THE NEGOTIATIONS ON THE FUTURE RELATIONSHIP BETWEEN EUROPE AND THE UK ARE PROGRESSING WITH DIFFICULTY
CORE READINGWITH LESS THAN THREE MONTHS LEFT UNTIL THE END OF THE BREXIT TRANSITION PERIOD AT THE END OF THE YEAR, THE EU AND THE UK HAVE RECENTLY INTENSIFIED NEGOTIATIONS ON THEIR FUTURE RELATIONSHIP. ANALYSIS SUGGESTS THAT BOTH PARTIES HAVE ALREADY ESTABLISHED EACH OTHER'S BOTTOM LINE IN KEY AREAS SUCH AS FAIR COMPETITION ENVIRONMENT AND FISHERIES. IF AN AGREEMENT IS TO BE REACHED BY THEN, BOTH PARTIES MUST MAKE COMPROMISES.FROM OCTOBER 7TH TO 9TH LOCAL TIME, THE EUROPEAN UNION AND THE UNITED KINGDOM HELD ANOTHER THREE-DAY NEGOTIATION ON THEIR FUTURE RELATIONSHIP. THIS IS ALSO THE LAST ROUND OF FORMAL NEGOTIATIONS BEFORE THE EU SUMMIT IN MID MONTH, WHICH HAS ATTRACTED MUCH ATTENTION FROM THE OUTSIDE WORLD.THE NEGOTIATION ATMOSPHERE HAS IMPROVEDFROM THE STATEMENT RELEASED AFTER THE MEETING, IT CAN BE SEEN THAT THERE HAS BEEN LIMITED PROGRESS IN THE NEGOTIATIONS, BUT THE ATMOSPHERE HAS IMPROVED. BOTH SIDES HAVE EXPRESSED THEIR COMMITMENT TO REACHING A FREE TRADE AGREEMENT NEGOTIATION. THE PUBLIC OPINION GENERALLY BELIEVES THAT THE MAIN DIFFERENCES BETWEEN EUROPE AND THE UK ARE DIFFICULT TO RESOLVE, AND THE RISK OF A "NO DEAL BREXIT" REMAINS HIGH. IN ADDITION, MANY EUROPEAN COUNTRIES ARE FACING THE CHALLENGE OF A RESURGENCE OF THE PANDEMIC, AND THE ECONOMIES OF BOTH EUROPE AND THE UK MAY BE NEGATIVELY AFFECTED.EUROPEAN COMMISSION PRESIDENT VON DER LEYEN RECENTLY CALLED BRITISH PRIME MINISTER JOHNSON TO ASSESS THE FUTURE EU UK RELATIONS NEGOTIATIONS. BOTH SIDES AGREED ON THE IMPORTANCE OF REACHING AN AGREEMENT AND ASKED TO INTENSIFY NEGOTIATIONS TO BRIDGE "SIGNIFICANT" DIFFERENCES.THE NEGOTIATIONS ON THE FUTURE RELATIONSHIP BETWEEN EUROPE AND THE UK HAVE BEEN FRAUGHT WITH TWISTS AND TURNS SINCE THEIR LAUNCH IN EARLY MARCH. ON SEPTEMBER 9TH, THE UK GOVERNMENT ANNOUNCED THE INTERNAL MARKET ACT, WHICH AIMS TO SET RULES FOR TRADE CIRCULATION IN FOUR DOMESTIC REGIONS NEXT YEAR. THE PROVISIONS RELATED TO NORTHERN IRELAND ARE CONSIDERED TO OVERRIDE THE PREVIOUS BREXIT AGREEMENT WITH THE EU. THE EU HAS STRONGLY RESPONDED TO THIS AND DEMANDED THAT THE UK REMOVE THE DISPUTED CLAUSE. ON OCTOBER 1ST, THE EUROPEAN UNION OFFICIALLY SENT A LETTER TO THE UK GOVERNMENT, INITIATING A BREACH OF CONTRACT JUDICIAL PROCESS. THE OUTSIDE WORLD ONCE