Having now taken a few days to digest the detail of the UK-…

First, let's be clear that negotiating a deal in 9 months, against the odds, and in the middle of a pandemic, is an achievement. It's too easy to underestimate the difficulty of negotiating over the screen for 4 months, from Mar-June, and under enormous pressure. /2

Both @DavidGHFrost & @MichelBarnier and their teams, deserve a lot of credit for sticking up with it in hard circumstances, often with lacking political clarity, & high stakes.

This shouldn't preclude us, or MPs and MEPs, from looking critically at the deal on the table. /3

That we have a deal is a result of the UK & EU having found a way to protect their core defensive interests.

From the EU's view, integrity of the single market is preserved with level-playing field obligations which go virtually beyond any other 3rd-country (even the Swiss). /4

For its part, the UK has negotiated down EU ask on dynamic alignment on state aid; eliminated any references to EU law; removed any role for the ECJ (NB not in the whole future relationship, due to EU law in NI Protocol); and preserved its right to control access to waters. /5

If you look at the deal through the lens of defensive interests, you'll see a victory no matter on which side you stand.

This negotiation was about defensiveness: protecting "sovereignty" on the UK side and "integrity of the single market" on the EU side, and at any price. /6

The compromise on LPF is, in my view, reasonable. On state aid, it includes a commitment to domestic regimes on both sides, with enforcement. Domestic courts should be allowed to review subsidy decisions.

This is far more than UK initial position, but less than the EU’s ask. /7

The non-regression on environmental, labour and social rules is less binding than expected (no arbitration), but it includes commitment to domestic enforcement.

Again, a reasonable compromise, but closer to the EU position than the UK's. /8

What is novel is the "rebalancing mechanism": what happens if there’re “significant divergences” across the LPF in a way that materially affect bilateral trade or investment.

The scope is wide: it applies to any future subsidies, or labour/social, or envi/climate protections. /9

If such divergences are found, either party can take unilateral temporary "rebalancing measures" (eg tariffs), based on "reliable evidence" rather than "conjecture".

Importantly, the right to impose rebalancing measures is symmetrical (both sides can use it), and /10

subject to the proportionality test before arbitration. If rebalancing measures are deemed unjustified, the other party can take countermeasures.

The two principles are just what I proposed several weeks ago as a way to break the deadlock. /11
https://t.co/jhPOopV36z

There's a compromise here if the UK and EU can agree on 2 principles:

(1) the unilateral right to retaliate must be symmetrical (which the EU seems to accept now), and

(2) the proportionality of any tariffs can be challenged before independent arbitration.

(4/n)
— Anton Spisak (@AntonSpisak) December 12, 2020

I think the compromise is reasonable, and I'm glad that sensible minds prevailed in the negotiating room, though I'm a bit doubtful about its functionality, since it could escalate into a tit-for-tat conflict.

Fortunately, there's a review clause after 4 yrs. /12

On governance, the UK secured a concession over removing concepts of EU law from the treaty, as well as role for the ECJ in dispute resolution.

Otherwise, it has folded completely. It accepted a single legal treaty that it had vehemently opposed at the outset; /13

a single governance system; a horizontal dispute settlement mechanism, with possibility of cross-retaliation (restricted to the trade parts of the deal); and robust enforcement provisions on LPF; and provisions on ongoing compliance with the ECHR. /14

On fisheries, there're others more qualified to assess the deal (see John's excellent take below).

I'd note one aspect where the UK has conceded: dispute resolution & cross-retaliation (there can be tariffs if there's no future agreement on quotas). /15

https://t.co/knd9FDO0gf

Fish thread.
Having read the Brexit deal, I believe B. Johnson misled the nation on Thurs when he said Britain could catch \u201call the fish that it wants \u201d in UK waters in 5 years\u2019 time. The clear presumption in the text is that EU fleets will have similar access after 2026.1/12
— John Lichfield (@john_lichfield) December 26, 2020

It's too easy to look at the deal through the lens of defensive interests and conclude it's the best we could get.

In my view, what matters in assessing the quality of a deal is not only the obligations, but also the rights it gives and the balance btwn rights & obligations. /16

If we look at the rights, the deal doesn't bode that well.

True, it provides access without tariffs and quotas (fow now, and s.t. goods qualifying for zero tariffs).

Plus, helpful provisions on air and road transport & energy; which are all a function of UK-EU proximity. /17

But my biggest concern with this deal is that the substantive provisions in the trade part fall even below the standard of recent EU FTAs. It's disappointing and, what's more, makes the overall deal look pretty unbalanced.

Here're several notable examples. /18

1. Mutual recognition of conformity assessment.

The EU agreed it (in limited way) with Canada, US, Switzerland, etc. The UK asked for It in its initial offer (see below).

With the exception of a handful of sectoral annexes, you won’t find it in the final deal. /19

2. A mechanism for recognising equivalence for sanitary and phytosanitary measures (SPS).

The same. The EU agreed with Canada, Japan, and proposed it to AUS/NZ.

Search for it in the deal, but you won’t find it. With implications for trade between GB and NI. /20

3. Provisions for services. Significantly watered down from initial texts.

The final offer on temporary movement of business visitors (Mode 4) is less generous than EU-Japan.

Also, forget about accompanying spouses, children, etc, that the UK had proposed initially. /21

4. No regulatory provisions for financial services.

This isn't about equivalence, but about ongoing cooperation. It can be found in EU-Japan. Forget about it here.

There'll be a non-binding MoU next year.

(Btw, this, from Sunak, is embarrassing) /22
https://t.co/pjQFi0oEyq

Having now taken a few days to digest the detail of the UK-EU agreement, here's a couple of observations from me on the deal, what it means, how we got here, & where it might take future UK-EU relations.

(A long thread)

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Having now taken a few days to digest the detail of the UK-EU agreement, here's a couple of observations from me on the deal, what it means, how we got here, & where it might take future UK-EU relations. (A long thread)

More from Trading

You May Also Like

Having now taken a few days to digest the detail of the UK-EU agreement, here's a couple of observations from me on the deal, what it means, how we got here, & where it might take future UK-EU relations.

(A long thread)