UK’s Sunak edges towards closing post-Brexit trade deal

Sunak in the last few days has been intensively seeking the blessing of the loyalist Democratic Unionist Party (DUP), and his Conservative backbench MPs, including the hardcore pro-Brexit European Research Group (ERG), to close the long-standing dispute with the EU.

As EU diplomats talked of unprecedented momentum to seal the deal, the old hurdle remained: having a UK premier invest and risk sufficient political capital at home to convince his parties’ Brexit hardliners and DUP to move on.

There is concern that the longer the drama in the UK drags on, the greater the risk of the deal and the political momentum behind it in London unravelling.

"We have made good progress, we can clearly see the finishing the line," EU Commission vice-president Maroš Šefčovič, in charge of the negotiations on the EU side, said at a press conference on Tuesday (21 February).

"In such negotiations being close doesn’t mean being done," he warned.

Šefčovič and UK foreign secretary James Cleverly had several phone calls this week, and are expected to meet later in the week.

One EU diplomat said the deal is ready — all it needs is the political sign-off.

Last Friday, Sunak went to Belfast to meet politicians in Northern Ireland, and then to Germany, where he met EU Commission president Ursula von der Leyen, raising hopes that an agreement was imminent. The two might now meet again in London, if a deal is sealed.

What’s the matter?

The current rules, the Northern Ireland Protocol, were negotiated and agreed by former British prime minister Boris Johnson and came into force in 2021.

As the UK had wanted to leave the EU’s customs union, the bloc was eager to close any possible backdoor to the EU’s highly-treasured single market.

The protocol introduced checks on goods sent from Great Britain to Northern Ireland to make sure EU standards and rules are met, creating a de facto trade barrier between two parts of the UK.

The protocol is designed to avoid a hard border between Northern Ireland and the Republic of Ireland by keeping Northern Ireland aligned with the EU single market rules for goods.

The fear is that a hard physical land border between north and south on the island of Ireland could undermine the Good Friday Agreement, the 1998 peace deal that ended decades of sectarian conflict in Northern Ireland.

The rules have been highly unpopular among unionists in Northern Ireland, became a deeply divisive issue within the Conservative party and soured relations between the UK and EU.

The DUP lost support in the 2022 elections and has since boycotted the power-sharing government in Belfast, the Stormont Assembly, in protest at the protocol, leaving the province without a functioning devolved government.

"There is no better solution than the protocol to solve the problems created by Brexit. It offers the best of both worlds to Northern Ireland," Georg Riekeles, associate director at the Brussels-based European Policy Centre (EPC) think tank told EUobserver.

The Johnson government proposed a bill that would suspend parts of the protocol, in violation of its own Brexit divorce deal. That bill has now been approved by the lower house in the UK, but is now stuck in the upper house. "It does not create trust," quipped the same EU diplomat.

What has changed?

The EU diplomat, who has been involved in Brexit negotiations, said it was never a question whether an EU-UK agreement could be reached, the questions has always been what the UK prime minister wants to do with it.

"Sunak does not want to add a prolonged trade crisis to the UK economic woes," the diplomat added.

The UK is expected to be the only G7 country to fall into recession in 2023, according to the International Monetary Fund.

Public opinion is also shifting. A recent Ipsos poll showed that 84 percent of Britons think it’s important to maintain a close relationship with the EU, and 45 percent think that Brexit is going worse than they expected.

"Sunak and, in fact, Britain needs a success story, the unnecessary conflicts need to end," the diplomat said.

"The deal depends on what Sunak is ready to push for in the context of difficult discussions with the ERG and DUP. It comes down to a lot of politics in the UK," Riekeles told EUobserver.

"Sunak is a different type of politician. As long as the UK side was run by the hardcore Brexit ideologues, the whole purpose of it was to make EU-UK relations difficult," Riekeles said, who served as an advisor to the EU’s chief Brexit negotiator Michel Barnier.

"Sunak is approaching the politics of EU-UK relations rather differently. What Sunak needs to do to succeed as a PM is to fix the economy," he added.

Labour leader Keir Starmer has previously offered help to Sunak to get enough support for the deal without Brexiteer Tory MPs, which would however deepen the wedge among Conservatives.

What will change?

If a deal is pushed through, the EU will have to change some of its rules to facilitate the agreement.

It is expected that fast lanes would be created where "trusted traders" could cross to Northern Ireland from Great Britain, if the end destination is not the EU, with lighter conditions, and less data provided.

Sanitary rules are likely also to be adjusted to make it easier for supermarkets and canteens in Northern Ireland to get supplies. The UK is expected to come up with labelling also making sure goods do not cross into the EU.

State-aid rules will also have to be adjusted to accommodate the new reality.

Normally the EU state-aid regime would need to apply in Northern Ireland. It is likely that a certain threshold of state subsidies will have to be reached before EU state-aid rules would be triggered in Northern Ireland.

It is a crucial issue for competition. One example is price caps. Northern Ireland and the rest of the UK had different energy price caps during the winter because of the existing rules.

Politically-toxic issues, such as European Court of Justice jurisdiction in Northern Ireland, is a must for the EU, which argued that only the ECJ can interpret EU law.

For unionists and Brexit ideologues, getting rid of the EU’s top court is paramount — that is an issue of "taking back control".

"The EU was always open to looking into the details of its application," Riekeles said.

"Now it’s time to implement, normalise, and look forward. Otherwise it’s 18 more months of standoff, pressures and litigation until the next UK general election," he argued.

"In the world we live in today, with the war in Europe, the geopolitical context, the US-China rivalry, economic pressure on Europe from US with WTO-breaching green subsidies, climate change, security challenges — frankly it is sad, almost pathetic, that in Europe one doesn’t manage to cooperate on fundamental common interests from research to security," Riekeles said.