BELIEVED THAT THE NEGOTIATIONS BETWEEN THE TWO SIDES WERE ON THE BRINK OF COLLAPSE.THE ATMOSPHERE OF THE LATEST ROUND OF NEGOTIATIONS HAS IMPROVED. THE UK'S CHIEF NEGOTIATOR FOR BREXIT, FROST, AND THE EU'S CHIEF NEGOTIATOR, BARNIER, BOTH TOLD THE MEDIA THAT THEIR CONSULTATIONS WERE "CONSTRUCTIVE". FROST STATED THAT THE OUTLINE OF THE AGREEMENT IS "CLEARLY VISIBLE", PARTICULARLY IN THE AREAS OF GOODS AND SERVICES TRADE, TRANSPORTATION, ENERGY, SOCIAL SECURITY, AND PARTICIPATION IN EU PROGRAMS. HE HOPES THAT THE EU WILL FURTHER DEMONSTRATE FLEXIBILITY.ACCORDING TO THE LATEST DEVELOPMENTS, THE EU AND UK ARE CLOSE TO REACHING AN AGREEMENT ON RECIPROCAL SOCIAL SECURITY NEGOTIATIONS BETWEEN THEIR RESIDENTS, WHICH INSIDERS CALL "THE MOST POSITIVE SIGNAL SO FAR". IN TERMS OF GOVERNMENT SUBSIDIES, FROST STATED THAT THE UK IS WILLING TO DISCUSS GOVERNMENT SUBSIDY POLICIES WITH THE EU, AND THE COMPROMISE REACHED BY BOTH SIDES IN THIS REGARD "GOES FURTHER THAN A GENERAL FREE TRADE AGREEMENT". THIS MEANS THAT BOTH SIDES HAVE ROOM FOR COMPROMISE ON THIS ISSUE.BARNIER RECENTLY STATED THAT IT IS POSSIBLE TO REACH AN AGREEMENT WITH THE UK, AND IT IS EXPECTED THAT THE TWO SIDES WILL CONTINUE NEGOTIATIONS AFTER MID OCTOBER. FROST SAID THAT THERE ARE STILL MANY PRACTICAL ISSUES THAT NEED TO BE NEGOTIATED, AND IN ANY SITUATION, THERE IS AN OPPORTUNITY TO REACH AN AGREEMENT.DISAGREEMENTS IN KEY AREAS ARE DIFFICULT TO RESOLVETHE ISSUE OF FAIR COMPETITION ENVIRONMENT AND FISHERIES HAS ALWAYS BEEN THE CORE DISAGREEMENT IN NEGOTIATIONS BETWEEN THE TWO SIDES.AT PRESENT, THERE IS A HUGE GAP IN THE POSITIONS OF BOTH SIDES ON THE ALLOCATION OF FISHERY RESOURCES. ACCORDING TO MEDIA ANALYSIS, THE UK GOVERNMENT HAS LINKED THE FISHING INDUSTRY TO SOVEREIGNTY ISSUES, MAKING THE ALLOCATION OF FISHING RIGHTS ONE OF THE ICONIC RIGHTS TO GAIN INDEPENDENCE AFTER BREXIT, AND HAS PROMISED TO INCREASE ITS FISHING OUTPUT TO ITS OWN FISHERMEN, SO IT IS UNWILLING TO MAKE CONCESSIONS.THE EU HAS BEEN IMPLEMENTING THE 'COMMON FISHERIES POLICY', AND THE CURRENT SHARE ALLOCATION WAS DIVIDED MANY YEARS AGO. AT PRESENT, THERE ARE ABOUT 178000 PEOPLE ENGAGED IN FISHING IN THE EUROPEAN UNION, WITH A HIGH DEPENDENCE ON BRITISH WATERS. ACCORDING TO DATA PROVIDED BY THE EUROPEAN FISHERIES UNION, 42% OF EU SEAFOOD IS CAUGHT IN UK WATERS. THE EU SEEKS TO CONTINUE SHARING FISHERIES RESOURCES