View from Brussels: Jaw-jaw as officials begin post-Brexit talks

Brexit ‘phase 1’ is done. Now to flesh out the nature of Britain’s relationship with Brussels before the ‘phase 2’ end-of-year deadline. All manner of trade, technology and energy issues will be affected, depending on whether the UK government insists on breaking with EU rules or sticks closely to them in return for lucrative unfettered market access.

Emissions trading is one area where the two parties could come to blows and where the EU could deploy its latest protectionist trade tool. The UK is leaving the EU’s Emissions Trading Scheme (ETS) but intends to set up a similar system and even link them together if possible.

However, if the prices do not match there will be problems, especially if the UK is indeed granted access to the single market and tariff-free trade.

The European Parliament’s main environment lawmaker, France’s Pascal Canfin (pictured), is concerned that a lower carbon price in the UK would lead to heavy industries relocating to where the polluter-pays principle costs them less.

New EU policies under the bloc’s Green Deal aim to slash greenhouse gas emissions, achieving carbon neutrality by 2050. But officials also want to preserve industrial growth and competitiveness.

A new border tax, which would impose tariffs on products that undercut domestic manufacturers and producers, is in the works. Trade officials want to make sure it is World Trade Organisation-compatible and roll it out as soon as possible.

Canfin told E&T that if the UK does not play ball on climate, then the tax could be used closer to home: “We might imagine that we will apply this mechanism to the UK in order to restore the level playing field.”

Setting a level playing field and reducing trade tariffs will inevitably lead the talks down the ‘freedom of movement’ path. Negotiations with the likes of Norway and Switzerland are proof of its importance in EU talks.

The transition period means that UK scientists can stay involved with the current Horizon 2020 research programme but membership of its successor, Horizon Europe, might require concessions.

It is a similar story with student-exchange scheme Erasmus+. The UK Parliament voted in January not to pursue membership but the government still insisted it “is committed to continuing the academic relationship between the UK and the EU”.

Brexit negotiator Michel Barnier has now been tasked with ensuring the “indivisibility of the four freedoms” during the forthcoming talks, which includes freedom of movement between the remaining 27 countries.

The UK is already tweaking how it handles migration. On 20 February, it will launch an uncapped fast-track visa scheme for top scientists and researchers. Business Secretary Andrea Leadsom said that “leaving the EU gives us new freedom to strengthen research and build the foundations for the new industries of tomorrow”.

But Mark Smith, from business consultancy Ayming, said “the government will need to tread carefully. In order to hit our R&D expenditure targets, we must retain access to the EU’s giant pool of talent.”

Prime Minister Boris Johnson is in favour of an Australia-style points-based system. Trade unions have warned against the idea though, with TUC saying that “introducing a points-based immigration system and salary thresholds for EU workers goes against single market rules”.

In the energy sector, the outlook is a little clearer as power links to Europe are believed to be largely Brexit-proof, but cooperation on ramping up renewable energy use has already taken a hit, after it emerged that British involvement in the North Seas Energy Cooperation initiative has lapsed.

NSEC is now made up of nine countries that want to improve offshore wind and tidal energy capacity. It is not an EU institution, so the UK’s exclusion was met with confusion, especially since Norway is a member.

A Commission spokesperson said that “NSEC supports the implementation of internal market rules and shapes future EU policy” but added that the UK could rejoin the scheme “in exceptional circumstances”.

As the talks between Brussels and London progress, we will see the tangible effects of ceding EU membership, as agreements lapse, funding dries up and a clearer picture of the post-Brexit world emerges.