Brexit trade deal: So near and yet so far

“On technical issues we’re 90% there,” was the upbeat assessment of EU-UK trade talks by a well-informed EU diplomat on Friday.

Well, sort of upbeat. Because he then went on to say: “That remaining 10% is political. And if that can’t be solved, then the 90% is irrelevant. There will be no deal.”

Such is the mood in Brussels ahead of next week’s round of formal negotiations to agree a post-Brexit trade deal with the UK, with fewer than 100 days to go before the end of the transition period.

EU leaders believe the prime minister’s domestic difficulties with Covid-19, plus dissatisfaction with his leadership amongst a number of his own MPs, make it more likely that Boris Johnson will seek an agreement with Brussels on a trade deal, rather than attempt to sell a no-deal scenario as a win, come the year’s end.

Nonetheless, EU diplomats have responded cautiously to reports in the UK press that a deal is now clearly in sight and that the government is keen to go into a negotiating “tunnel” with Brussels to clinch an agreement.

“We’re nowhere near there!” was the reaction of one EU insider close to the negotiations. Brussels insists its negotiators only ever enter a “tunnel” when the political landing zone is clear for both sides to see.

But the key sticking points in trade talks remain stubbornly the same: fishing rights, competition regulations (the so-called level playing field) including state aid and the governance of any eventual agreement – i.e. how disputes between the two parties would be handled.

Some in the EU think government sources are now briefing UK journalists that a deal is (almost) at hand because Downing Street is getting ready to compromise. The EU’s argument has long been that it has listened to and tried to respect UK red lines in negotiations (for example, to avoid involving the European Court of Justice in the treaty), but that the UK has not taken steps towards recognising EU priorities.

The UK negotiating team denies this and says the opposite is true.

Whatever the case, the above EU diplomats think any positive noises coming out of the government are good news for negotiations.

But the glass-half-empty brigade in Brussels are more sceptical. They worry Downing Street is raising expectations of a deal as a stick with which to beat the EU; allowing the government to paint itself as flexible and the EU as intransigent, should negotiations fall apart.

These diplomats note the UK has yet to volunteer concrete compromise proposals they know would be acceptable to Brussels. Trust in the Johnson government is not great.

They also roll their eyes at the “win” against Brussels being touted by some in the UK; an assertion that the EU is now backing down and will be awarding the UK third country status, thereby avoiding what the prime minister warned could have been an EU blockade on food from Great Britain to Northern Ireland after Brexit.

“That was bonkers,” is how one well-placed insider put it to me.

The EU view is that the row over third country status was “created” by Downing Street to then demonstrate a “climbdown” by Brussels that actually never took place.

The EU says it never imagined not being able to award third country status to the UK allowing food exports to the bloc. It awards that status to many countries worldwide, from Mongolia to Mauritania. But, as with all these countries, Brussels wants to see domestic legislation regarding food standards. It says that is what it is still requesting from the UK.

But what you also frequently hear in EU circles is that ultimately they don’t care how the prime minister sells or frames a narrative around a deal to his backbenchers or the wider public back home, as long as a compromise is found that translates into the legal text of a treaty between the two sides.

And there is talk of compromise on state aid and other level playing field issues in Brussels. It would involve pretty big concessions from the EU, which means not all member countries are currently on board, notably France.

The proposal looks like this. The EU would soften its ask on the UK signing up to common regulations on labour, the environment, state aid etc., thereby respecting the UK principle of post-Brexit sovereignty. In exchange the EU would ask the UK to sign up to a robust dispute settlement mechanism.

This, so the EU can feel assured that if the UK broke competition rules (or vice versa of course) swift legal action could then be taken.

Don’t forget, EU leaders need to be able to sell any eventual trade deal with the UK to their businesses and other voters back home. And major UK trading partners France, the Netherlands and Germany already feel the shadow of upcoming big national elections.

Under this compromise suggestion, EU politicians would want the UK to sign up to common “principles” on labour, the environment and state aid. The UK would be free to implement those principles as it saw fit and if Brussels felt that implementation allowed unfair competition to UK businesses in the EU single market, then it could trigger an arbitration process.

As I mentioned, though, this is just a proposal from some member states. You’d need all EU countries to agree. The UK would also need to show its willingness to make concessions.

Bearing in mind the difficulty of all this, the

guesstimate I’m hearing in Brussels right now is that a trade deal “could” be agreed by mid or late November. This would still allow time for the deal to be ratified by the European Parliament and the UK parliament before the transition period ends on 31 December.

The aim amongst negotiators is to keep the deal at a level where it would need approval by all EU leaders but not all national parliaments – remember how the EU’s deal with Canada got held up by the regional Belgian parliament in Wallonia? – even though what the EU and UK are still working towards goes beyond a basic free-trade agreement to include fishing rights, police and judicial co-operation, professional qualifications and the flow of data.

Something else to watch out for next week is the meeting of the Joint Committee to discuss the implementation of the Withdrawal Agreement, including the Irish Protocol.

Cabinet minister Michael Gove will be in Brussels.

The EU says it has a number of concerns to raise with him – such as UK readiness to have necessary IT systems and port checks up and running as of 1 January. Brussels also wants to know what the government intends to do with its Internal Market Bill, parts of which threaten to override aspects of the Protocol.

The EU is eager to remind Mr Gove that the Northern Ireland Assembly this week adopted a motion rejecting the Bill, making it harder for Downing Street to argue that the controversial aspects of the legislation are designed to protect Northern Ireland.

Essentially the EU hopes that tensions over the Bill will eventually disappear – with some of the government’s concerns being dealt with in the Joint Committee, and others, in a trade deal between the EU and the UK agreed by the end of the year.

Accepting both sides’ insistence that they can’t and won’t go for a deal “at any price”, chances are that could still happen.