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Brussels-based European Policy Centre (EPC) has poured cold water on hopes the EU’s position will move on key red lines as the deadline to reach a trade deal before the end of the transition period fast approaches. While the “mood music has improved” the group argued “progress remains extremely limited” and the “new format of intensified talks has failed to generate fresh momentum”.
The think tank set out five scenarios which were likely to occur as a result of ongoing negotiations between Michel Barnier and David Frost.
They warned there was “a sense on the UK side that EU negotiator Michel Barnier’s position is moving, thus generating new hopes for a deal.”
They added time was “likely to alter the perception of Brexit” claiming even in the short term, the focus of the EU and its populations “will no longer be on Brexit.”
In a piece for the EPC, Jannike Wachowiak, a junior policy analyst, and Fabian Zuleeg, chief executive of the think tank, the pair argued “the balance of power in these negotiations dictates that the UK will need to concede significantly more than the EU”.
Looking to five future outcomes the EPC outlined an option which could see a “basic deal” being reached which does not “protect the EU’s red lines”.
However, they claimed it was highly unlikely for this option to be reached, adding of it: “While the EU has signalled readiness to consider the UK’s red lines (eg the role of the European Court of Justice, a noticeably different deal on fisheries) and discuss possible compromise ‘landing zones’, it will not drop its fundamental demands.
“The EU is willing to let the UK government claim victories if compromises on certain details can be found, but this flexibility reaches its limits when it comes to the EU’s economic interests and political unity.
“A basic trade deal that is decoupled from the EU’s demands on governance and the level playing field (or does not include an agreement on fisheries) is, therefore, the least likely scenario.
The think tank explored two other options which could see a basic deal by summer or autumn 2020 with EU red lines intact.
They warned it was “unlikely” that the UK government will concede any of its red lines before the summer.
But they claimed “a thin trade deal” in autumn was still possible provided that the UK “starts to seriously engage with the political trade-offs between market access and divergence.”
The EPC added: “While compromise is required from both sides, the balance of power in these negotiations dictates that the UK will need to concede significantly more than the EU.
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“Even if both sides want a deal, negotiating all the technical details by the end of the year remains a challenging task, particularly as there are domestic decisions within the UK that impact the EU-UK negotiations but are still pending (e.g. how the UK’s state aid regime will work).”
A fourth potential outcome was a “late extension leading to a basic deal based on UK concessions” which the think tank said was up to 10 percent likely.
The EPC suggested Boris Johnson could “contemplate a short extension (possibly rebranded as something else) to not face a no-deal outcome.”
This could be possible if Mr Johnson “realises his brinkmanship does not pay off and the EU is indeed serious about its affirmations to not agree to a deal at any price”.
They added of the fourth outcome: “While it is still technically possible to secure more time in autumn (most likely via a new mixed treaty or as part of a future relationship deal), a late extension request involves significant legal and political obstacles.
“Such concessions would be a difficult sell for Johnson and certainly cause an uproar within his Conservative Party. As such, it seems unlikely he would go down this route.
“If he does, however, it would send a strong signal he wants to secure a deal.”
The final outcome which the EPC said was 60 to 75 percent likely was a “no deal by default or design”.
They said there was a “high potential” for this to occur despite this not being the desired outcome for either side.
If the UK failed to adhere to its Withdrawal Agreement obligations, the EPC said this could “seriously undermine the prospects for a future agreement, and thus would most likely lead to no-deal.”
They added: “Future political events (e.g. a second COVID-19 wave this autumn) might take the spotlight away from Brexit when a political push is most needed.
“If the UK Government holds out until the last possible moment, time might simply run out.
“Domestically, the blame for a no-deal Brexit could be laid at the door of an ‘intransigent’ EU and the economic consequences at least partly attributed to the fallout from COVID-19.”
Concluding, the EPC said under all five scenarios, the chances for a comprehensive and ambitious deal as envisaged in the Political Declaration are “virtually zero.”
They said: “A deal that does not respect the EU’s red lines is highly unlikely as the EU has no incentive to sign a deal that does not protect its long-term interests.
“The moment of truth will come in autumn when political attention turns to Brexit once again, and Johnson has to reveal his hand.”
Deadlocks still remain over fishing and the level playing field with the latest round of talks set to take place next week.
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