For Downing Street, it is a “ratchet” clause. In Brussels the proposal is said to be about “evolution” – a clause in the Brexit treaty that will ensure that as one side develops their environmental, labour and social standards, the other cannot sit tight and enjoy competitive advantages without consequence. On Wednesday Boris Johnson and Angela Merkel said it was the biggest obstacle to a trade deal. What would this clause do? There is agreement on “non-regression” clauses, which would ensure that neither side can undercut a common baseline of standards after the transition period ends on 31 December. But Brussels wants to go further. As the EU develops its rulebook on working conditions or the environment, for example, it is seeking a mechanism to ensure that European businesses are not left at an economic disadvantage if Britain fails to step up its own regulations. As time goes by, the minimum standards protected by non-regression will inevitably become obsolete. They will, the logic goes, need to be upgraded and it should be possible for either side to propose a revision when the time comes. There should be a forum for discussion, it is argued, and a system for dispute resolution, possibly through independent arbitration. If one side drags its feet in agreeing to an upgrade, the EU wants recourse to complain and be given licence to counter the damage to its economic actors. Why is this contentious? The UK says this poses a threat to its sovereign right to make its own standards from 1 January. The UK’s chief negotiator, David Frost, claims that fear of countermeasures could lead to Britain being dragged into following EU policy. The impact of the corrective measures would be asymmetric. If the UK seeks to punish the EU with tariffs, it would be bad for some member states, depending on the products targeted, but they can share the pain around. If the EU puts tariffs on the UK, it could be disastrous as Britain is on its own. Officials in Brussels suspect there is another motivation behind the UK’s scepticism: a future Labour government could agree to upgrades in standards that a future Conservative administration would be powerless to peel back. Once the clause has ratcheted up a policy, there is no way to ratchet down. Downing Street has offered an alternative: a review of the baseline standards after a number years, potentially four. At that point the EU could apply tariffs on certain British goods to correct any imbalance or vice versa. The EU does not like this concept. It fears it will set itself up for an internal row every four years. When the EU applies tariffs, the UK would reciprocate. Every member state has its own interests in terms of products, whether it be French cheese, Italian wine or German cars. To EU eyes, it would also be giving the deal away on the cheap. This is their moment of leverage: a deal with the evolution clause that encourages both sides to do the right thing, or a no-deal exit. Will the row be the cause of a collapse in the negotiation? It is certainly possible. British political considerations are rubbing up against European economic interests in a dangerous way. But on Wednesday the prime minister set up a straw man, ready to be blown down. “Our friends in the EU are currently insisting that if they pass a new law in future with which we in this country do not comply or don’t follow suit, then they want the automatic right to punish us and to retaliate,” he told the Commons. This appears to offer plenty of wriggle room. The EU is not dogmatic about how the clause will work. There is a recognition that it would be democratically unacceptable for either side to have to change a specific law because its trading partner has done so. The EU does not want to lose its autonomy, after all. It is also understood that automatic tariffs are not the way forward. Consultation and arbitration provides a buffer. There is a potential deal to be done.