Forty-eight hours before the Brexit referendum on 23 June 2016, Donald Tusk phoned all 27 EU leaders.

"He said: Listen, if this happens [ie, a Leave vote], this is more or less what I'm going to say," a senior EU official told me in 2017. 

The European Council President processed the thoughts of the EU leaders and tweaked the statement slightly. Then at 7.22am on the morning of 24 June, after the Leave victory had been proclaimed, Tusk’s office emailed the statement to capitals and EU institutions.

Beyond Tusk’s pained regret, the key line was that the UK would have to abide by its rights and obligations as an EU member until the day of departure.

Donald Tusk

The senior official said that line was a deliberate signal about the EU’s post-Brexit relationship with the UK. 

"There you had the principle that we do want the UK as a partner, but it is up to them to define at what level we find this balance of rights and obligations."

In other words, the UK would have to decide how many obligations it accepts in order to enjoy the rights of single market access.

"Sovereignty is about the ability to get your own rules right in a way that suits our own conditions…"

So, at the very moment, delirious leave supporters were proclaiming the UK had taken back control, the EU was already injecting the notion of a level playing field into the DNA of its own post-Brexit position.

Four and a half years on, this fundamental contradiction remains unresolved. Welcome to Brexit for slow learners. 

One weary EU diplomat sums up the dilemma.

"How do you allow a third country to do whatever it wants, and at the same time enjoy the benefits of the internal market? How do you square that circle?

"How do you legislate for when the UK wants to diverge [from EU standards]?  How do you make sure that if that seriously impacts your position you can do something about it?"

A detailed inspection of the past eight months reveals just how difficult the level playing field issue has been.

On 17 October 2019, both London and Brussels published the Joint Political Declaration. Article 77 set out a jointly-agreed understanding of what a level playing field meant and should look like.

Due to the fact the UK was right on Europe’s doorstep and there was an existing economic interdependence, there should be "open and fair competition, encompassing robust commitments to ensure a level playing field."

The deeper the relationship, the greater the obligations. Distortions of trade should be avoided, and neither side should have an unfair advantage.

Both sides would "uphold the common high standards" that would be in place from the moment the transition ends in the fields of state aid, competition, social and employment standards, environment, climate change, and taxation. 

The new relationship should rely on EU and international standards, and include an effective enforcement and dispute settlement mechanism.

It was not legally binding and it didn’t take long for both sides to drift apart in their interpretation of it.

The UK began describing it as a "framework." Member states regarded it as a pledge.

Even before the negotiations began, London was disregarding the Political Declaration. In a spiky lecture in a Brussels university on 21 February, David Frost said the idea that the UK would match EU standards was "absurd".

"Sovereignty is about the ability to get your own rules right in a way that suits our own conditions… [L]ooking forward, we are going to have a huge advantage over the EU – the ability to set regulations for new sectors, new ideas, and new conditions – quicker than the EU can, and based on sound science not fear of the future."

One UK source said after the speech: "It’s not to say we don’t recognise that in any FTA we need things which protect each side from unfair competition. But we really don’t see that requires the kinds of levels of alignment that the EU are talking about."

While the UK was rejecting the level playing field, member states wanted it strengthened.

The main LPF plank was the so-called "non-regression" clause, the promise that neither side would drop their standards below that which applies on 1 January (ie, EU standards would be the baseline).

Michel Barnier’s negotiating mandate, adopted by member states four days after Frost’s Brussels speech, contained no fewer than 13 references to the level playing field, but there was an important addition which signalled that non-regression on its own was not enough.

Michel Barnier

The level playing field had to "stand the test of time".

One EU source recalls: "Member states took one look [at the original non-regression clause] and said, that’s good but not good enough. We want this relationship to last over time. In these areas - environment, social, labour, climate, taxation standards - we’re intending to be quite ambitious in the future and this relationship is for the long run. 

"We don’t want to be in a position where we now agree to a joint floor on standards which then gets superseded and becomes obsolete very quickly."

To the UK, the fact that the floor was based on EU standards, there was already the danger of European Court of Justice (ECJ) involvement. The ECJ is the only arbiter of EU law, and ending its writ was a red line for London.

Member states, in turn, feared that they would be constrained in toughening up, say, climate change legislation because their industries would complain that they would just be undercut by their British rivals. 

On 5 March, three days after the negotiations got under way, a diplomatic cable was sent to one national capital.

"The UK wants to maintain high standards on labour, environment etc, but doesn't want to commit at all to that. Also the UK wouldn’t agree to sanctions or governance [a dispute settlement mechanism]. Common high standards, as mentioned in Article 77 of the JPC [Joint Political Declaration] has now been rejected by the UK. The only thing they want is international standards." the cable read.

Two weeks later another cable indicated that David Frost’s team was becoming even more hostile to the level playing field.

"When it comes to common standards, as included in the Political Declaration, they are being rejected," the cable read, "because London says they only want a bargain basement FTA and lower ambitions on services, and want to strike out against the level playing field."

Another cable suggested London wanted to stick to WTO rules on state aid, meaning a commitment to transparency and a "light" consultation mechanism but no dispute resolution.

