The deal: not what it looks like

By Pete North - December 27, 2020

Many of my assumptions about the deal were wrong. Like many others I was expecting a thin deal. And indeed many are still calling it that because of what it doesn’t contain. Trade wonks were looking out for particular devices such as equivalence on REACH or mutual recognition of conformity assessment. The absence of these such devices, though, does not equate with a “thin deal”.

The first mistake is to look at this deal, or indeed any EU deal, as a boilerplate FTA. But this one especially. It is not an FTA. It is a partnership agreement. The framework for developing closer ties. As with most such agreements the content of the deal is less important than the institutional architecture. This one sets up a Partnership Council, 19 specialised committees and four working groups which will no doubt be expanded over time.

In effect, these are negotiating silos. The Brexit trade talks have only just begun. Though the deal does not contain much of what we might have hoped for, it is broad if not deep, and must be looked at in the wider context of the the whole relationship including the withdrawal agreement and the Withdrawal Act which ports EU regulation into UK law. Retained regulation will continue to play a major role in rebuilding the equivalence arrangements. We must also take into account the separate declarations effectively following Australia’s strategy of unilateral alignment.

In addition, as we have already explored, the deal does dispense with EU law, but in a very significant way pivots toward Geneva, encompassing all of the major international organisations which form the basis of most EU technical law.

The summary notes to the deal give the game away. Though the deal doesn;t go as far as formalising the various regulatory relationships, it lays down the building blocks. The section on aviation safety is a clue.

103. The Agreement is largely in line with precedent and sets out a framework for cooperation on aviation safety, and a process for agreeing Annexes to the agreement that will facilitate recognition of UK and EU certificates, approvals and licences. Areas where the UK and EU could agree Annexes in future include: monitoring of maintenance organisations; personnel licences and training; operation of aircraft; and air traffic management.

104. The airworthiness Annex to the Agreement sets out the conditions for the UK and EU to recognise each other’s aeronautical products and designs. For example, minor changes and repairs to aeronautical products and designs that are approved in the UK will be automatically accepted by the EU. In addition, the Annex foresees the possibility of the EU extending their scope of automatic recognition of UK aeronautical products and designs once it gains confidence in the UK’s capability for overseeing design certification.

The deal, therefore, sets the course and declares our intentions. In effect, the contentious decisions have been deferred to take the sting out of the deal to ease its passage through ratification. On a superficial level it allows Frost to tell us that we no longer align with EU law, the deal amounts to a non-regression, or rather non-divergence pact.

In a way, it is something of a victory for the ERG in that they envisaged a GATT24 agreement on tariffs in a “managed no-deal” scenario, propped up by “mini deals”. In a round about way, it could be argued that this deal is exactly that. It eliminates tariffs as a starter for ten, it provides for basic continuity of trade as a third country, and removes any ECJ influence. But instead of it being no-deal, we have a framework agreement as preferred by the EU with a view to rebuilding the relationship over time.

In that light, there is a certain genius to it in that all sides can claim victory. The measure of this deal, though is not what it is. Rather it is a matter of where it is going. Here begins a new journey on a long continuum. Over time we will see more annexes added to the deal, and though the will be no such thing as EU law in the bilateral relationship, rules that give the same effect shall appear in it. Though the UK has not adopted the boilerplate TEFU tract on subsidies as can be found in the Ukraine agreement, the character is essentially the same. Subsidies must still fall within legitimate parameters.

As we remarked yesterday, this agreement should not be compared with Canada or Japan’s EU FTA. This is very much a unique agreement which has to pay far closer attention to the political zeitgeist so as not to spook the horses. Unusually it does not to the same extent copy out boilerplate tract from WTO agreements. It certainly tracks the principles therein, but seeks to go further. In many cases the language is less binding but it is leaden with political obligation. One might call it formal informality.

To call it a thin deal is to misread this agreement. A thin deal on tariffs without the technical instruments we might have hoped for would be substantially fewer pages. It is only “thin” insofar is it will fly under the radar of the ERG whose superficial tests will be met. But if you were hoping for a deal that removes regulation and binding commitments, you’re better off moving to Mars. Technocracy is here to stay.

Beyond assessing the overall character of the deal, it will fall to specialists in each individual areas to pass their judgement upon it, and no doubt the media will focus on the relative trivialities such as fishing. On a more macro level the consensus view is about right. It doesn’t go as far on services as we need it to and those dependent on frictionless trade are sure to be angered. This is a major step back from single market particpation.

What matters is that the deal is a pathway back to integrated trade, one piece at a time, off the media radar. Through the joint committees we will see instruments added in much the same way that agree components of TTIP have been smuggled through the back door with only minimal protest from fringe NGOs. No-one else will notice or care.

No doubt the ERG and BXP types will call any arrangement BRINO or re-join by stealth particularly since the deal does not provide for substantial deregulation or divergence. This, though does not impinge on sovereignty as such. We are more than entitled to have our “bonfire of regulations”. It just means we won’t be exporting anything if we do. The limited practical freedoms we have may allow us to pivot toward other markets where we may feel is in our interests to do so, and in some areas this could be significant, but I’m sceptical.

In the end the deal should have been more than it is, but in such a politically charged atmosphere, this is about as far as it could have gone at this stage. The economic cost of that will be considerable and it will take two years at least to get the ball rolling through the various committees. A lot of work has to be done to rebuild trust and confidence between the parties, where the EU has to get the measure of Brexit Britain’s intentions and behaviour.

In this, one gets a sense that certain pennies have dropped. No doubt the election of Biden poured cold water on a number of transatlantic ideas and the UK is reassessing its global strategy, perhaps realising that the EU still matters as a trading partner. If there is a change in tone and attitude, the process of rebuilding will be faster.

This will no doubt leave remainers puzzling as to why we would go through such an enormous bureaucratic exercise to accomplish what amounts to very little at enormous cost. This is a dispute where remainers and leavers will never see eye to eye. This exercise is a switch from supranationalism to intergovernmentalism, broadening our horizons beyond Brussels, recognising that Britain was never an enthusiastic member of the EU and would always have to disembark before it reached its final destination – whatever that may be.

Brexit will never satisfy the eurosceptic fundamentalists because reality simply cannot oblige their definition of sovereignty, and though we may sit as sovereign equals in international forums, we do not sit as power equals. If we are to accomplish anything internationally we will need to build partnerships and alliances of like-minded nations, not least because the problems and threats we face in this century are far beyond the capacity of any country acting alone. Leavers just believe cooperation can happen without political subordination. Though remainers will never see what the issue was, the die is now cast. A course has been set. It now falls on all of us to see if we can build on what has been made of it.