdrop of the coronavirus crisis distracting attention and causing delay to an ambitious negotiating schedule, it would surely seem ridiculous for the UK government to declare talks had not progressed sufficiently by June and walk away as it threatened earlier in the year. More likely we wait for the autumn, and a decision then as to whether to accept a deal, probably mostly—but definitely not entirely—following EU terms and details. All while implementing domestic changes, particularly those at ports of entry and commitments on Northern Ireland, and trying to make progress with the US.

In my view an extension of the transition period makes sense, to give us more time for all of these decisions. The UK government currently disagrees. As former civil servants might say, that is a brave move. For those who will not get what was promised, there will be no hiding place from the binding commitments made in these negotiations. Perhaps it is beginners’ over-confidence, but it is far from clear that these implications have been properly considered.