A deal is opening between Brussels and London in the negotiations on future relations. Before the Corona break, EU chief negotiator Michel Barnier presented the British in March with a 440-page draft of how they envisage the future partnership with the United Kingdom. A clear signal: Brussels, not London, is setting the bargaining framework from a position of strength. Then Barnier was tested positive for the corona virus – the former French Foreign Minister and his team, around 50 people, went into quarantine. Last week, Barnier and British negotiator David Frost set a schedule through June. The first round of negotiations after the corona break began on Monday as a video conference.
The main controversies remain: fishing and banks. London is the largest financial center in the world. Since the 1990s, business and politics have increasingly been relying on the rapidly growing financial services, which are also growing globally. Today, money transactions, shares and policies represent around 30 percent of British economic output – in Germany it is less than five percent. At the same time, de-industrialization is well advanced. The deficit in British foreign trade is correspondingly high: in 2018 it was over 180 billion euros.
For the conservative Prime Minister Boris Johnson, after his Corona illness, the well-being of the negotiations depends crucially on a deal that ensures banks, investment companies and insurance companies continued unimpeded access to the EU internal market with its almost 300 million consumers. Financial service providers who want to do business in the EU need a »European passport«. They acquire this according to an extensive procedure with an operating license in an EU country. So far, with the approval in London, British banks have been able to sell loans throughout the EU and advise millionaires on their investments. The City of London does an estimated a quarter of its business here.
As a result, thousands of jobs are now at risk with Brexit and entire departments could be relocated to Frankfurt, Paris or Amsterdam. In order to prevent a wave of emigration, the new British finance minister Rishi Sunak is striving for equivalence: an approval in Great Britain would then automatically also apply to the EU. It is the same with banks from the United States, Japan and Singapore. However, the British government has announced that it intends to deviate significantly from the previous EU rules. This should make negotiations as difficult as Johnson’s adherence to the special role of British overseas territories such as the Cayman Islands – these recently appeared on a black list of the EU as a tax haven.
Barnier’s 440-page draft aims in the opposite direction: London should continue to comply with EU rules in bilateral trade. To be accommodating would have its price, but this is about fish. Many fishermen in Britain were among those in favor of Brexit. The richest fishing grounds in Europe are in the British economic zone, which stretches 200 nautical miles into the Atlantic.
So far, the principle of “relative stability” has applied in EU waters, which has been applied since 1982: each country receives a certain percentage of the total catch quota of a fish population. “German fishermen are currently catching almost 100 percent of their North Sea herring quota in the British economic zone,” reports Ralf Döring from the Thünen Institute for Sea Fishing. The fish processing plant in Rügen gets around 80 percent of its herring deliveries from the British North Sea.
Johnson also questions this old principle to claim higher odds. German fishing is small, of course, and the deep-sea fleet consists of only seven ships. French, Danish and Dutch trawlers in particular, however, fetch thousands of tons of fish from the British sea. Market value: about one billion euros.
A deal could therefore look like this: The British keep their waters open to EU fishermen, in return, British financial service providers can continue to use the EU market. Both sides must have reached an agreement by the end of the year. Left-wing MEP Martin Schirdewan, who is a member of the parliamentary group responsible for the Brexit negotiations, is not the only one who considers longer negotiations to be “inevitable”. In contrast, the British supporters of a hard Brexit now see the opportunity to leave the EU in the slipstream of Corona without an agreement.