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Can the UK and EU finally net that trade deal?

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It is remarkable that, even at this late stage, with the UK prime minister’s October 15 deadline for a political deal looming ever closer, the Brexit trade negotiation still hasn’t really kicked into high gear.

David Frost, the UK’s chief Brexit negotiator, will meet EU counterpart Michel Barnier in London this week, and the two sides will engage in “restricted format” talks to try to intensify discussions. But there must surely be a limit on how much the sides can tinker around the edges.

Optimists note that a high-level political channel has been opened between Boris Johnson and European Commission president Ursula von der Leyen — a move that reflects the fact that the Frost-Barnier track is widely seen to have reached its useful limits. 

But the “channel” is ultimately only as useful as what is communicated down it. For now we continue to dance around the well-worn issues of state aid, fishing and governance, amid reports of only incremental movements by either side. 

And yet both camps clearly want a deal and to say the “landing zones” are in sight — even if they still have divergent understandings of what those landing zones might look like.

Which means that the question of the political choreography of the coming endgame is becoming increasingly urgent: crudely put, this is how both sides can manage the timing and optics of the concessions each needs to make.

The outlying risk is that they continue to wait so long for the other to make a move that when the move comes it is too little, too late (there is a risk that each side has overinflated expectations of the other’s willingness to compromise).

The stand-off over fishing rights is one particularly combustible area. This week the British have put this issue front and centre of their negotiation demands — partly, I suspect, to distract from ticklish forthcoming concessions on state aid, and partly because the EU position (maintaining the status quo) is so obviously indefensible. The temperature is rising and that worries officials on both sides.

Mr Barnier phoned round the main EU fishing member states this week to — as one put it — “soften us up” for coming EU concessions and ask which stocks they wanted “prioritising” in the negotiations. But it seems the EU fishing states collectively refused to take the bait.

Mr Barnier was told to stick to his mandate to “uphold” current levels of fishing access for EU fleets and to maintain the linkage between a deal on fish and a wider trade deal, according to those familiar with the conversation.

This is not because EU fishing states are unaware that they will have to make concessions in the end, just that they see no point in doing so now — recalling that a satisfactory fishing deal was always meant, in their minds, to be linked to a free trade agreement. 

They argue that Mr Barnier should use that leverage, given that nearly 70 per cent of UK-landed fish is sold in the EU.

Fishing states’ logic is that, if the UK does a trade deal, they will have to concede some fish and Mr Johnson will get something he can then trumpet as taking back control of UK waters. That will be a clear Brexit dividend, even if the exact size of the payday is likely to be obscured and may well be smaller than many in the UK would wish.

And if there is a no deal? Well, then the UK’s own hard-over position will make sense, but it won’t change the fact that Mr Johnson will have “won” masses of fish for a British fleet that is not big enough to catch it all and — until a deal is done — has nowhere to sell it. 

So while a deal on fish is clearly in both sides’ interests, the political risk is that this kind of stand-off creates a potentially toxic dynamic — the EU stands its ground on fish, and the UK equally stands its ground on other parts of the FTA. Nobody moves.

There is another potential choreography issue over Mr Johnson dropping the offending clauses of the UK internal market bill. 

This needs to be done in concert with the FTA, but it would be wise to avoid an “ultimatum” or stand-off situation where the European Parliament refuses to ratify the deal until Mr Johnson drops the clauses, and vice-versa. Both sides need to avoid a parliamentary face-off.

So there remains a danger that accidents can happen. Mr Johnson’s deadline for a political deal might be October 15 (the date of the EU leaders’ quarterly European Council summit) but the EU side seems rather more relaxed.

Some EU diplomats and officials speculate that incremental improvements in the run-up to the European Council will open the door to a “tunnel” or the “submarine” (when the teams clam up and get down to the final business) in the final weeks of October, with a moment of political theatre in early November to seal the deal.

