Brussels to break vow not to talk trade in Brexit talks

Officials will discuss import quotas on Brexit negotiation sidelines.

David Davis, left, and Michel Barnier at a press conference following the conclusion of the first day of Brexit talks | Stephanie Lecocq/EPA

LONDON — As Brexit negotiators get down to business Monday, it looks like sticking to the official agenda is proving to be hard.

The EU’s chief negotiator Michel Barnier has long insisted the U.K. needs to deal with its financial obligations to the rest of the bloc and settle the rights of EU citizens in Britain before talks can turn to future trade relations between post-Brexit Britain and the remaining 27 EU countries. On the first official day of talks in June, U.K. Brexit Secretary David Davis appeared to concede the point, acknowledging that “enough progress, in their words” would have to be demonstrated to leaders of the EU27 before negotiations would proceed beyond the opening divorce stage.

But Barnier plans to raise the thorny issue of EU import quotas on the sidelines of this week’s negotiations, according to half a dozen officials briefed on the talks. Although not the broader trade discussion on a future relationship that the U.K. has pushed for, talks on quotas would move negotiations past the immediate practicalities of Britain’s exit from the bloc and start to imagine global trade post-Brexit.

There is no mention of import quotas in the official agenda. According to an early schedule seen by POLITICO, Davis and Barnier will kick off the week’s negotiations in the European Commission’s Berlaymont building at 2:30 p.m. Negotiators are then expected to break into working groups to discuss citizens’ rights, the divorce bill and “other separation issues.” Discussions about the Irish border will begin Tuesday.

Brussels’ quota preference

Despite the EU’s insistence that the bill and citizens’ rights needed to be tackled first, the EU27 negotiators plan to stray into trade technicalities early in the process, officials said.

Barnier’s team of technocrats is mulling options for how to adjust the amounts of imports it allows into the EU from abroad once Britain leaves the bloc, these people added.

Under WTO rules, the EU has struck 124 deals, outlining the quantity of products such as chicken, butter and beef it allows its trading partners to export every year.

Such import quotas, known in technical jargon as tariff rate quotas, specify certain quantities of this produce that can enter the EU from abroad with lower duties. Quotas are divided up and allotted to importers depending on where the demand is within the EU.

For instance, New Zealand is allowed to export up to 230,000 tons of sheep and goat meat a year to the EU but the U.K. eats up around 40 percent of that amount. With Britain set to leave the bloc by 2019, officials have less than two years to iron out a new quota regime.

On Thursday, Sabine Weyand, deputy chief negotiator in the European Commission’s Brexit task force, briefed dozens of senior EU diplomats on three possible solutions, according to five sources, all of whom were present in the room.

“Whether or not it’s a headache depends on how cooperative people are.” — WTO official

The first option would be to maintain the status quo by leaving all import quotas the same — an option Brussels does not favor as it would mean spreading Britain’s share of each quota among the remaining 27 members.

The second option foresees Britain negotiating to take over a portion of the EU quota but only by changing very sensitive products such as beef and butter, a solution diplomats described as complicated to achieve. “The problem is finding an agreement on how to choose sensitive product lines and which ones you designate as sensitive,” said an official who took part in the meeting.

The final option, preferred by Brussels, is to lower the EU quota and have Britain add a new quota itself.

This third option would aggravate London, where the government is keen to forge new trade deals with international partners after it has left the EU and does not want to be constrained by agreeing quotas before those negotiations begin.

“It’s a question of whether the Brits want to cooperate or if they want to go their own way,” said a diplomatic official at Thursday’s meeting.

The European Commission and the U.K.’s Department for Exiting the European Union both declined to comment on import quotas.

In Geneva, the EU’s trading partners are eagerly waiting to see how Brussels tackles the issue since there is no precedent for a WTO member leaving an economic union while inside the organization.

The issue of quotas is expected to be particularly difficult as it might take years for the U.K.’s WTO position to become clear, especially since all other member countries, including all exporters, would have to agree.

“It’s not impossible it’s just a lot of hard work,” said Peter Ungphakorn, a former WTO official, “Whether or not it’s a headache depends on how cooperative people are.”

Politics back home

Davis won’t stay in Brussels for the full week, according to a U.K. official. The hour-to-hour management of the talks will be left to Permanent Secretary for the Department for Exiting the European Union Oliver Robbins, who will lead the negotiating team.

Since June’s election, in which Prime Minister Theresa May lost her majority in the House of Commons, every parliamentary vote is a test for her government. Davis will return to London on Monday afternoon in case there is a tight vote over the number of Friday sittings and other House of Commons procedural matters — issues that could attract Tory rebels and cause problems for the prime minister. So tight is the parliamentary arithmetic, Britain’s weakened prime minister cannot afford to have her ministers out of the country for long.

May herself will not be involved in the talks directly, but a No. 10 official said the prime minister was being “updated regularly throughout the process.”

The four-day round of Brexit negotiations will conclude Thursday with a two-hour working lunch for Barnier and Davis after a morning “plenary session,” according to the early schedule. The plan is then to round things off with a press conference.

Meat of the matter

Barnier warned last week that the U.K. risked its ongoing relationship with the European Union if it did not acknowledge its financial obligations to the rest of the bloc. That was after the Foreign Secretary Boris Johnson said Tuesday that European Union leaders could “go whistle” if they expected the U.K. to pay a large Brexit divorce bill.

But Davis struck a more emollient tone Thursday. In a statement, he said the U.K. government recognized the U.K.’s obligations to the EU, and the EU obligations to the UK, that they “need to be resolved” — although the final amount is certain to be the subject of intense negotiations.

Monday is also the first time negotiators have met since Theresa May set out the British position on citizens’ rights last month, offering “settled status” to EU citizens living in the U.K. EU leaders have said the offer is not enough, although the talks this week will indicate how far apart the two sides really are.

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