Pieter Cleppe: There is still good likelihood of a Brexit deal

Even in an orderly scenario, the market access to the EU the UK asked for will be more restricted

Pieter Cleppe.

Is Johnson keen on 'no deal'? No, he is not. He understands that this could bring a lot more damage to the UK economy, and I think that he is very keen for a deal just as the EU side is very keen for a deal, says Pieter Cleppe, Policy Analyst, in an interview to Europost.

Mr Cleppe, do you expect а positive outcome from the current talks on the future EU-UK relationship?

I think yes, there is still a good likelihood of a deal, but even a deal will of course not solve everything. Even in an orderly scenario, the market access that the UK asked to the EU will be more restricted. That is of course not a good thing, but it is the most likely outcome. The most sticky issue is not fish, it is also not state aid. It's governance, and governance basically means an answer to the question what happens when both sides disagree on the implementation of the deal on the future relationship. Will the European Court of Justice be able to intervene, will there be some kind of secretariat monitoring everything, so that is the key question that still needs to be resolved.

The EU said that it continues to work for a deal, but not at any price. Is London ready to intensify the negotiations, provided that when time was running out it delayed the new round of talks by seven days?

The UK is playing hardball, so they are basically saying that the EU needs to move for there to be continued talks. And I think that the UK has actually succeeded in that. The European Commission has clearly communicated that in every trade deal people make compromises. Dutch Prime Minister Rutte also explicitly spoke about compromises, German Chancellor Angela Merkel also spoke about compromising. French President Macron was a little bit more hardcore, as he is always the bad cop, but I think the communication of the UK, the content was not: “don't come here anymore we don't want to do anything with you anymore”. No, the communication was: “we want to continue negotiating but then you will have to do compromises”. The EU has openly said that they are willing to make compromises. Of course, it's not going to be easy, I think, especially the governance issue, but there definitely is continued negotiations.

The approach of Boris Johnson, saying recently that there is “no basis” to resume trade negotiations, isn't it a trick, a kind of kicking the can down the road, as to accuse the EU afterwards, if there is 'no deal'?

Both sides are actually guilty of not tackling the issue, of postponing it until the end and wasting time. Both sides are right to accuse each other of that. That is not good, they should have tackled the issue much earlier, and now it is much more unnecessarily complicated. Is Johnson keen on 'no deal'? No, he is not. He understands that this could bring a lot more damage to the UK economy, and I think that he is very keen for a deal just as the EU side is very keen for a deal. They have both promised compromise in order to get there.

In your view, what should it mean to have “as close as possible partnership with the United Kingdom”, which is the EU's intention?

One can interpret this in different ways. It doesn't tell precisely what it means. It could mean many things. I would mostly see it as a sign of goodwill on the part of the EU. It may mean that they are willing to keep trade open as much as possible. But that is also what the UK wants, and I think both sides agree there. In the ideal scenario for the UK, the UK does not have to change any of its rules, does not care about the EU in terms of regulation or rule oversight and gets exactly the same market access as today.

In the ideal scenario for the EU, there is exactly the same market access for the UK as today, but the UK takes over all of the EU regulations. I think we probably will land somewhere in the middle, in the sense that the middle is not where the UK takes over 50% of the EU's regulation but where there is, let's say, sufficient trust that the UK regulation does not give an unfair competitive advantage to the British.

We can define it in many ways but I personally think the EU has to be flexible - if you say we will only trade with partners that take over all of our rules, which is the dream scenario for the EU side, then it would mean that you end up with no trade. No country will of course accept that. Even Norway, Iceland and Liechtenstein, even if they are bound to take all the relevant regulations related to the access they enjoy to the EU market, they constantly negotiate and haggle about it.

The only way to resolve this in a way that will protect trade and jobs as to limit the damage of Brexit is to be flexible. It is good that the EU wants to compromise as well, but now they actually have to show that in practice. I should add that even if the EU is overflowing with goodwill and wants to give the UK as much trust as can be possibly imagined, this may not be feasible for the EU. This is because the European Court of Justice in Luxembourg is actually a very inflexible actor in this negotiation, and could perhaps strike down the deal. I recently published a comment making the case that perhaps the EFTA Court could be a solution.

Why the EFTA Court?

Because it is the court interpreting the relationship between the EU, on the one hand, and Norway, Iceland and Liechtenstein, three non-EU countries that have access to the single market, on the other, and this is the only court that has been trusted by the European Court of Justice to interpret EU law. The EFTA Court is actually based in Luxembourg, but it is not an EU court. It is a court belonging to Liechtenstein, Iceland and Norway. So one way would be for the UK to 'dock' to the EFTA Court, which is actually not that complex. It simply means that the UK would delegate judges to the EFTA Court that will then interpret aspects of the EU law in case there is an issue of EU law at stake in the interpretation of the deal between the EU and the UK.

Is there still time to negotiate something like this?

I agree this is a very last minute, but this is a court that has existed for 25 years, so it has a very long track record and enjoys a lot of trust. The European Commission has actually suggested it as a solution. If the UK would accept this, it could also be a solution for another complicated relationship and another complicated negotiation that is still not resolved between the EU and Switzerland, and it could be a solution that would leave the sovereignty of the UK intact.

