Investing.com -- The United Kingdom (TADAWUL:4280) is set to host an essential summit with the EU next week, aiming to initiate a complete trade reset after nearly five years under the current Trade and Cooperation Agreement.
The summit to be held on May 19 is expected to focus on various points of contention and future directions for U.K.-EU relations, according to a preview by Deutsche Bank (ETR:DBKGn) on Friday.
The bank suggests that expectations for the summit should be moderate, with the likely outcome being an agreement on cooperation.
The summit is anticipated to result in a broad-based consensus on joint areas of interest, from defense to climate changes, and a commitment to deepen security and trade ties.
A successful outcome would include an agreement on a Security and Defence Partnership, potentially opening doors for U.K. participation in EU defense procurement schemes.
The summit is also expected to serve as a foundation for more detailed discussions on areas like agri-food trade, emissions trading, and youth mobility. However, Deutsche Bank predicts minimal progress on trade issues outside of defense and security.
In the upcoming months, the U.K. aims to secure agreements on animal and plant health standards, reduction of rules of origin checks on advanced manufacturing, and mutual recognition of professional qualifications.
Deals on these three aspects could contribute up to 0.3pp to U.K. GDP in 10 years, according to the Centre of European Reform. This could be a significant offset for the Chancellor to the ongoing trade war and potential growth downgrades from the OBR in its autumn update.
The U.K.-EU summit’s primary focus will be defense. The U.K.’s objective is to secure a comprehensive ’Security and Defence Partnership’ with the EU, marking the beginning of a new era of closer ties on European defense, security, and cooperation.
The U.K.’s main goal is to ensure that the EU’s ’buy European’ clause allows U.K. firms to benefit from the EU’s initiative to expand the European defense manufacturing base.
The U.K. also hopes to gain access to the European Commission’s SAFE facility, a loan funding arrangement of up to EUR 150bn.
Discussions on agriculture and fisheries are expected to be prominent. The U.K. Government has already accepted terms on fisheries in principle, aiming to transition from annual negotiations on quotas to a fixed access amount for EU fleets.
However, the length of the deal remains uncertain and could be a contentious point in trade negotiations. Concessions on fisheries are expected to facilitate discussions on other parts of the trade deal.
Reform to sanitary and phytosanitary rules (SPS) is a priority for the Labour Government, which has also indicated potential alignment with the EU’s SPS rules. This alignment could result in a larger role for the European Court of Justice (ECJ) in arbitration mechanisms, a contentious issue for the UK.
This issue could also arise in discussions about certification regimes, including rules of origin checks for the manufacturing sector.
Youth mobility schemes will also be a topic of discussion. The U.K. Government has shown willingness to expand its initial plans for these schemes with the EU. However, recent talks on both fisheries and youth mobility schemes have encountered some difficulties.
Any discussions on immigration will likely be secondary and deferred to later trade discussions. While no concrete announcements on immigration schemes are expected, they are anticipated to be part of the discussions at the U.K.-EU summit.