WITH THE UK, PROPOSING A FIXED QUOTA AND COUNTRY BASED ALLOCATION OF FISHERIES RESOURCES. THE UK HOPES TO DIVIDE BASED ON THE LOCATION OF FISHERY RESOURCES. IN TERMS OF TIME ALLOCATION, THE EU HOPES TO HAVE A LONG-TERM SOLUTION, WHILE THE UK HOPES TO NEGOTIATE ONCE A YEAR.ACCORDING TO IGOR SAKIS, AN ANALYST AT BRUSSELS BASED CONSULTING FIRM FIRST POLICY, THE UK HAS GREATER INITIATIVE IN FISHERIES RESOURCE NEGOTIATIONS. IF AN AGREEMENT CANNOT BE REACHED, THEORETICALLY THE UK COULD BAN EU FISHING VESSELS FROM CONDUCTING FISHING OPERATIONS IN BRITISH WATERS, RESULTING IN A LOSS OF HALF OF THE NET INCOME FOR EU FISHERMEN AND AT LEAST 6000 PEOPLE LOSING THEIR JOBS. HOWEVER, THIS MOVE IS NOT BENEFICIAL FOR BRITISH FISHERMEN, AS EVEN IF THEIR FISHING OUTPUT INCREASES, IT WILL BE DIFFICULT FOR THEM TO ENTER THE EU MARKET OR THEY MAY NEED TO PAY TARIFFS. THE UK'S STRATEGY MAY BE TO SEEK COMPROMISE FROM THE EU ON TRADE.ACCORDING TO EU SOURCES, THE UK HAS PUT FORWARD A SERIES OF PRINCIPLES TO CONTROL GOVERNMENT SUBSIDIES IN TERMS OF FAIR COMPETITION ENVIRONMENT CLAUSES, BUT HAS FAILED TO PROPOSE APPROPRIATE GOVERNANCE INITIATIVES. EUROPEAN COUNCIL PRESIDENT MICHEL SAID THAT THE EU HOPES TO REACH AN AGREEMENT, BUT THIS DOES NOT MEAN THAT THE EU IS WILLING TO PAY ANY PRICE, AND NOW IT IS TIME FOR THE UK TO "PLAY THE CARDS".AT PRESENT, BOTH THE EU AND THE UK HAVE MADE IT CLEAR THAT THE BREXIT TRANSITION PERIOD WILL END ON DECEMBER 31ST, WHICH MEANS THAT THERE IS NOT MUCH TIME LEFT FOR NEGOTIATIONS BETWEEN THE TWO SIDES. BARNIER SUGGESTED THAT A MORE REALISTIC DEADLINE FOR REACHING AN AGREEMENT IS THE END OF OCTOBER, SO THAT THE EUROPEAN PARLIAMENT HAS ENOUGH TIME TO APPROVE THE AGREEMENT. SOME EXPERTS ALSO BELIEVE THAT, APART FROM THE TIME REQUIRED TO FULFILL LEGAL PROCEDURES, THE FINAL DEADLINE FOR REACHING AN AGREEMENT BETWEEN EUROPE AND THE UK COULD ACTUALLY BE MID NOVEMBER, GIVING BOTH SIDES TIME TO RECONCILE THEIR DIFFERENCES.THE NEGATIVE IMPACT IS GRADUALLY EMERGINGRECENTLY, ANALYSIS REPORTS RELEASED BY MULTIPLE INSTITUTIONS HAVE SHOWN THAT THE NEGATIVE IMPACT OF BREXIT ON BOTH SIDES IS GRADUALLY BECOMING APPARENT, WITH A PARTICULARLY SEVERE IMPACT ON THE UK. TAKING THE FINANCIAL SERVICES INDUSTRY AS AN EXAMPLE, AS ONE OF THE PILLAR INDUSTRIES IN THE UK, IT IS NOT WITHIN THE SCOPE OF TRADE NEGOTIATIONS BETWEEN THE TWO SIDES. ACCORDING