That all sounds orderly, and in keeping with the eleventh-hour timing of a typical Brussels negotiation. But it is also built on the presumption of the old EU tactic of running the negotiation into the end zone and forcing Mr Johnson to concede 80 per cent to the EU, while Brussels offers some concessions round the edges.

That could be how it goes down. It might also prove a miscalculation that overestimates how far Mr Johnson is prepared to walk back from his “sovereign” Brexit.

A deal absolutely remains to be done. It should be done. It probably will be done, but accidents can still happen. 

Brexit in numbers

Line chart of Number of collaborations with EEA countries (000s) showing British business research links with Europe have dropped sharply

One factor in UK decision-making on a no deal will be to balance short-term disruption (which is probably coming anyway) with a long-term relationship that leaves the UK at least notionally free to write its own future without reference to Brussels.

While much of the media coverage is focused on potential short-term disruption — which, like Michael Gove’s recent warning of 7,000-truck queues in Kent, is probably overstated — the more important questions may well be around maintaining the UK’s long-term attractiveness as a destination for investment. 

This week the FT highlighted that an analysis of Horizon 2020 grant applications had found that, since Brexit, the international collaborations of British businesses under the EU’s flagship innovations scheme had nearly halved since the referendum. 

In 2016 UK companies had 15,900 international research partners in Europe, but that figure had fallen to 8,300 by 2019, the last year for which data are available. All this during a period when UK companies were fully eligible to participate in the grant schemes.

Business groups were rightly concerned about those numbers, which point to a longer-term challenge that needs to be addressed as the new Brexit world unfolds: keeping the UK attractive relative to other countries.

That’s partly about other policy areas, such as investing in a skilled workforce, but also finding ways to ensure that informal barriers — different patent and regulatory regimes, for example, or a cumbersome immigration system — don’t deter engagement with the advanced economies on our doorstep.

That Horizon 2020 analysis should provide a wake-up call. A trade deal will help restore certainty and build confidence, but in the long term — long after exporters and importers have adapted to the new customs systems — this risks being the longer, slower tail-impact of leaving the EU.



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CDU leadership backs Armin Laschet’s bid to be German chancellor

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Armin Laschet won a key victory in his campaign to succeed Angela Merkel when the party he leads, the Christian Democratic Union, backed him as their candidate for chancellor in September’s Bundestag election.

The CDU governing executive’s decision to back Laschet was a setback for Markus Söder, governor of Bavaria, who has also laid claim to the title.

The move was expected, but could prove controversial. Söder is by far the more popular politician, and many CDU MPs had argued in recent days that the party would have a much better chance of winning September’s election with Söder as their candidate.

After throwing his hat into the ring on Sunday, Söder said he would accept the CDU’s decision. However, it is still unclear whether his party, the Bavarian Christian Social Union, will accept Laschet as the CDU/CSU’s joint candidate. The CSU’s executive is meeting later on Monday.

Sunday’s events threw the process for finding a successor to Merkel, who will step down this year after 16 years as Germany’s leader, into confusion. The CDU and CSU traditionally field a joint candidate for chancellor: that person is usually the leader of the CDU, which is by far the larger party.

Volker Bouffier, governor of the western state of Hesse, said the CDU’s executive had unanimously backed Laschet at a meeting in Berlin on Monday morning. He added, however, that no formal decision had been made on the issue.

Bouffier said the executive had made clear “that we consider [Laschet] exceptionally well-suited and asked him to discuss together with Markus Söder how we proceed”. He added that “the current polls should not determine the decision over [who we choose as] candidate”.

Since Laschet was elected CDU leader in January, the party has suffered a precipitous slump in the polls and that created an opening for Söder. He has frequently argued that the CDU/CSU’s joint candidate should be the politician with the best chances of winning in September.

Voters have blamed the CDU for the government’s recent missteps in its handling of the coronavirus pandemic, in particular the slow pace of Covid-19 vaccinations. Revelations that a number of CDU and CSU MPs earned huge commissions on deals to procure face masks also badly damaged the party’s image.