I think they have to look again at that solution. It would not mean that the UK joins EFTA or the Single Market. It would only mean that the UK uses this court to solve the governance conundrum that we have. Because what the EU will do, and probably has already done, is to propose a solution whereby the ECJ, its own top court, will be the ultimate arbiter of all aspects of EU law. And if the EU doesn't do that, the ECJ may well strike down the deal that the EU would agree with the UK. That is a big issue.

And what about the level playing field?

This is also an issue. Level playing field means to accept certain rules in return for market access. I think the UK will be happy to align with certain regulations, but then the big question is what happens if there is a dispute on whether the UK has respected these regulations or not.

In such a scenario, the question of governance comes up, and if then the EU says we need our own top court to rule on this, I think it will be very hard for the UK to swallow this. Even if Boris Johnson would accept it now, to avoid a cleavage or excessive damage, then this will be second-guessed by the UK in the future for sure. I think the main challenge is to agree some kind of a mechanism, also on top of that mechanism to determine what happens if the UK or the EU change their regulations.  If the EU side says we actually want to continue to constrain your regulatory freedom then it's not going to work. It's ridiculous that the UK would continue to be in a regulatory straitjacket run by Brussels and the court in Luxembourg. A good deal is a deal that is sustainable and leaves the UK with all they always wanted - a lot of trade but also a lot of sovereignty.

What would be the possible scenarios after 1 January 2021?

Let's start with the most pessimistic scenario - that is, 'no deal'. When you then have a lot of issues at the border, confusion, issues with Northern Ireland, apart from the EU-UK deal, there has to be an agreement on how to implement the Northern Ireland aspects of the Brexit deal. I think a messy 'no deal' will not last very long, and they have to go back to the table after 1 January. Maybe it is optimistic, but that is my opinion.

In the more optimistic scenario, I think they can still agree something. Boris Johnson could agree the arrangement worked out by the EU. The EU's top court is having a very important role. The EU wants to push the arrangement that it also agreed with Georgia and with Ukraine, whereby the European Court of Justice is really more powerful over the judiciaries of these countries than it is over the judiciaries of EU Member States. Will the UK accept that? I would not rule it out that Boris Johnson can possibly agree to that in order to solve the issue, but it will not be a sustainable deal. The UK will second-guess it, saying we don't want it, it is too damaging for our sovereignty, we have to renegotiate that. I think the ideal scenario, as I've explained, is to look at what works. The EFTA Court is one example of something that already works and could be implement relatively quickly. The next few weeks will be incredibly important regarding the choices that have to be made. 

British industry expresses concerns over readiness for the changes due in January. What will be the biggest threat for businesses?

Simply put, two things. First of all: market access. Certain economic activities will no longer be legal to be deployed, certain trade will no longer be legal, if for example certain chemical elements that the UK want to export to the EU, in theory the EU can say well this is a substance under the UK chemical regulation, which we do not recognise. That is a very pessimistic scenario but that is possible. Number two is that if something can be traded legally, these goods will be subject to tariffs. All this imposes a very high cost on business on both sides.

Do you think the EU is learning the right lessons from Brexit?

I don't think so. What we have seen in the last year and in the reaction to the Covid crisis is that the European Union is doing what it is always doing. It tries to use every crisis to transfer more power and money to the EU level. Every single time when there is a crisis, EU policymakers say we need a solution, and the solution is more money and more power to the EU level.

Now we have this joint lending scheme, SURE and the Next Generation EU. Every single time, the countries that are net payers are angry they have to pay, and we see people in the countries that have to accept the conditions linked to the payments are angry as well. Think of Hungary, Poland, countries that will now have to accept rule of law conditions, or some other European countries that are not happy with other kinds of more economic conditions linked to transfers or loans, and this creates a lot of resentment, it puts Europeans against each other, it strengthens the case of the opponents of the EU.

Nevertheless, the EU always follows the same path. It is addicted to asking for ever more money and power, and ultimately this hurts the EU and also jeopardises all the good aspects of the project, the framework for open trade and the economic prosperity that all of this brings. It is all endangered by these transfers of EU money, we can see how in some countries it is leading to a lot of corruption, and even to support for organised crime.

I can point to a study by the Central Bank of Italy, which has described how the mafia has actually been strengthened by all this European cash. In some countries, even the government leaders themselves are cashing-in on European subsidies - or are using European funds to reward their allies and increase their power. This is definitely one of the reasons why the UK, the second biggest Member State and geopolitical player, has left - the concern about all this, the waste of money, the lack of responsibility and the ever-greater tendency of the EU to concentrate power and money. Still, exactly a month after the UK left, in February and March, when the EU faced a massive crisis, it could not stop itself from doing what it had always done - asking for more money and power. It is a bureaucracy completely out of control, and it is endangering the project it is supposed to protect.

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Pieter Cleppe is a Brussels-based Policy Analyst, dealing with EU affairs, Brexit, and the Eurozone. He’s a columnist for The Daily Telegraph and The Spectator and a frequent commentator in international media. Between 2008 and 2020, he has headed the Brussels office of the British EU affairs think tank “Open Europe”. A trained lawyer, Pieter Cleppe previously practiced law in Belgium and has worked as a cabinet adviser to the Belgian State Secretary for Administrative Reform. Prior to that, he served as an analyst at Belgium's Itinera Institute, which he helped establish.

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