Britain’s hopes of an advantageous free trade agreement with the EU could be dashed if it attempts to use Brexit as an opportunity to abandon the “European model” and transform itself into a low-tax, low-regulation economy, Brussels’ chief negotiator has warned.
Michel Barnier said the EU wanted to strike an “ambitious” deal with the UK, but warned that the remaining 27 national parliaments and the European Parliament could refuse to ratify it unless Britain commits to a “level playing field” on issues like fair competition, food safety, social protections and environmental standards.
Mr Barnier also said that Britain must come forward with proposals to avoid a hard border in Ireland – as well as settling its financial accounts “accurately” – if it wishes to make progress towards trade talks at next month’s crunch European Union summit
He suggested that this could involve separate regulatory regimes for Northern Ireland and the mainland, effectively moving the border with the single market area to the Irish Sea.
Meanwhile, he confirmed that UK-based financial services firms would lose the “passport” which allows them to operate in the EU market after Brexit.
He borrowed Theresa May’s old catchphrase to mock those who argue that a special arrangement should be made for the sector, telling them: “Brexit means Brexit, everywhere.”
His comments came as Prime Minister Theresa May prepared to chair a Downing Street meeting at which senior ministers are expected to discuss an attempt to break the deadlock by increasing Britain’s offer on its “divorce bill”.
Downing Street refused to comment on reports that the Cabinet’s Exit and Trade (Strategy and Negotiations) sub-committee could approve a further £20 billion in payments, bringing the total offer to around £38 billion – well short of the 60 billion euro (£53 billion) sought by Brussels.
Speaking during a visit to Birmingham yesterday morning, Mrs May repeated that the UK would “honour our commitments” and “no other European Union country needs fear that they will have to receive less or pay in more”.
European Council president Donald Tusk has set a deadline of the start of next month for breakthroughs on the divorce bill and the Irish border if the EU27 are to conclude at the December 14-15 summit that “sufficient progress” has been made to move on to the second phase of negotiations, dealing with the future trade relationship.
German foreign minister Michael Roth said the EU27 need “clarity” from Britain on its divorce bill, warning: “I currently see no chance of the European Council in December really sending out the signal that these talks can get going.”
Speaking ahead of a meeting of the EU’s General Affairs Council in Brussels, Mr Roth added: “In the end, it’s about the rights of the citizens of the EU and it’s about the money.
“I have already made it clear that the British must make a move. They must stand by their contractual obligations. They can’t be released from them.”
The prospects of progress in December were dealt a blow by the collapse of Chancellor Angela Merkel’s attempts to put together a coalition in Germany, meaning that one of the European Union’s most significant players will be focused on her own position and a possible re-run election rather than being fully engaged in the Brexit process.
Supporters of Brexit seized on the Chancellor’s difficulties to caution Mrs May against making a further financial commitment at this point.
“Especially as Germany struggles to form a government, now is not the time for Britain to offer more money than her obligations are due in EU Brexit negotiations,” said Conservative backbencher Henry Smith.
“The EU27 will of course miss UK cash but no deal would damage their economies and trade surplus with us far worse.”
Another Tory MP, Nigel Evans, said any money saved by leaving the EU should be “spent on British nurses not on Brussels bureaucrats”, telling the BBC: “Yes we will have obligations, but we’re not going to pay ransom money simply to leave the European Union.”
Speaking to the Centre for European Reform, Mr Barnier said the EU was ready to move on to trade negotiations, and held out the prospect that it would offer “its most ambitious FTA approach”.
But he warned; “There will be no ambitious partnership without common ground in fair competition, state aid, tax dumping, food safety, social and environmental standards.
“The UK has chosen to leave the EU. Does it want to stay close to the European model or does it want to gradually move away from it?
“The UK’s reply to this question will be important and even decisive because it will shape the discussion on our future partnership and shape also the conditions for ratification of that partnership in many national parliaments and obviously in the European Parliament.”
On Ireland, he said the EU and UK were close to agreement on measures to ensure the continuation of the Good Friday Agreement and the Common Travel Area.
But he said it remained “unclear” what rules would apply in Northern Ireland after Brexit.
He dismissed arguments that the North’s regulatory framework must match that on the mainland to preserve the integrity of the UK single market, pointing out that Northern Ireland already has “specific rules in many areas that are different to the rest of the UK”.
“I expect the UK, as co-guarantor of the Good Friday Agreement, to come forward with proposals,” he said.
“The island of Ireland is now faced with many challenges. Those who wanted Brexit must offer solutions.”