Boris Johnson

  • Brexit trade deal talks between the EU and UK will resume this week.
  • The UK is refusing to consider extending the Brexit transition period despite the ongoing coronavirus crisis.
  • Theresa May's former Europe adviser predicted a "bust-up" between the negotiating teams.
  • Growing numbers in the EU believe the UK may not even want a trade deal with thh EU.
  • Visit Business Insider's homepage for more stories.

The EU fears that the UK government is deliberately stalling on Brexit trade deal negotiations, and may secretly be aiming to exit European trade arrangements without first agreeing a new deal.

The UK is due to exit Europe's trade and customs arrangements at the end of 2020, despite growing pressure from business groups to extend the Brexit transition period.

However, Boris Johnson's government insists the country will leave, regardless of whether a new trade deal is negotiated.

The hardline stance, in which few concessions are being offered to the EU, has led some in Brussels to wonder whether the UK government even wants to sign a new trade deal before 2021.

"The chasm is both broad and deep," an EU source close to negotiations told Business Insider.

"Increasing numbers here [in Brussels] wonder if the British Government wants a deal at all."

This chasm was illustrated recently by an exchange of letters between the UK's chief negotiator, David Frost, and his EU counterpart, Michel Barnier last week,

Frost, chosen by Johnson to lead the UK side, said the UK was "perplexed" by the EU's approach, which he recently branded "ideological," and that the trade deal Brussels was offering was unfair.

Barnier over the weekend told The Times newspaper that the UK needed to show "more realism" in talks, and accused Prime Minister Johnson of rowing back on commitments he signed up to during the Article 50 negotiations.

"There is a big gap on level playing field, governance, and fisheries, and the talks are not going awfully well," Hilary Benn, chair of the House of Commons' Future Relationship with the EU committee, told Business Insider.

Anand Menon, director at the UK in a Changing Europe think tank, said he didn't think there would be a breakthrough during this week's talks, despite it being the last full round before the crunch meeting later this month.

"Neither side is ready to give concessions this week. Both sides are reconciled to a 'meh' sort of summit where everyone is unhappy, but nobody wants to walk," he told Business Insider.

Raoul Ruperal, who served as chief Europe adviser to former UK prime minister Theresa May, said failure to make significant progress by the end of this week's round of talks could put the entire negotiation at jeopardy.

"It looks like we're heading to some sort of bust-up over the big issues," he told Business Insider.

"And the question is, what is the path back to the table and getting things back on track?

"If there is a falling out, the path back looks quite challenging."

Johnson is ignoring warnings about the Brexit transition period

The EU's chief negotiator, Michel Barnier. (Getty)

This stand-off is fuelling concerns that the UK is set to walk away without a deal when the transition period ends in December, creating more chaos for supply chains and businesses being pushed to the limit by the COVID-19 outbreak.

UK opposition parties have urged Johnson to avoid this outcome by extending the transition period, which is scheduled to end on December 31. It can be extended by up two years, under the terms of the Withdrawal Agreement.

Major business groups have issued the same plea. The logistics industry has warned the UK government that British hauliers cannot prepare for January while dealing with the effects of the coronavirus. Other business groups are waiting for the outcome of this month's crunch meeting before deciding whether to also go public.

Yet, despite warnings about the damage a crash-out on January 1, 2021 would do, the UK government is insistent that it will neither request nor accept an extension to the transition period - and this message has been heard loud and clear in EU capitals. Johnson's government says extending the transition would only create more uncertainty for business, and delay the UK's sovereign decision to detach itself from the EU's core institutions.

The UK's hardline opposition to extending the transition period has fueled suspicions that Johnson's government is actually aiming to leave without a deal.

Phil Hogan, the EU's trade chief, last month said the UK was not approaching negotiations seriously, and planned to blame the economic woe caused by leaving the EU without a trade deal on the devastating impact of COVID-19.

One member of Johnson's Cabinet recently told The Spectator that "the costs of an Australian-style deal have dropped massively," because the pandemic had already done massive damage to UK businesses and supply chains.

Menon said he believed that while Johnson would prefer a deal, he was not averse to leaving without one.

"There's no doubt they are serious about their red lines," he said. "They are absolutely serious about not being under EU law. The UK is perfectly willing not to have a deal, but they're preference is to have a deal."

He said a part of the UK's thinking was that there will be significant disruption for businesses whatever happens, given Johnson is not seeking a close relationship with the EU of the sort pursued by his predecessor, Theresa May.

