It'd be a pity if the deal collapsed on the ratchet clause. There's a sensible middle ground here if the UK and the EU can agree to a clear process for when, and how, any tariffs can be imposed in future.

Here's my proposal.

(A short thread) https://twitter.com/faisalislam/status/1337341494907252736

First, what do the two sides want?

The EU wants to be able to act quickly, and without going through lengthy arbitration, if it considers a risk that lower UK standards lead to unequal competition. It worries UK exporters into the single market could undercut EU firms.

(2/n)

The UK wants its (sovereign) ability to decide for itself whether it wants to raise its domestic standards on environment, labour and employment. It doesn't want to be subject to punitive tariffs if it doesn't choose to raise its domestic rules along with the EU.

(3/n)

There's a compromise here if the UK and EU can agree on 2 principles:

(1) the unilateral right to retaliate must be symmetrical (which the EU seems to accept now), and

(2) the proportionality of any tariffs can be challenged before independent arbitration.

(4/n)

Here's how it'd work in practice:

Assume that either side, the UK or the EU, raises their *domestic* rules with respect to environment, labour or social/employment standards, and is concerned the unequal level of protection threatens the equal conditions of competition:

(5/n)

Step 1: Consultation

The "offended" party wouldn't be able to retaliate immediately. It'd have to follow a clear process. That process would begin by asking for a "consultation" with the other side at the Joint Committee.

(6/n)

The purpose of the consultation is to explain to the other side how, after raising its standards, this may threaten the conditions of competition and potentially create an imbalance of trade.

The objective here is to try to solve it through cooperation and agreement.

(7/n)

Step 2a: Agreement > New common floor (> Sorted)

If there's agreement at the Joint Committee, the two sides could agree that the new regulations of one side should form the new "common floor" of level of protection that both sides should respect.

(8/n)

What this doesn't mean is "following EU law/EU rules". It means that the side with lower standards would commit to increase the domestic level of protection - however it chooses to do - in a way that meets the common floor within an agreed period of time.

(9/n)

The two sides would, then, take a mutual (and sovereign) decision to amend the agreement to this effect. In practice, this is usually done through a decision of the Joint Committee (and a change to one of the annexes of the agreement).

(10/n)

Step 2b: Disagreement >Proposal for "rebalancing measures"

If the UK and EU could not agree, and after an imbalance of trade was created, the offended party could propose "rebalancing measures" - e.g., financial compensation for it being undercut by lower standards.

(11/n)

Step 3a: Agreement on rebalancing measures (> Sorted)

Any rebalancing measures should "proportionate" and necessary to the extent that they remedy the imbalance.

What are these measures? Ideally, they should be mutually agreed. In which case, this is sorted.

(12/n)

Step 3b: Disagreement on rebalancing measures > Unilateral remedial measures

But they might not agree. Then, the offended party could impose "remedial measures" - either tariffs or suspending other concessions. (That's what the EU ultimately wants.)

(13/n)

Any such "remedial measures" should be subject to two important conditions: they should be "proportionate" to the nature of trade imbalance and allow the other side to respond (by giving it a notice period, say, 30 days).

(14/n)

Step 4: Proportionality test

How to avoid a scenario of over-blown tariffs being imposed?

After the offended side has stated intention to impose tariffs, there should be a possibility to challenge the "proportionality" of tariffs before independent arbitration.

(15/n)

The arbitration panel wouldn't have the right to stop the offended party from imposing tariffs.

But it would be able to prevent any disproportionate measures, esp if they're clearly over the top and politically motivated.

(16/n)

So, this solution would allow both sides to have the right to impose unilateral tariffs if they think that lower standards of the other side lead to unequal competition.

But there'd be an agreed process in place to ensure that their remedial actions aren't over-blown.

(17/n)

Johnson can argue that he has secured valuable concessions (on the symmetry of retaliatory measures and the proportionality test).

And, the EU would be able to act if they think UK (non-)action is damaging the single market.

Both sides can claim victory. Happy ending.

(End)