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Brexit: What is a level playing field?

By Chris Morris
Reality Check correspondent, BBC News

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media captionBBC Reality Check explains why the level playing field matters in Brexit talks

A question that has dominated the post-Brexit trade talks right from the start remains unresolved.

How closely aligned with the EU's economic structures will the UK be in future?

As the negotiations head into their final phase, before the UK leaves the single market and the customs union at the end of the year, the answer still depends to a large extent on what's known as the level playing field.

But while the EU emphasises fair competition, the UK insists on sovereignty. It is a disagreement that gets to the heart of what Brexit is all about.

What does it mean?

The level playing field is a trade-policy term for a set of common rules and standards that prevent businesses in one country gaining a competitive advantage over those operating in other countries.

It's about fair and open competition and it's an important part of the EU single market in which member countries allow the free movement of people, goods, services and capital.

The trade negotiators have been trying to reach agreement for months on how widespread level playing field provisions should be once the UK is no longer part of the single market.

The EU is insisting they must be maintained when it comes to regulations involving workers' rights, environmental protection, taxation and - in particular - state aid (or government subsidies for business).

It refuses to guarantee the UK the best access to the single market - with no tariffs or taxes on goods crossing borders - if there is a possibility that companies based in the UK could be given state support to undercut their rivals elsewhere in Europe.

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Is the EU trying to make the UK a special case?

Yes and no.

On one hand, almost all trade agreements involve level playing field provisions, because all parties are keen to ensure their businesses aren't operating at a commercial disadvantage.

But the closer a trading relationship is, the stricter those rules become.

And the EU points out that the UK is one of the world's largest economies, right next door, and already deeply integrated with European markets.

The political declaration that set out the framework for the future relationship between the EU and the UK made this link explicit.

Given the "geographic proximity and economic interdependence" of the two sides, it said, the future relationship must include "robust commitments to ensure a level playing field".

The UK now says it is not asking for any special treatment. It just wants a basic free trade deal along the lines of deals the EU has done with other friendly countries.

But the EU insists the wording of the political declaration - agreed with Boris Johnson's government - must be adhered to, even though it is not a legally binding document.

What this means in practice is if the UK wants a trade deal that involves no tariffs and no quotas (no limits on the amount of goods that can be traded), the EU will expect it to sign up to stricter rules than those set out in other recent EU trade agreements with countries such as Canada or Japan.

In other words, it is a special case because there is far more trade involved and the stakes are higher.

What are the options?

Prime Minister Boris Johnson wants a zero-tariff, zero-quota deal, but also insists on the UK's right to diverge or move away from EU rules and regulations.

That freedom to choose was partly what Brexit was all about. It could mean sticking closely to EU rules in some areas but not in others.

But the EU insists freedom comes at a price and it adds a third zero to the equation - "zero dumping", which means the strictest level playing field rules it can negotiate.

One option is to have what are known as non-regression clauses, which means the two sides would agree not to water down the shared rules they currently have. This is being explored in areas such as labour laws and environmental regulations that affect the way businesses operate.

It could mean agreeing a baseline of standards which they will both meet.

But the argument over state aid is even more complicated.

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And this is partly what the trade negotiations have come down to?

Yes, it's one of the last outstanding issues. But it's a big one, and both sides, predictably, have been digging in.

The EU has relaxed its initial demand that the UK should copy and paste its rules on state aid now and in the future, something known as dynamic alignment, but it is still pushing for something fairly close to it.

It basically wants the UK to agree a legal framework for competition rules that mirrors its own, with a strong independent regulator sorting out disagreements.

The UK says any deal must fully respect its sovereignty.

"That is not just a word - it has practical consequences," says the UK's chief negotiator David Frost, including "deciding ourselves on a robust and principled subsidy control system".

The government has said this new state aid system will be based broadly on international rules, but it has yet to set out its plans in real detail.

And the EU says that isn't good enough.

"We are ready to be creative," says President of the European Commission Ursula von der Leyen, "but we are not ready to put into question the integrity of our single market".

So, if there is to be progress, one side or the other (and probably both) is going to have to compromise on some pretty fundamental principles.

With only a few weeks to go, not only is there disagreement on what the rules should be, there is also no meeting of minds on how any future disputes should be resolved.

It's another reminder that while the UK wants to remain a friend and partner of the EU after Brexit, it will also become an economic rival.

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