As far as I can gather, the EU has only one genuinely non-negotiable red line that could prevent a resumption of talks on a free trade agreement with the UK – which will be made clear by its negotiator Michel Barnier in a telephone call on Monday with the UK negotiator David Frost.
Barnier and the EU are insisting the UK adhere to the EU’s framework for limiting subsidies to businesses, what is called ‘state aid’, and there should be a UK enforcement mechanism for those state aid rules.
The prime minister, counselled on this issue by Dominic Cummings, has been saying this is unacceptable because:
1) Boris Johnson wants the freedom to subsidise as much or as little as he likes.
2) There is no such stipulation in Canada’s trade deal with the EU and the PM thinks it’s only fair the UK should be treated the same way.
The EU’s response is that UK businesses and exports are so much more embedded in its markets than Canada that the UK would represent a much greater risk of unfair competition were it to adopt a market-distorting regime of subsidies. And the EU would also say that it has moved a distance from its original position on this, in that it dropped a stipulation that there would be any role for the European Court of Justice in enforcing the rules – because it recognises this is toxic to Brexiters.
Also the question for Johnson and his party is more about principle than practice, because it is almost impossible to envisage any Tory or even Labour government being constrained by the EU state aid framework if said government wanted to rescue an important ailing business or deliver grants and subsidies to strategically important industries.
Apart from anything else, if the UK government were to break the state aid rules, the remedies would tend to be after the event, by which time the ailing businesses – like our big banks during the banking crisis – would already have been kept alive and strategically important industries would either be viable or not.
So is Johnson really arguing that he wants to blow up a free trade agreement with the EU, that is so desperately wanted by British exporters, so that he has the right to prop up lame duck businesses with subsidies forever?
Does Johnson in his heart believe that if he doesn’t have the sovereign right to turn the UK into a Soviet-style land of state-controlled industrial white elephants, Brexit really would not mean Brexit?
It was because I struggled to believe this was the PM’s cunning plan that I said last week – in a tweet overtaken by events – that the odds of a deal with the EU were ‘quite close to 100 per cent’, unless there was breath-taking incompetence. The point is that the EU has moved and is prepared to be more flexible still on all Johnson’s other red lines, including access and quotas for EU fishermen in UK waters.
But on state aid my understanding is the EU’s position is thus far and no further. Which means we may know even later today whether the free trade negotiations have just been paused or are finally and definitively over.
By the way, I asked an official very close to Johnson what was stopping the Prime Minister moving to what would look like the sunny uplands of a free trade deal agreed largely on his terms, and whether in fact he never really wanted a deal. This is what Johnson’s colleague said: ‘The PM is in two minds constantly over this. He doesn’t know whether he really wants one [a deal] so no one else [around him] does. And he worries that any deal he agrees could be better. It is Arafat syndrome.’ Oh dear.