On Global Trade & Investment
Published Three Times a Week (with occasional bonus quotes) by
The Global Business Dialogue, Inc.
Washington, DC  20006
No. 76 of 2020

Click HERE for Wednesday's quote on China's fishing fleet in the Eastern Pacific.

“[G]iven that they [the EU] have refused to negotiate seriously for much of the last few months, and given that this summit appears explicitly to rule out a Canada-style deal, I have concluded that we should get ready for January 1 with arrangements that are more like Australia’s based on simple principles of global free trade.”

Boris Johnson
October 16, 2020
Some time ago, the UK Prime Minister, Boris Johnson, set October 15 as the deadline for reaching a trade agreement with the European Union.  As October 15 grew nearer, everyone who cares about the UK-EU relationship was focused on the question, would Prime Minister Johnson stick to that deadline? Well, the ides of October arrived yesterday, but there was a complication. The European Council was in the midst of a two-day summit in Brussels, and it seemed – and seemed reasonable – that the British Prime Minister would wait for that meeting to conclude before making his decision. But the EU itself didn’t wait. On Thursday, that is on the 15th, the European Council issued a statement with the conclusions from its meeting – then still in progress. Their assessment of the talks with the United Kingdom was a key part of that statement and read in part as follows:

The European Council reaffirms the Union’s determination to have as close as possible a partnership with the United Kingdom on the basis of the negotiating directives of 25 February 2020, while respecting the previously agreed European Council guidelines, as well as statements and declarations, notably those of 25 November 2018, in particular as regards the level playing field, governance and fisheries.
Against this background, the European Council invites the union's chief negotiator [Michel Barnier] to continue negotiations in the coming weeks, and calls on the UK to make the necessary moves to make an agreement possible.

That last highlighted passage suggests that, from the perspective of the EU, the path forward needs to be paved with further concessions from the United Kingdom.  To say the least, that is not how Prime Minister Johnson sees the situation. As he put it in his statement earlier today:

For whatever reason, it is clear from the summit that after 45 years of membership, they [the EU] are not willing – unless there is some fundamental change of approach – to offer this country the same terms as Canada.

Many have concluded from the subsequent developments that the EU did not expect Boris Johnson to take such a firm step away from a negotiated trade agreement with the European Union and toward a reliance instead on the MFN provisions of the WTO, i.e., the so-called Australia model. 

First, for those who might have mistaken the olive branches in Mr. Johnson’s statement as an opening, subsequent statements from the Prime Minister’s office swept away any ambiguity. Exhibit A here is the comment from the British Government spokesman who said, “From our point of view, the trade negotiations are finished.” 

Second, although yesterday’s statement from the European Council implied that future concessions would have to come from the United Kingdom, German Chancellor Angela Merkel took a more balanced approach. In a hopeful comment earlier today, Ms. Merkel said:

We asked Britain to be willing to compromise. This of course means that we too have to make compromises.

Third, following Mr. Johnson’s strong statement, the EU’s chief negotiator, Michel Barnier proposed to fly to London on Monday to continue the negotiations. The British have said no, advising the EU official that there is “no basis for negotiations,” according to The Telegraph.
Events are moving too quickly for us to believe we can add to them in any way. Still, we’ll allow ourselves one guess. That and a dollar will get you a cup of coffee at McDonalds. (It will cost a bit more elsewhere). Our guess is that the UK and the EU will work out a trade deal but probably not before the 1st of January. Put differently, January 1 could well see the EU and the UK trading on WTO terms. It shouldn’t take the two sides very long after that, however, to figure out that they can do better.

Finally, we confess our original plan for today’s TTALK was the “smaller” but related topic of who gets to fish where in the waters that surround the United Kingdom. We will come back to that soon. It is, after all, one of the three big areas of gaps in the hoped for agreement between the UK and the EU, the other two being, in the words of the European Council statement, “level playing field [and] governance.”  
Statement from the Prime Minister takes you to the statement issued earlier today in London by Prime Minister Boris Johnson, in which he explained that the UK was now operating on the assumption that there will be no trade agreement between the United Kingdom and the European Union, and that as of January 1, the UK and the EU will trade on WTO terms. This was the source for today’s featured quote.

Talks Over is a link to the Euronews story with the above quote from a spokesman for Prime Minister Johnson.

Conclusions of the Meeting is a link to this statement from the European Council on the summit held in Brussels on October 15 and 16.

No Basis for Negotiations is a link to The Telegraph article with this UK response to Michele Barnier’s plan to travel to London next week.

Or Other GBD Notices, click below.