"The gap between deal and no deal is thinner than it's ever been before," Menon said. "They [government] have the argument that businesses are going to have to adapt anyway, so they might as well adapt to all the changes at once."

Labour MP Hilary Benn, who has chaired the Brexit committee since 2017, agreed with Menon, pointing to what he said was a relatively relaxed UK government approach to securing a new trading relationship with the UK's biggest trading partner.

"It's extraordinary that the government has not done an updated economic assessment of the kind of deal it's looking for with the EU, whereas on the US trade deal there were 50 to 60 pages of assessment," Benn told Business Insider.

"I cannot for the life of me understand why our most important relationship is treated in that way."

A detailed new report by the Social Market Foundation for the Best For Britain campaign group says that the combined impact of COVID-19 and leaving the transition period without a trade deal would create pockets of economic damage nationwide, with the northwest and the West Midlands being the most severely affected.

Any breakthrough is likely to come late in negotiations

While the prospects of this week's talks producing a breakthrough appear remote, some observers point out that neither side is likely to make key concessions until later in the year anyway.

Georgina Wright of the Institute For Government think tank told Business Insider: "The UK and EU only expect real movement towards the end of summer and beginning of autumn.

"It's completely normal at the start of negotiations for there to be little movement and for both sides sticking rigidly to their positions. They want to get a sense of the full spectrum and what trade-offs are possible."

Wright said a likely outcome of this week's talks was "both sides saying there hasn't been sufficient progress, but they are confident that there will be in the coming weeks," paving the way for talks to continue over the summer.

Menon agreed. "The breakthrough probably won't be until September or October. It'll be late in the day," he said.

Johnson has previously threatened to walk away from negotiations and prepare the UK to trade with the EU on costly World Trade Organisation rules, if there isn't enough progress in talks by the crunch meeting in June.

However, both sides are expected to continue negotiating into the summer, even if there is a bust-up this week.

Wright said that while recent exchanges between London and Brussels have been frosty, the UK's decision to publish its draft negotiating text could be key to unlocking negotiations if, as expected, they continue beyond this month.

"That's possibly the best way to try to get the EU member states to move from their position," she said.

"Now member states can reflect on the UK's text, and get a better sense of where the UK is coming from."

If a breakthrough does eventually arrive, what could it look like?

Former UK government official Ruperal said it would "involve a bit of give and take on both sides," with the EU making concessions on the emotive issue of fisheries, and the UK on what the EU calls the level playing field - an agreed set of rules to prevent businesses in the UK undercutting the EU, and vice versa.

"In most areas there is a landing zone that would seem reasonable to both sides," Ruperal told Business Insider.

If talks don't collapse next month, they could later this year

However, Ruperal warned that the toughest issue to resolve would be state aid, on which "the gap is huge."

"The area I find hardest to see a landing zone is state aid," he said. "It's politically and technically complex."

Even if UK and EU negotiators do overcome their differences and reach an agreement, the timeframe for implementing it by the end of the transition period in December is much tighter than in normal trade negotiations.

"The problem here is we don't have the luxury of time," the Institute For Government's Wright told Business Insider. "You can't take the talks to the wire in December in the same way you did with the Article 50 negotiations."

Compared to talks over the Brexit Withdrawal Agreement, which concluded late last year, the EU's process for ratifying a trade deal is more complex, and will require several weeks before transition ends on December 31.

This means, in reality, both sides have just a few months to strike a deal. In total, UK and EU negotiators have less than a year to negotiate a free trade agreement, while most deals take a few years to be thrashed out and put into law.

Ruperal told Business Insider: "If there is a breakthrough, it [the negotiations] can begin to move quite quickly, potentially. If there is a big breakthrough, the rest can fall into place. But the absolute latest would have to be the end of October or start of November. That's when you'd have to get things pushed towards ratification."

The Institute For Government on Saturday released a paper setting out other ways both sides could create more time for talks while extending transition remains off the table. Both the UK and EU have already ruled out one option, which is attaching to a trade deal an implementation period for businesses to prepare for new trading arrangements.

The UK in a Changing Europe's Menon said that while a major breakthrough in negotiations was more likely in the autumn, so was Prime Minister Johnson taking the nuclear option and deciding to walk away from talks altogether.

"Politically, a lot of it is about the blame game," Menon said.

"I don't think politically it makes much sense for the UK to walk away now. It makes more sense to continue to negotiate, to look reasonable, and then turn around in the autumn and say 'well, look - the EU screwed us'."

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