EU and UK negotiators turn to review clauses in bid to unlock deal

Negotiators are exploring the idea of review clauses to break the deadlock in EU-UK trade talks, with the possibility that parts of the deal could be revisited several years after they take effect.

EU diplomats said the two sides are discussing whether review clauses and transitional arrangements have the potential to ease the pain of compromises needed to get an agreement done — but warned that both sides still have very different views of how this might work.

Brexit talks are continuing virtually this week after a member of the EU negotiating team tested positive for Covid-19 — the positive case forced EU chief negotiator Michel Barnier and senior members of his team to go into self isolation on Thursday.

With time running short to ratify an agreement by the end of Britain’s transition period on December 31, both sides are on the hunt for creative compromises.

Depending on the results of Covid-19 tests, physical negotiations may resume in London from Friday. UK prime minister Boris Johnson is ready to speak to European Commission president Ursula von der Leyen later in the week to consider progress. “We expect that to happen at some point, whether it looks like a deal or no-deal is taking shape,” one British official said.

Both sides are still struggling to bridge faultlines in the talks concerning EU resistance to losing fishing rights in British waters and the UK’s opposition to EU demands for ‘level playing field’ guarantees for business. 

“Time is short. Fundamental divergences still remain, but we are continuing to work hard for a deal,” Mr Barnier tweeted on Monday. 

The concept of a review clause was already broached in the negotiations last week as a way of overcoming the impasse on fishing.

The UK proposed last week that the EU could retain part of its current quota rights for several years, after which there would need to be further negotiations on future arrangements.

A senior EU official confirmed at an internal meeting with national ambassadors on Friday that the EU negotiating team was willing to consider the idea, but only if the review clause was linked to the broader EU-UK economic relationship.

Such a step, diplomats said, would allow the EU to strip the UK of valuable access to the European market if talks on fish turned sour. 

British officials confirmed that UK chief negotiator David Frost has suggested a transition deal for fisheries but said it would have to be “short”.

One cabinet minister said that a transition would suit Britain because “we don’t have enough boats to catch all the fish in our waters”, meaning an interim solution would make sense while the UK builds up a bigger domestic fishing fleet.

But the two sides disagree over how long a temporary arrangement should last. Another key sticking point is that Britain still insists that, even with a temporary agreement on quotas, access to its waters should be subject to annual negotiation.

People briefed on the UK negotiating position said that Britain was nevertheless still keen to persist with the idea of review clauses to resolve issues in the talks.

According to people familiar with the negotiations, the UK believes a trade deal could be reviewed after four years — creating the possibility, for example, to re-establish tariffs on trade in goods if Britain no longer wanted to abide by the terms of the level playing field in areas such as state aid. 

But it is extremely unlikely that Brussels would accept such a trade-off given its repeated insistence that tariffs could never replace the need for fair competition rules.

EU officials also pointed out that no review clause would be needed to invoke such penalties if Britain flouted its commitments, as this would be covered by enforcement powers baked into the deal. 

Meanwhile, senior civil servants expressed growing confidence to MPs that — contrary to recent predictions from industry groups — preparations would be completed on time for the new UK-EU trade border that will come into force on January 1, including computer systems, lorry parks, customs agents and vets required to complete export declarations to the EU.

Alex Chisholm, the permanent secretary at the Cabinet Office said that “huge advances” had been made in preparations since research was conducted for a damning National Audit Office report published earlier this month which predicted the UK was likely to face “widespread disruption”.

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