Building a New UK-EU Relationship Around Trade and Climate

There’s an inevitability every time we consider individual issues in the UK-EU to reflect on the past few years of Brexit. This raking over past problems particularly well remembered in Brussels then considers whether something different can happen in the future. Spoiler alert, yes, the worst days of aggression are already behind us, even if for both sides we really need to see things done differently in the future to continue to build on this.

To encapsulate this, let’s imagine that the UK goes to the EU to ask to formally be exempted from the Carbon Border Adjustment Mechanism costs. And that in return the EU must agree that the UK can do whatever it likes with environmental policy as long as we have some sort of CBAM to which EU companies will be exempt.

Or that the EU says the UK can only align with CBAM if it agrees to European Court of Justice oversight on the entirety of its climate related legislation, which is all to automatically follow that of the bloc.

Do we have a deal? I very much doubt it. Probably we’ll get a lot of mutual recrimination instead.

Yet, only slightly exaggerated that was the approach to negotiations across the UK-EU relationship that characterised much of the post-referendum period. Some form of distorted equivalence comes from mutual recognition claimed by UK government advisers to represent the ‘normal’ form of world trade but actually nothing of the kind. A take it or leave it view from Brussels where the UK could not be trusted unless it signed up to maximum obligations in return for reducing some trade barriers, with definitely no special deals. And then mutual recrimination.

From one extreme to another really, for that also typically isn’t how the EU characterises its third country relations either, where there are plenty of mini-deals on all manner of subjects. As yet that doesn’t include environmental measures, but they will come. The UK isn’t actually special or different, any more than Switzerland, Turkey, the US and so on. All have their awkwardness, just that we haven’t learnt any better alternative between London and Brussels even if the Windsor Framework helped remove some toxicity.

What is needed for the UK-EU relationship to be reset is actually not to be relying on another negotiation, on green issues perhaps, or an implementation review standard in EU deals that doesn’t typically mean much more than a report from the Commission to Member States. In any case so many subjects aren’t even in the Trade and Cooperation Agreement.

Rather, there has to be political initiative jointly on both sides to approach the relationship differently. Most likely that will come from a new UK government asking for a summit at which a new cooperation on defence will be the heart, but this should also be setting off a new form of cooperation on other subjects of which measures on net zero are an obvious candidate.

To be clear, this isn’t about rejoining the EU, single market and customs union, those red lines will hold for some time. Equally, UK-EU agreements shouldn’t require ECJ oversight except for the inevitable matters of EU law, or the expectation of removing all barriers to access the single market. We are talking about cooperation to reduce trade barriers and achieve wider policy goals such as joint tackling of climate change.

To return to the question of CBAM, this will be about the UK deciding to align sufficiently in return for import exemption, with a dialogue on future changes. Not new, we have seen this sort of thing already for example in data adequacy.

Indeed, the UK government have already started a journey from same said advisers trying to persuade the government it could ignore what the EU was doing entirely on carbon pricing, to now saying we will have one but different to the EU, which feels like the road to inevitable alignment when realising the risks otherwise to UK exports.

However, to complete the process of the UK aligning with CBAM the EU also has to be ready to engage more than it has done on this subject or with the UK. There will have to be a recognition that it is important for the bloc to have good relations with the neighbours, and that it can’t win every point of negotiations. That’s where a strong political relationship is needed to underpin the entire conversation, one that accepts there will be challenges.

Many will say that the EU won’t have the desire to negotiate with the UK, and based on their past experience, that would be understandable. As a provocateur the UK offers nothing. As a helpful partner at difficult times, there may be more of an appeal. The EU needs some formal arrangements with third countries on CBAM, so why not the UK?

CBAM shouldn’t be the limit. There should be an understanding on the role of subsidies in the green transition, to save both sides from future troubles. We can also envisage new instruments such as a mutual recognition agreement on green goods, because both sides should be able to export what may well be innovative products without being caught with the costs and time of double testing.

An evolving relationship is normal in trade relationships particularly between neighbours that share many values, even after a nasty divorce. Too many politicians and analysts haven’t understood this, thinking in very old terms of two teams of hero negotiators facing each other across the table.

Modern trade politics, at least between allies, is about finding the mutual spaces for cooperation between their respective, and mutually respected, red lines. Right now, in what is being briefed by the EU and Labour Party, there has to be some concern as to whether this can be achieved, but we can hope that this is more about the correct convention that oppositions don’t really negotiate internationally.

Notwithstanding the past, there is a new UK-EU cooperation to be found, one that starts with political relations and is increasingly strengthened by trust. There will always be differences, sometimes serious, but also a resilience underpinned by the many on both sides that even in the darkest times have been trying to sustain relations. Most likely progress will be rather tentative initially. But if both sides can share the aim of cooperation, it can develop.

Given trade and climate change is such a key issue on which values and challenges are largely shared, there is also a moral imperative to make progress. After eight years the UK and EU should have learnt enough about what doesn’t work in the relationship, now it is time to find something more constructive.