In a week that saw Angela Merkel warning that Brexit is a ‘wake-up call’ for the EU and Trade Commissioner Hogan accusing the UK Prime Minister of ‘brinkmanship’, we gained further insight into the EU’s understanding of its ‘level playing field’ requirement and the future free trade agreement during a presentation of the European Commission’s Task Force for Relationships with the UK to the Article 50 working party.
Adherence to maintaining a level playing field will likely be a major sticking point in future relationship negotiations between the EU and the UK, akin to the Northern Irish backstop. Indeed, Northern Ireland remains a prominent concern, as the Commission believes that large British companies with subsidiaries in Northern Ireland will be caught up in the Irish Protocol without a free trade agreement in place by the end of the year. In order to avoid this, a free trade agreement would need to include a level playing field provision on state aid under which UK firms with Northern Irish subsidiaries would fall. It is understood that the level playing field is becoming a prominent issue due to concerns that Boris Johnson may significantly reform the UK economic model in a way in which the EU could be undercut.
During an Article 50 working party meeting on 13 January, the European Commission highlighted fisheries, trusted trader programmes and security as key policy areas in which agreements must be found. Additionally, the slides highlight the ‘qualitatively big difference between trading and operating within the Internal Market ecosystem and trading with the EU as a third county’ with regard to regulatory issues in an FTA context.