Are both sides inching closer to a deal?

Nov 04, 2020

After weeks of stalemate on the Brexit front, there has been a shift in the mood music in recent days. Emerging reports tell us that EU and UK negotiators have made significant progress this week towards resolving some of the biggest issues that have delayed Brexit talks so far. While this might raise hopes that a deal could be reached in early November, the differences between the two sides remain substantial, particularly in relation to the level playing field, governance, and fisheries. Negotiations continue this week.

Some reports state that there is progress being made on working through legal texts, which is in line with the organising principles of the negotiations. However, a potential chink in the UK’s armour has emerged: as of 1 November 2020, the UK is now in breach of its deadline to respond to the EU’s formal notice on legal action for violating the tenets of the Withdrawal Agreement. As the root cause of the issue – UK’s highly contentious Internal Market Bill – continues to be debated in the House of Lords, the European Commission has not yet received a response to the start of infringement proceedings which were launched on 1 October 2020. Spokesperson for the Commission, Daniel Ferrie, has confirmed that they have not received a reply from the UK on their legal notice, following which the Commission is now considering next steps in the process, including issuing a reasoned opinion.

"Much remains to be done”

Following days of intensive negotiations, talks continue between both blocs. EU chief negotiator Michel Barnier has stated that both sides are “working hard for an agreement. However, much remains to be done”.

Northern Ireland in the spotlight

Keeping in mind disruption to trade and increase in goods prices, the Irish Government has also reportedly been pressing the EU and UK to allow Northern Ireland exporters to benefit from existing and future free trade agreements between the EU and other countries around the world.

This issue is particularly important, as under the Northern Ireland (NI) Protocol, any goods produced in NI can circulate freely throughout the EU while it adheres to EU Customs Union rules. However, because Northern Ireland will still be legally part of the UK's customs territory, those goods will not be recognised as “EU goods” for the purposes of being exported as part of existing EU free trade agreements (FTAs) with countries like Canada, Japan, South Korea, etc. This would mean that NI exporters would miss out on nearly 60 FTA markets, and the European Commission would potentially need to negotiate tweaks to pre-existing agreements to recognise NI goods as EU goods.

This would also have serious implications for Irish goods, as a number of them contain components or ingredients from NI and are then exported around the world under EU free trade agreements. It would have an adverse impact on cross-border businesses as well. Those in the dairy industry would be particularly hard hit, as nearly 70 per cent of dairy produced in NI crosses the border to be processed in the Republic of Ireland.

The Government’s main argument to press for this is that NI businesses are being asked to take on the complex implementation of the NI Protocol, and that despite their complying with all EU regulatory requirements, they still can’t benefit from EU trade deals. It is understood that the Government has raised the issue informally at the highest levels with the European Commission and the UK government. This issue has also been raised at the EU-UK Joint Committee on the Withdrawal Agreement.