The malaise in the CDU was highlighted last month when it slumped to its worst ever election results in the two states of Baden-Württemberg and Rhineland-Palatinate, which for decades had been Christian Democrat strongholds. National polls currently put support for the CDU/CSU at between 26 per cent and 28 per cent, way down on the 33 per cent it garnered in the last Bundestag election in 2017.

There was more bad news at the weekend for Laschet, who as well as being CDU leader is also prime minister of North Rhine-Westphalia, Germany’s most populous state. A poll for broadcaster WDR in NRW found that only 26 per cent of voters in the state are satisfied with the work of the regional government Laschet leads and only 24 per cent of voters consider him a suitable candidate for chancellor.

The slide in the CDU’s fortunes contrasts with the rise of the Greens. The party garnered 8.9 per cent of the vote in 2017 and is now polling at 23 per cent. It is seen as a racing certainty that it will be part of Germany’s next government.



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EU and UK edge towards accord on trade rules for Northern Ireland

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The UK and the EU are making progress in talks on how to apply post-Brexit trade rules in Northern Ireland, raising hopes of an agreement that could help reduce tensions that have spilled over into violence on the streets of Belfast.

Officials on both sides said that recent days of intensive contacts had given cause for optimism that the UK and EU can craft a “work plan” on how to implement the Northern Ireland protocol, which sets the post-Brexit terms for goods to flow between the region and Great Britain. EU Brexit commissioner Maros Sefcovic and his UK counterpart David Frost may meet to review progress this week. 

“They are advancing on a technical level and probably we will see a [Frost-Sefcovic] meeting rather sooner than later”, said one EU diplomat, while cautioning progress depended on firm commitments from the UK and its “unequivocal support” for the Brexit withdrawal agreement.

Other EU diplomats and officials said strong UK engagement in the technical talks on implementation of the Northern Ireland protocol had raised hopes that an understanding could be reached. 

“The mood seems to have warmed up a bit — the tone of the discussions is quite good,” said one British official. 

The talks are a follow up to a draft plan about implementation of the Northern Ireland protocol that was submitted by the UK to Brussels at the end of last month — a step the EU said was essential to rebuilding trust after Britain unilaterally extended waivers for traders from some aspects of the rules in March. This move prompted EU legal action.

The discussions between British and EU officials in recent days have taken place against the backdrop of violence in Northern Ireland, stoked in part by resentment within the unionist community at how the protocol treats their region differently to the rest of the UK.

From April 2 there were eight consecutive nights of unrest in Northern Ireland, involving both unionist and nationalist areas. The police responded by deploying water cannons for the first time in six years.

The Brexit deal placed a trade border down the Irish Sea in order to keep commerce seamless on the island of Ireland. The Northern Ireland protocol requires customs and food safety checks for goods entering Northern Ireland from Great Britain.

Officials said the EU-UK talks now under way about implementation of the protocol cover a wide array of practical issues ranging from trade in steel and medicines to the policing of food safety standards, how to deal with residual soil on plant bulbs, and the construction of border inspection posts. 

“Technical talks are ongoing”, said an EU official. “Depending on the progress made at technical level, a political-level meeting may be held soon.”

But EU diplomats and officials also cautioned that more work remains to be done, especially on the thorny issue of applying food safety checks. Difficult talks also lie ahead on the timetable for putting particular measures in place.

Meanwhile Downing Street played down a report in The Observer that it was resisting proposals by Dublin for a special crisis summit to address the outbreak of violence in Northern Ireland.

“We have not refused anything,” said a Number 10 official. “It’s something we will consider.”

However there are concerns on the British side about the wisdom of holding a summit in Northern Ireland with Irish government ministers at a time when pro-UK loyalist groups have been engaged in street violence.

Irish officials said taoiseach Micheál Martin and British prime minister Boris Johnson have spoken and would “maintain close contact over coming days”.



