MNI INTERVIEW: EU-UK Reinsurance Deal Likely Despite Tension

The EU and the UK are still likely to eventually reach equivalence agreements in specific areas like reinsurance, but frictions over Northern Ireland are reducing the scope for broader deals in financial services in the near term and there is a slim chance of a collapse of the overall post-Brexit trade agreement, the chair of the House of Lords' European Union Committee told MNI.

With committees to administer the EU-UK Trade and Cooperation Agreement only likely to be created once the European Parliament ratifies the treaty in the coming months, frictions over Northern Ireland and other areas are likely to continue, Lord Kinnoull said in an interview, in which he also warned that the trade deal could still collapse.

"Given the delay in ratification it doesn't make any sense to have a fully operational treaty before the things that you set up to run the treaty, the 24 committees, are helping to run it. It is like having a car without a driver," Kinnoull said, noting that Cabinet Office Minister Michael Gove had written to him in February to inform him that the committees would not be up and running before the European Parliament approves the trade deal.

SPILLOVER EFFECT

The committees are meant deal with everything from the Northern Ireland protocol to road haulage and, in their absence, prompted by political pressure over supermarket shortages, the UK government unilaterally extended the grace period for not imposing regulatory checks on goods moving from Britain to Northern Ireland to Oct. 1, triggering EU legal action.

This dispute could have a spillover effect for financial services, according to Kinnoul.

"There is the potential for a lot of political gaming concerning equivalence decisions this year. I can't see them not being swept up in the various spats," he said. But he added: "Whether ultimately equivalence decisions are reached is also affected by the business area, there are some areas like reinsurance where there are good reasons to think equivalence decisions could be reached because it is in everyone's interests."

The timetable for ratification of the Trade and Cooperation Agreement is tight. The deadline has been extended to Apr. 30, but the UK government has said it will not sign up to another extension and the European Parliament is only scheduled to begin its debate at the end of April. This has resurrected the spectre of no trade deal, Kinnoul said.

CLIFF EDGE

"I don't think it is a very big risk, but you have got the risk that something further could go wrong and that one or other of the sides wouldn't agree to an extension and that you would slip into no deal simply because, for instance, the European Parliament hadn't voted on things," Kinnoull said.

"You have got a cliff-edge, there are various ways to stop going over the cliff but either the parliament agrees to ratify the deal or both the EU and the UK have to decide to extend. If one of those two things doesn't happen then you get into a no deal situation."

In the meantime, the current lopsided approach with the UK green lighting EU imports and the EU vetting UK ones looks set to continue, said Kinnoul, calling for the government to out the committees into operation.

"These 24 committees are there to perform functions and simply letting a very important treaty, the most comprehensive treaty anywhere really, try and operate without any of those committees is not wise. So we feel those committees ought to be started up now," he said.

"Unless the government changes its general policy that dynamic would continue and that essentially means there is grit in the machine, certainly one way for trade between the two … which is to be regretted," Kinnoull said.

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