From market access for stockbrokers to passports for pets, Brussels is still holding back on granting Britain a whole collection of rights and regulatory waivers with under five weeks until the UK exits the EU’s single market.
With Brexit negotiators hunkered down in London in search of a breakthrough in trade talks, some important aspects of life after the end of the transition period on December 31 will be determined by the EU’s willingness to extend rights to the UK that it has already granted to other non-members of the bloc.
In some cases — such as financial services — this takes the form of unilateral rights that are in the European Commission’s gift. In other cases, the question is whether the EU is ready to negotiate flexible arrangements with the UK to protect existing trade for businesses on both sides of the Channel.
But so far, there has been largely silence from Brussels, adding to tensions ahead of the end of the transition period. If the decisions are not granted it would add to the fallout from a no-trade deal Brexit. For example, British motorists would not enjoy the same waiver from burdensome insurance red tape that the EU has extended to other non-EU members such as Serbia. Nor would the City of London benefit from valuable market access rights granted to other financial centres such as New York.
EU officials say that the bloc’s stance is being driven by factors ranging from a desire to maximise negotiating leverage in the trade talks to genuine difficulties in figuring out how to extend certain regulatory permissions.
Here, the Financial Times considers the three categories of EU rights that the UK is still waiting to be granted, many of them technically outside the scope of the negotiations, but nevertheless intertwined with the politics of the future-relationship talks.
1. Pure bargaining chips
These are the areas, such as pet passports and health insurance schemes for travellers, where there should be no technical obstacle preventing the commission from acting.
But by applying the principle of “nothing is agreed until everything is agreed”, the commission has increased the potential political cost for the UK of a no-deal outcome in future-relationship negotiations.
On pet passports, for example, the UK has applied to become a “part 1 listed” country and so be affiliated to the EU’s scheme, which allows dogs, cats and ferrets to cross borders without quarantine. It is a status that other non-EU countries, such as Greenland, Switzerland and Iceland have been granted, but the UK has awaited a decision for at least the past two years.
Failure to secure the status would place hugely onerous burdens on British pet owners, who would be required to send blood samples to EU-accredited labs at least 30 days after their pet’s last rabies vaccination, with results taking up to four months to be returned.
Similarly, a replacement for the EU’s “EHIC” health insurance scheme that guarantees emergency cover for UK and EU travellers, including those with pre-existing conditions, is another area of mutual interest where a technical agreement should be possible. The UK is seeking to negotiate a reciprocal arrangement, but failure to get this would leave elderly holidaymakers in particular facing heftier insurance premiums when they head to the EU.
A third example is a reciprocal waiver for the “green card” car insurance scheme that would spare British and EU motorists pointless bureaucracy when they cross the Channel — but on which the commission has withheld an “enabling decision” since at least May 2018.
2. Difficult but do-able
The significant examples here are two areas that the EU and UK agreed to largely leave out of their future-relationship talks: financial services and data.
The EU’s model is that rights in these areas are created through unilateral decisions. For financial services, this would mean the EU and UK judging that each other has a regulatory system as strict as its own. For personal data, the EU would need to take an “adequacy decision”, endorsing UK privacy standards as sufficient to allow companies to transfer digitally-held information across the Channel.
EU officials have been clear that the bloc is deeply reluctant to show its hand on financial services while trade talks with Britain continue. But the exercise is also complex, especially given that the UK’s post-Brexit regulatory regime is still bedding down: the EU sent 1,000 pages of questionnaires to UK authorities earlier this year, and got 2,500 pages of answers back.
On data, the situation is arguably even more difficult. While the EU has already taken decisions favourable to countries such as Japan and New Zealand, the situation has since become more complicated owing to a victory for privacy advocates in the European courts — raising the bar the EU has to reach before granting permissions.
There are other, smaller examples that fall into this category, such as the fact that unless the EU amends its export health certificate for animal products, British meat products such as minced beef and sausages will have to be exported to the EU in frozen form in order to conform to EU rules for meat imports from “third countries”.
3. Managing long-term challenges
Michel Barnier, the EU’s chief Brexit negotiator, has made clear that the EU needs to think about how to manage the long-term challenge posed by the new competitor on its doorstep.
The upshot of that has been a negotiating position so hawkish that even the EU car industry warned in October that it was not in its interests. Brussels rejected UK proposals aimed at preserving existing supply chains, instead pushing stricter rules on the proportion of local content needed for goods to qualify for zero tariffs.
Joint calls this summer from the EU and UK food and drink producers for Mr Barnier to be more “flexible” are also expected to be rejected, with the industry warning that it faces a “hidden hard Brexit” as products made with non-EU or UK ingredients fail to qualify for zero-tariff access to the EU single market.
The medical devices and chemicals industries have also asked for flexibility and mutual recognition of product testing regimes, but Mr Barnier has consistently argued that it will not be in the EU’s long-term economic interests to grant these testing rights to the UK as it seeks to draw business, investment and supply chains into the bloc’s single market.