TO BRITISH MEDIA REPORTS, REGARDLESS OF WHETHER THE UK AND EUROPE CAN REACH A TRADE AGREEMENT, THE IMPACT ON THE UK FINANCIAL INDUSTRY IS INEVITABLE, AND MANY FINANCIAL COMPANIES HAVE ALREADY MADE CONTINGENCY PLANS FOR THIS. A 2019 SURVEY BY ERNST&YOUNG FOUND THAT DUE TO BREXIT, FINANCIAL SERVICES COMPANIES ARE TRANSFERRING ASSETS WORTH APPROXIMATELY £ 1 TRILLION AND RELOCATING AROUND 7000 JOBS FROM LONDON TO OTHER EUROPEAN CITIES. BLOOMBERG COMMENTED THAT BREXIT WILL THREATEN LONDON'S POSITION AS THE EUROPEAN FINANCIAL CENTER. HALF OF LONDON'S STOCK TRADING VOLUME COMES FROM EUROPEAN COMPANIES, WHICH MAY CHOOSE TO LIST ON OTHER EXCHANGES IN THE FUTURE, WHICH IS BAD NEWS FOR INVESTORS IN BOTH THE UK AND THE EU.A RESEARCH REPORT BY BAKER MCKENZIE INTERNATIONAL LAW FIRM SHOWS THAT IF THE TWO PARTIES CANNOT REACH A TRADE AGREEMENT, COUPLED WITH THE IMPACT OF THE PANDEMIC, THE UK WILL LOSE £ 134 BILLION ANNUALLY IN THE NEXT 10 YEARS. THE REPORT STATES THAT COMPARED TO THE UK STAYING IN THE EU, EVEN IF AN AGREEMENT CAN BE REACHED, BREXIT WILL DRAG DOWN 3.1% OF THE UK'S ECONOMIC GROWTH AND REDUCE EXPORTS BY 6.3% IN THE LONG RUN. EVEN THOUGH UK COMPANIES CAN ADDRESS CHALLENGES BY ADJUSTING THEIR SUPPLY CHAINS AND OTHER MEASURES, THE IMPACT OF BREXIT ON UK EXPORTS REMAINS SIGNIFICANT.LOSSES ON THE EU SIDE ARE ALSO INEVITABLE. A REPORT FROM GERMANY'S HALLE INSTITUTE FOR ECONOMIC RESEARCH SUGGESTS THAT IF A FUTURE RELATIONSHIP AGREEMENT CANNOT BE REACHED, EU UK TRADE RELATIONS WILL FALL BACK INTO THE FRAMEWORK OF THE WORLD TRADE ORGANIZATION, AND EU BUSINESSES WILL LOSE OVER 700000 JOBS. AMONG THEM, GERMANY WILL BE AFFECTED ******, RESULTING IN THE LOSS OF 176000 JOBS. FRANCE, POLAND, AND ITALY WILL LOSE 80000, 78000, AND 72000 JOBS RESPECTIVELY. BRITISH COMPANIES THAT PROVIDE SERVICES FOR EU BUSINESSES EXPORTING TO THE UK WILL ALSO LOSE 22000 JOBS.OSCAR GUINEA, SENIOR ECONOMIST AT THE EUROPEAN CENTER FOR INTERNATIONAL POLITICAL ECONOMY RESEARCH, TOLD OUR REPORTER THAT THE IMPACT OF BREXIT ON THE EU AND THE UK IS COMPREHENSIVE, FROM ECONOMIC AND TRADE TO INDUSTRIAL POLICIES, FROM PERSONNEL EXCHANGES TO REGULATORY POLICIES, WHICH ALSO HIGHLIGHTS THE IMPORTANCE OF TRANSITIONAL NEGOTIATIONS. THE BEST OPTION FOR BOTH SIDES IS TO REACH AN AGREEMENT AND ACHIEVE AN 'ORDERLY BREXIT', WHICH CURRENTLY REMAINS A HUGE CHALLENGE FOR BOTH PARTIES.