Trade negotiations in recent years have faltered due to an atmosphere of suspicion. Politicians need to start sending more positive signals to allow diplomats and negotiators to start finding ways to seal agreements.
When the UK-EU Trade and Cooperation Agreement was being negotiated it was seen an exception. Instead of opening up trade, its goal was to ease the transition from the United Kingdom being part of the EU’s single market to a relationship primarily based on World Trade Organization rules.
Whole policy areas typically included in free trade agreements such as public procurement are largely absent of this agreement. The European Union insisted on extensive level-playing field provisions in the expectation of the UK cheating.
In retrospect, though, the TCA should perhaps have been seen as warning. Modern trade negotiations increasingly take place with a similar underlying atmosphere of suspicion.
EU-Mercosur free trade agreement negotiations have for some time been moving in the direction of mutual distrust about what the other parties might do. Sometimes it is hard to recall that this agreement is supposed to increase trade.
There are many more examples, whether from the EU and Australia, or almost anything the United States has done in trade policy since 2016.
For businesses seeking a renewed free trade agreement agenda there is a fundamental problem. If you don’t change the mood, what is discussed will be more about market access conditions than openness.
Any agreement reached in this way is unlikely to deliver much growth.
What we may see in the UK-EU relationship in the coming years is a return to something more positive. There is every reason to believe deepening ties will lead to better agreements.
Those seeking openness should heed this lesson. Mutual goodwill must be the basis of the free trade agreement agenda.
Improving the mood between UK and EU
In the early weeks of the new UK government there has been a noticeable change in attitudes towards the EU. Most notable were early calls from new ministers to their EU counterparts – which would have been unthinkable under previous governments since 2016.
New foreign secretary David Lammy visited Poland, Sweden and Germany the weekend after the election. Business and Trade Secretary Jonathan Reynolds spoke with Valdis Dombrovskis on the phone and met at the G7 trade ministers meeting in July.
The UK successfully hosted the second meeting of the European Political Community. Although there were no concrete deliverables, the EU leaders present spoke positively about London’s approach.
Labour’s plans for enhancing trade relations with the EU remain formally rather modest. Agreements on sanitary and phytosanitary issues, visas for touring artists and recognition of qualifications are the frequently mentioned items.
There are internal discussions on going further than that.
Though evidently an awkward topic for the UK, there is a growing awareness of the need to respond to EU asks on youth mobility.
Joint work on economic security, regulatory alignment and aligning Emissions Trading Schemes are also under consideration.
Concrete agreements, even negotiations, may be some time away. Thinking has however started on both sides about what these may contain.
Allowing officials to think creatively
At a time when trade agreements were driven by more open attitudes, negotiators were empowered to find ways around problems.
Through ministerial example, UK civil servants have also been given permission to engage with EU counterparts.
Before the UK election, many officials in relevant areas could not wait to be allowed to test ideas on progressing particular issues with the EU. Now we can expect them to act on this.
Formally, the EU line is to wait for proposals from London. In reality, many in Brussels will be equally keen to engage.
Commission officials are already developing their thinking as to how discussions could be structured.
This isn’t just about those working in EU institutions. Businesses and other stakeholders will take their signals from governments.
There is ample opportunity for joint UK and EU industry positions. On past evidence this can be an effective tool to help forge agreements.
Indeed, the extension of generous rules of origins for electric vehicles in the TCA at the end of last year, was considerably helped by joint pressure by the car industry.
Goodwill is often infectious. Although the pain of recent UK-EU negotiations won’t be easily forgotten, a new picture can be built over this experience.
The EU-Switzerland talks are perhaps ahead of the UK in this regard. Two previously troublesome relationships are therefore in recovery.
Whether this can be transferred to other EU relationships remains however to be seen.
European Union needs to recover its confidence
If politicians create the impetus for their officials, there will only be a limited amount that EU negotiators can achieve right now.
Pressure comes from several directions. Overt protectionism across the political spectrum means prospects for France ratifying any future trade agreements seem remote.
Meanwhile many MEPs from various member states put pressure on trade from various angles, including with environmental, labour and nationalist arguments.
Summarising the problem, Ursula von der Leyen’s ‘Political Guidelines’ released in July ahead of her confirmation vote as European Commission president for a second term sees trade as both an opportunity and a problem. Talk of “long-term, mutually beneficial partnerships” is undermined by suspicion.
Translated into day-to-day operations, such messages are easily received by those at the front line as them not being fully trusted. However much it is claimed that the targets are really the third countries concerned.
Some time ago, when I discussed Indian resistance to trade agreements with informed observers, lack of public trust in negotiators emerged as an unexpected reason for it. In this specific Indian case, there would be suspicions of corruption if too much was given away.
In the EU or US, it is more likely that creative officials could be seen as part of the ‘deep state’. This makes productive negotiations extremely difficult.
To have a renewed trade agreement agenda, negotiators have to feel empowered. To use a particular term disliked by some, a safe space must be created.
Right now, in most EU negotiations, that is not sufficiently present. Negotiations are thus bound to flounder.
Atmospherics can change this, as we are starting to see with the UK. Though this has to be sustained if there are to be agreement in the end.
Tricky though it will be, the most siren political voices need to be quietened for significant progress on trade policy and positive associations built with the idea of openness for workers and consumers.
That’s outside the political mood of the moment and that’s why we’re struggling.
Businesses need to seek to change to the mood music before demanding more agreements.
To read the perspective as it was published on the Borderlex webpage, click here.