The abrupt end of the latest round of talks between Britain and the European Union a day earlier than planned was not only surprising but perplexing. Clearly, the first opportunity for face to face talks since March did not produce a breakthrough and separate statements from chief negotiators David Frost and Michel Barnier spoke of significant differences remaining.
But the language on both sides was restrained and Frost's had none of the belligerence that often characterises his rhetoric towards Brussels. The fact that Barnier chose not to give a press conference was seen by some as another happy augury but it was in fact simply an act of deference towards Angela Merkel and Ursula von der Leyen, who were giving a joint press conference later.
Before this week's talks began, the EU told Britain it was ready to compromise in order to accommodate the red lines Boris Johnson identified in a video conference last month with the presidents of the European institutions.
"The EU side had listened carefully to UK prime minister Boris Johnson's statements in recent weeks, in particular, his request to reach a political agreement quickly, and his red lines: no role for the European Court of Justice in the UK; no obligation for the UK to continue to be bound by EU law; and an agreement on fisheries that shows Brexit makes a real difference," Barnier said on Thursday.
The Europeans hoped that Britain would respond with a step towards compromise of its own but by the time the talks ended on Thursday, Frost had produced no such offer. During the course of the week, it became clear that unless Britain makes a substantial move within days, there will be no significant progress this month.
Johnson this week named Frost as his next national security adviser and the chief negotiator's word carries a rare level of authority in Downing Street. Last October, he successfully urged Johnson to accept the revised withdrawal agreement as the best available deal. He faces a similar judgment call today.
The British red lines Barnier spoke about on Thursday are those Johnson identified in last month’s conference call. The two sides are also at odds over the governance structure but Johnson did not mention it on the call and British misgivings about signing up to a single overarching agreement have diminished. Some within the government recognise that it offers opportunities as well as risks.
The issue of fisheries is highly charged politically on both sides but neither views a compromise as impossible. Although Britain rejects the concept of binding “level playing field” commitments, it will agree to maintain current employment, environmental and consumer standards.
The toughest issue is state aid, with the EU calling for Britain to continue to follow EU rules on a continuing basis. This is problematic for Britain both because it limits the country’s freedom to subsidise indigenous industry and because it would give the ECJ a role in British economic policy.
One obstacle in the way of a compromise is the fact that Britain has not yet set out plans for how it wants its own state aid regime to operate after the end of the transition period on December 31st. This leaves the EU unable to evaluate how a system of parallel state aid regimes would work, with both sides agreeing guidelines but regulating separately.
While the British accuse the Europeans of being too legalistic, the Europeans complain about British amateurishness. But both sides agree that Johnson wants a deal and that he would like to get it as soon as possible.
At the start of the coronavirus pandemic, there was talk around Westminster and Whitehall about how the crisis could reduce – or at least obscure – the impact of failure to agree a deal with the EU. But few now talk about the disruption of a no-deal outcome being lost within the greater disruption caused by coronavirus.
Cost of no-deal
Bank of England governor Andrew Bailey said last week that the British government could have struggled to fund itself if the bank had not intervened with £200 billion of quantitative easing to buy government debt. The cost of a no-deal outcome to the EU talks, on top of the ballooning cost of the coronavirus crisis, would test either Bailey's patience or his credibility when he insists the bank is not underwriting the British government's debt.
Donald Trump's declining political fortunes are also driving Johnson towards an EU deal as he prepares to deal with Joe Biden, a multilateralist whose advisers see Brexit as an expression of right-wing populism. As Suzanne Lynch has reported, Biden and his team are also acutely sensitive to any risk to the peace process and will monitor closely Britain's implementation of the Northern Ireland protocol.
Despite the fall in his approval ratings, Johnson remains in a very strong position with an 80-seat majority in parliament and no prospect of a general election until 2024. He has the immediate political scope to move either way on the negotiations but failure to reach a deal with the EU will make it harder for him to fulfil his government’s domestic agenda and to make a success of Brexit.