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UK Government publishes draft free trade agreement in hope of breaking EU negotiation deadlock

21 May 2020
Brexit Flags
The UK has sought to strengthen its negotiating position in its talks with the EU by publishing a series of draft legal agreements it hopes will form the basis of a comprehensive free trade agreement.  The move comes as concerns grow that the EU's focus has shifted to prioritise the Covid-19 pandemic at the expense of UK trade talks. 

On 19 May 2020, the UK government published a series of draft texts setting out how it envisages the future EU-UK relationship could be enshrined into law after the agreed transitional period expires (currently scheduled for the 31 December 2020).  The texts cover a range of subjects, including trade, fisheries, aviation, energy, law enforcement and judicial cooperation. 

The Guardian reports the texts represent an attempt by the UK to "reboot" the negotiation process which has made little progress in recent weeks.  Both the UK's lead negotiator David Frost and the EU's lead negotiator Michel Barnier have expressed frustration with the delays and entrenched positions.  With the next round of talks due to start on 1 June, the UK is eager to find a way through the impasse, hence the publication of the detailed texts. 

The 12 draft legal documents include a Comprehensive Free Trade Agreement and side agreements covering areas such as fisheries, aviation, energy, law enforcement and judicial cooperation. The positions taken in the texts are consistent with the UK Government's document entitled The Future Relationship with the EU: the UK's Approach to Negotiations, which was published on 27 February 2020, leading some to speculate that this is a restatement of the UK Government's position for the benefit of UK citizens, rather than a genuine attempt to make progress, a position strengthened by the inclusion of an open letter from David Frost to Michel Barnier, making arguments which must surely already have been made directly.

Prime Minister Boris Johnson’s official spokesman told reporters at a briefing: “we have decided to publish these now as a constructive contribution to the negotiations so that they are available to all and so that the Commission can share the texts with the Member States in case helpful.” 

Cabinet Office minister Michael Gove told MPs “significant differences of principle” remain on fisheries, governance and the regulatory level-playing field, including State aid law. UK sources have indicated that the newly released legal documents could be used by Mr Barnier, the EU’s chief negotiator, to convince EU leaders to compromise on some of these key issues. 

In response to the publications, Barnier commented: “I welcome the UK’s publication of draft legal texts today. Transparency is very important in negotiations. [….] In the next round, we must make tangible progress across all areas, including level playing field and governance.”  

Michel Barnier also noted that the European Commission had already published the legal texts it proposes should be used for the future relationship on 18 March 2020. 

The Brexit transition period is scheduled to come to an end on 31 December 2020, but can, in theory, be extended by mutual agreement provided a decision is taken by 1 July 2020.  However, the UK government has declared that there are no circumstances in which the UK would delay its departure from the standstill relationship with the EU beyond this end of this year, including the coronavirus crisis.

Should the transition period end without a UK-EU trade deal, both the EU and the UK will necessarily be subject to non-preferential World Trade Organisation ("WTO") rules. As the UK will step out of the EU's Single Market and customs territory on 1 January 2021, it will be subject to the EU's high external tariff schedule as it applies to all non-preferential EU trading partners (i.e. where no free trade agreement is in place, lowering tariffs and treating origin of goods preferentially). 

Pending a future UK-EU comprehensive trade agreement, the UK will have to apply the WTO's "most-favoured nation" ("MFN") principle in its trade with the EU as from 1 January 2021. MFN treatment means that the UK will have to treat the EU (and the EU will have to treat the UK) as favourably as they treat any other trading partner with which they do not have a free trade agreement.  UK exports to the EU will be subject to the EU's high external tariffs and vice-versa. This will impact negatively many sectors, for example all trade in agricultural products and food.  

The UK declared on 18 May 2020 that although it intends eliminating tariffs for most products post-Brexit, agricultural products, the car industry and fisheries will continue being protected against cheap imports from third countries.  Absent a deal, such tariffs will also have to be applied on imports of such goods from the EU, and vice-versa. That would likely lead to disruptions of traditional trading patterns with the EU, increased costs for UK consumers and less favourable origin rules in the EU-UK trade. It would therefore make sense for EU and UK negotiators to either conclude a deal before the end of the year or shortly after the end of the transition period to minimise financial and employment losses on both sides of the Channel.

DWF Law LLP has a breadth of expertise in Brexit and trade related matters. We are able to draw upon a team of leading experts, in our UK, Brussels and other international offices, who have extensive experience in this area, including working within the UK Government on Brexit matters, within the European Commission and helping business leaders quickly adapt to new laws and regulators.

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