On taxation, British negotiators were rejecting guarantees that exist with EU taxation law. London did not want to go beyond the provisions on good tax governance, labour and environmental standards that were found in the EU Canada trade deal (CETA).

In other words, no "ratchet" mechanism, no enforcement mechanism, only the kind of arbitration panel that exists within the European Free Trade Association (EFTA).

All this pushback, reflected in these diplomatic cables, meant that talks on the level playing field got nowhere fast. EU officials routinely complained that UK negotiators were simply not engaging on the issue.

British officials said existing free trade agreements, like CETA, had ample level playing field protections. They even produced a letter that the former trade Commissioner Phil Hogan had written to the Dutch parliament, extolling the virtues of the protections that existed within CETA, in order to convince recalcitrant Dutch MPs to pass CETA legislation.

Progress was also derailed by the Covid-19 pandemic. 

"The EU has to move from their position of, you've got to do what we do. That’s not going to work." 

Michel Barnier’s team published their 400-page draft legal text on 18 March, but when member states got hold of it on 13 March, it was the day before the Belgian Covid lockdown kicked in.

An analysis of the text that would normally have lasted several days was shoehorned into an afternoon in a huge conference room in the Justus Lipsius building in Brussels.

"Everyone freaked out," says one source present. "It was a four or five-hour meeting on the eve of the lockdown. Delegates were looking at each other. People were coughing. We had to squeeze several days worth of reading and commentary into one last physical meeting. Then we didn't see each other until June." 

When June came around there had only been a handful of videoconference negotiating rounds between EU and UK officials. 

Both sides were as far apart as ever on the level playing field, especially state aid.

One diplomatic note spoke of "difficult discussions" on the question of state aid and subsidies.

"UK wants to stay close to FTA precedents…UK remains in the logic of a WTO subsidy control system. Furthermore, the WTO rules do not ensure enforcement at national level," the cable stated.

When it came to the level playing field in general "for the UK, supervision of support measures by an independent authority is virtually out of the question...binding dispute resolution in LPF is still rejected by the UK as unnecessary."

As the negotiations rolled into the summer, EU officials were becoming increasingly frustrated on the level playing field issue. But the UK also wanted to intensify the talks and to move into a tunnel situation.

On 11 June, Boris Johnson held a "High Level" video call with the presidents of the Commission and Council, Ursula von der Leyen and Charles Michel.

There were no breakthroughs, but both sides did agree to speed up the schedule of negotiating rounds in July. 

Von der Leyen pressed upon Johnson the need for a credible level playing field. "We should not underestimate the fact that if we don’t deliver on the LPF the chance of ratification is very low," a senior EU source said afterwards.

Boris Johnson and Ursula von der Leyen

"We also said on fisheries that no one was questioning UK sovereignty in its own waters. We also pleaded for predictability for our fishermen who have been fishing there for centuries."

That was in June.

In July the EU dropped its demand for dynamic alignment on the state aid issue. In its place, Michel Barnier suggested a "toolbox" with four elements: jointly-agreed high-level principles on how both sides would approach state subsidies; a robust, independent competition authority in the UK; a dispute settlement mechanism; the ability for either side to take swift retaliation while arbitration was ongoing.

By September the UK was still resisting any movement on LPF.

One diplomatic cable reported: "The UK does not want to go beyond general guidelines. Not enough to prevent unfair competition. The UK intends to give only guidance to national authorities on [subsidies] without a legal framework for supervision… This won’t work without enforcement at national level and subsequently internationally, but the UK does not yet want to engage on this."

One UK source countered: "We’re not saying this should be a free for all, and see who wins. We accept you need mechanisms in place to deal with disputes. The EU has to move from their position of, you’ve got to do what we do. That’s not going to work." 

While the deadlock continued, in public the focus of attention switched from the broader level playing and on to state aid. Brexit commentators fixated on Dominic Cummings, Johnson’s senior advisor, and his hostility to any external constraints on a British government subsidising any sector it saw fit.

Then in early September, the UK introduced the Internal Market Bill (IMB), triggering an immediate crisis in relations. Although the spotlight zeroed in on how it breached the Northern Ireland Protocol (and international law), it was highly relevant to the state aid issue.

That is because the UK wanted to overturn a provision within the Protocol which kept EU state aid rules operational in Northern Ireland.  The rules contained a "reach-back" effect which would have extended the remit of EU state aid law into the rest of the UK if the government subsidised a British corporation with branches in the North.

The effect of the IMB was to harden the EU’s approach to having a binding dispute mechanism linked to a level playing field.

The European Commission was still looking for some way to ensure that there was a level playing field, that it remained level over time, and that there was a binding mechanism to ensure that was the case.

Officials say that because the UK was still not engaging in the idea, the Commission on its own was forced to come up with suggestions. Combined with the impact of the IMB, and the whole question of trust, what it came up with appeared to toughen up the so-called "ratchet" clause, whereby if the EU raised its standards, the UK should as well.

If they didn’t, and British firms gained an edge over European ones competing within the same market, there should be the ability for the EU to retaliate with tariffs, or in another sphere.