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France to offer mRNA jabs as second dose after AstraZeneca 

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France has become the second country after Germany to recommend that younger people who have had a first dose of the Oxford/AstraZeneca vaccine be given a different jab for their follow-up shot.

The mixed-dose approach has been recommended by health experts in both countries — despite there being little clinical trial data to support it — because of the slim risk that younger people can develop blood clots when given the AstraZeneca jab.

The World Health Organization reiterated its position on Friday that there was “no data on interchangeability of vaccine platforms”, noting further research was needed.

The move comes as the European Medicines Agency said it is also probing a possible link between the Johnson & Johnson vaccine and four serious cases of unusual blood clots in the US, where it is currently being rolled out. It is not yet being distributed in the EU or UK. The vaccine is based on an adenovirus vector, similar to the AstraZeneca shot.

The EMA said it was not yet clear whether there was a causal link. J&J said it is working with experts and regulators to assess the data. “Our close tracking of side effects has revealed a small number of very rare events following vaccination,” it said. “At present, no clear causal relationship has been established.” 

In France, the policy will affect roughly 530,000 people under age 55 who were given a first shot of AstraZeneca from early February to mid-March when they were eligible under its strategy of giving healthcare workers the vaccine, while reserving the mRNA vaccines for elderly people most at risk.

The Haute Autorité de Santé, a panel of medical experts which advises the government, has said they should be given booster shots from BioNTech/Pfizer or Moderna. France has changed course to use AstraZeneca only in people aged above 55 since the blood clot issue emerged.

France announced its decision on Friday after the HAS recommended the mixed-dose strategy. Germany took a similar stance in early April. 

Health minister Olivier Véran told RTL radio on Friday that the mixed-dose approach was “totally logical” given the analysis of European regulators and France’s desire to continue its vaccination campaign as the scientific evidence evolved.

European countries, whose vaccination campaigns have been slower than world leaders such as the US, Israel, and the UK, have been grappling with how to use AstraZeneca doses since the blood clot reports emerged, with some countries applying new age restrictions and others pausing its use entirely.

But with Covid-19 still spreading, officials are also seeking to reassure people that the AstraZeneca vaccine’s benefits still largely outweigh the risks. 

The European Medicines Agency recently established that there was a “possible link” between the AstraZeneca vaccine and unusual blood clots with low blood platelets that have mostly affected women under 60 years old, though regulators have said there is no specific risk factor by gender.

The EMA said it had examined at least 86 such reported cases and 16 deaths, and recommended updating the vaccine’s safety information to list the clots as a possible side effect.

Élisabeth Bouvet, a vaccine expert and member of the HAS, said on Friday that the mixed-dose approach was a practical solution intended to protect younger people, who are at lower risk of developing severe forms of Covid-19, from the risk of blood clotting side effects. “It is really a choice based on safety,” she said.

“Given that the protection of the Covid-19 vaccines begins to diminish after three months, these people need an additional dose,” she added. “The idea is to give mRNA vaccine as a second dose for this population in a ‘prime-boost’ strategy.”

Even in the absence of clinical data, Bouvet said that they believed the approach carried low risks of side effects and was likely to offer people additional protection given that the Covid-19 vaccines all aim at the same spike protein on the coronavirus.

“We think that this approach will work,” she said. “There is no reason to expect any particular side effects with mixed dosing but it would be good to study the immune response it creates.” 

Peter English, a retired Public Health England consultant in communicable disease control, said it was “reasonable” to use other vaccines, particularly in younger patients, until the risk of blood clots caused by the AstraZeneca vaccine has been clarified.

“If we are to achieve vaccine-induced herd immunity [not just through masks and social distancing] a high uptake of vaccination will be required in the groups most likely to spread the virus, not just in those most at risk if infected,” he said, noting vaccine mixing and matching has been done for other diseases. 

Trials studying a combination of vaccines, including AstraZeneca’s and Russia’s Sputnik V shots, are under way.



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