Barnier and Frost open the route to a Brexit trade deal

With Michael Gove now predicting a 66% chance of a UK-EU trade deal being struck, it appears that British negotiators are preparing to make serious concessions on state aid and fisheries to get an agreement over the line by the end of the month. The cards are being placed carefully on the table.

First, on state aid, Downing Street now accepts the need for a special joint-state aid regime in the trade agreement, which has been a key request of the EU since the beginning of talks. Speaking to members of the House of Lords yesterday, UK Chief Negotiator Lord Frost said Britain was ready to consider state aid commitments that “go further than you normally do in a free trade agreement”.

Frost added: “We are beginning, and we are only just beginning, a discussion on… agreeing some provisions that, as it were, shape and condition the subsidy policy on both sides.”

Given that the EU has already conceded its request for any such provisions to be overseen by the European Court of Justice, it appears that, on principle at least, the two sides are very close to a deal on state aid. It would likely look like the framework suggested by the Institute for Government, whereby the UK agrees to stringent domestic subsidy rules, similar to those of the EU, which are underpinned by an independent regulator.

This regulator would have to be able to scrutinise, say, Dominic Cummings’ plans to subsidise technology companies, with the power to retract the aid if it is proven harmful to trade between the UK and EU. The Institute for Government says a strong domestic subsidy control regime would be good for the UK in any case, as it would prevent harmful “subsidy races” between different parts of the Union. It would also block the EU’s ability to obstruct Great British subsidies through the Northern Ireland Protocol.

Notably, in Downing Street’s read-out of the Prime Minister’s call yesterday with EU Council President, Charles Michel, state aid was not listed as a point of disagreement.

Second, the UK has been trailing further concessions on fisheries, which has become “the most difficult issue remaining for [negotiators],” according to Frost. In addition to its rumoured offer of a three-year transition period for EU fishermen, British negotiators are considering offering generous multi-year quotas to the bloc, which they believe will assuage the French government’s concerns.

In response, EU negotiators have also embraced the spirit of compromise, with Michel Barnier urging member states to show some flexibility on fishing rights to unlock a deal. In a private meeting with ambassadors from the 27 EU countries, Barnier said that a deal was possible in the immediate aftermath of the EU Council summit on October 15-16, and that the EU should not be “radical” in its demands for how much fish it should catch in British waters after January.

Third, Downing Street is preparing to concede on the jurisdiction of the European Court of Human Rights in order to secure a comprehensive security agreement. UK negotiators are said to be floating the idea of including a commitment to not scrap the Human Rights Act – which is overseen by the ECHR – in the UK-EU trade agreement. This would allow British law enforcement to continue to have access to EU crime databases.

The UK side believes that such a compromise would prove that the UK is willing to be pragmatic on questions of security, potentially opening the door to a much larger agreement on EU external security. It also adds to a sense of momentum in the wider talks.

This new ray of optimism does not mean that a deal is inevitable, however. Even under Gove’s optimistic prediction, there is still a one-in-three chance that talks break down. What this week’s push does show that, at this late stage, both sides are willing to take liberties to secure a deal.

Downing Street has been boosted by the increasing involvement of senior EU politicians – with Boris Johnson holding phone meetings with both the Council President and the Commission President this week – and EU negotiators have been surprised by the sudden flexibility on the British side.

If talks on fisheries move as fast as they have on state aid, a deal will be struck very soon indeed.