"It wasn't that the EU wanted to do something more ambitious," says one diplomat. "They just wanted to find something new. But that something new turned out to be a firmer, tighter gripping mechanism.  And that might have been influenced by the IMB issue."

In October, the talks were once again in crisis.

After EU leaders, at a summit in Brussels, gave a lukewarm assessment of progress, failed to trigger the "tunnel" and suggested the UK had to make the first move to break the deadlock, Boris Johnson declared the talks all but dead.

The so-called "walkout" was quickly patched up, but the effect appears to have been cathartic, but only up to a point.

"After the October crisis there was a return to the table and a more intensive set of discussions got going," says one source. "The UK tabled a number of new elements. They were creative, but were a clever way of nullifying the effects we were trying to achieve."

The talks had by now entered a semi-tunnel. Very little information leaked out, although Michel Barnier continued his periodic briefing of member states and MEPs.

"Very few people know what happened at that time," says one source. "So few people have seen the documents."

David Frost had already signalled, for the first time, that London could look at the state aid issue in ways that went beyond standard free trade agreements.

"There was progress around principles at that time," says the source, "and detailed discussions on the key elements [ie, Michel Barnier’s "toolbox" idea]."

However, the media had taken their eye off the level playing field ball by focusing almost completely on the state aid issue.  But it hadn’t gone away.

On 2 October, Boris Johnson and Ursula von der Leyen had held a phone call in which both sides expressed concern about the level playing field, and the whole set of sensitive issues: how might both sides evolve standards in tandem, what kind of retaliation might be acceptable if one side diverged, who would determine if any divergence had genuinely distorted trade or given one side an unfair advantage?

Then as the post-walk out tunnel period intensified going into November, Stephanie Riso, Von der Leyen’s chief Brexit advisor and a veteran of the Withdrawal Agreement negotiations, took a more active role in the negotiations.

Her presence began to attract favourable mentions in the British media. There were suggestions, vehemently denied, that she had been given instructions to nudge Barnier in a more conciliatory direction. Some member states - France, Belgium, Denmark, the Netherlands in particular - were getting nervous.

"The feeling was that Barnier or Stephanie Riso were going too far in the direction of the UK," says one diplomat, "imperilling the internal market."

Commission officials deny this was the case; whatever the truth, Barnier appeared to toughen his stance on the fisheries issue around the same time.

As the talks lurched from one unofficial deadline to the next, the three outstanding issues - fish, LPF and governance - came more sharply into focus, and the sovereignty debate became ever more shrill.

The negotiators were still operating within intense secrecy. However, some ideas which appeared to link all three issues surfaced.

One was an EU idea that any agreement on fisheries could be subject to a review clause, that would also extend to a review of the entire free trade agreement. That might on paper give the EU some reassurance that if the UK were not abiding by level playing field principles, there was an emergency brake down the road.

Writing in the Financial Times, Peter Foster suggested this might work for both sides: "Under some UK thinking, a four-year review clause on the free trade agreement would enable Brussels to assess if the UK had behaved in a way that undermined non-binding promises on free and fair competition - with Brussels imposing tariffs on UK trade in retaliation if necessary."

The idea slipped back into the depths as quickly as it had surfaced.

As Brussels struggled to understand the extent of Brexiteer obsession over sovereignty, some officials speculated that the Conservatives were terrified that if they gave ground on the principle of the UK raising its standards to keep in step with the EU, it might give a future Labour government a free hand to strengthen workers’ rights. 

If a Tory government later came to power, it could be faced with a legacy of workers’ rights that were somehow part of an international treaty, and where it would face tariffs if it lowered such standards.

In the event, Barnier’s team appeared to backtrack from whatever new ideas the UK was proposing. Officials deny that he suddenly threw in a last-minute demand under pressure from Paris designed to keep the UK tied to EU rules in perpetuity.

Whatever the truth, the whole issue around the level playing field, binding dispute mechanisms, ratchet clauses and so on, has been boiled down into an absolutist scrap over sovereignty, one that neither side looks set to win, as the hours slip past.

"Our friends in the EU are currently insisting that, if they pass a new law in the future with which we in this country do not comply or do not follow suit, they should have the automatic right to punish us and to retaliate," Johnson told the House of Commons on Wednesday to loud murmurs of disapproval.

In response, one senior Commission official observed: "His speech to the Commons was like he was going into war. I think Boris Johnson has built himself up as a huge independent, sovereign leader of a sovereign great nation. If he concedes anything he loses."

This is the climate ahead of Sunday’s deadline. Member states are adamant that Britain simply cannot have zero tariff and zero quota access to the single market without abiding by some rules of the game.

London is digging in on the view that retaliatory tariffs, if the UK refuses to stay in step with EU standards, make a mockery of the entire raison d’être of Brexit.

Brussels sees the treaty as lasting generations, and loosening more and more strings for the UK would erode the fairness of the relationship.

"The idea is not to make the level playing field smaller," says one EU source. 

"That way you might start with a football pitch and end up with a squash court, because you can't maintain it.  It might be level but it would be smaller and surrounded by jungle."