Brexit: UK likely to end up with Canadian-style deal, warns Barnier

The EU’s chief negotiator, Michel Barnier, has warned that Britain can expect a trade deal little better than the one the EU struck with Canada – and even that would take years to negotiate, despite Theresa May’s claims to the contrary over Britain’s future after Brexit.

Barnier said he could envision a short transition period being agreed between the EU and the UK before March 2019 to ease the UK’s exit from the bloc, but it would require the British government accepting the continuation of EU law and the jurisdiction of the European court of justice.

A future trade deal, however, would have to be negotiated over “several years” and “will be very different” from the status quo, Barnier told a group of European newspapers.

“If we reach an agreement on the orderly withdrawal of the United Kingdom, such a [transition] period, both short and framed, is possible,” he said. “To my mind, it makes sense that it covers the financial period, so until 2020. It would leave us more time to prepare for the future relationship.

“But I insist on one point: such a period would be possible only if it is framed by the maintenance of all of the regulatory architecture and European supervision, including jurisdictional. It would maintain the economic status quo and all obligations of the UK.”

“From the moment the UK told us that it wants out of the single market and the customs union, we will have to work on a model that is closer to the agreement signed with Canada.

“The single market is a set of rules and standards and is a shared jurisdiction. Its integrity is non-negotiable, as is the autonomy of decisions of the 27. Either you’re in or you’re out.”

Britain wants to discuss its future trading relationship with the EU because 44% of UK exports go to, and 53% of imports come from, the EU 27 countries. Post-Brexit conditions of trade could, therefore, have a major effect on Britain’s economy.

The World Bank estimates UK trade with the EU in goods and services could fall by 50% and 62% respectively if no trade deal is agreed after Brexit, against 12% and 16% if the UK stays in the single market through a Norway-style agreement.

Clean Brexit campaigners say the shortfall can be offset through more trade with non-EU countries, but those who argue the UK must retain close links with the single market doubt this, certainly any time soon. Both groups want certainty.

However, the EU27’s negotiating guidelines for the two-year Brexit talks say discussion of the “framework” of a future relationship can only take place in phase two of the talks, once “sufficient progress” has been made on the separation phase and particularly the UK’s exit bill.

The deal struck between the EU and Canada, known as the the Comprehensive Economic and Trade Agreement (CETA), lifts 98% of tariffs on imports between the two parties, and was a significant move towards freer trade.

It does not, however, significantly reduce non-tariff barriers for trade and traditional rules-of-origin regulations would apply for the UK’s exports to the EU, under such a deal.

If the non-EU import content of a UK export was too high, for example, there would be a loss of duty-free access for particular sensitive industrial goods, notably cars. A lack of regulatory harmonisation for medicines, automobiles and aircraft equipment would also require products being checked at the border.

A deal similar to CETA would furthermore offer little to the UK’s vital financial services sector post-Brexit, when businesses located in the City will lose their automatic right to offer their services across the EU.

Barnier said of the negotiations over the future that they would be highly complex and would take many years before they could be put to the national parliaments for ratification.

He said: “The two phases are difficult. The second will be very different and will last several years. It is truly unique because instead of promoting regulatory convergence, it will aim to frame a difference. It will involve risks, including about its political ratification, making all the more necessary transparency around these topics.”

Barnier’s comments appeared to contradict the prime minister’s claims in the House of Commons on Monday that the details of a future trade deal would be settled before the UK left the bloc. May has insisted this will be necessary to allow the implementation in changes to customs controls, for example, in the two years directly after March 2019.

The prime minister had suggested in her Florence speech in September that a deal between the UK and the EU would be far more advanced than that struck with Canada, claiming that such a deal “compared with what exists between Britain and the EU today would represent such a restriction on our mutual market access that it would benefit neither of our economies”.

May added in her speech in Italy: “Not only that, it would start from the false premise that there is no pre-existing regulatory relationship between us. And precedent suggests that it could take years to negotiate. We can do so much better than this.”

However, Barnier appeared to offer the British government little hope of such an advance on the Canadian deal being possible, although he acknowledged his team was working on the details of an exit treaty.

He said: “The strategic interest of our continent is to partner with this very large country with a permanent seat on the United Nations security council. But this is not a reason to undermine the single market.”

Of a no-deal scenario, Barnier said: “We do not want it at all, but we do not exclude any option. Such a scenario would cause us problems, and much larger [ones] in the UK.

“I will give you some examples. In London, to leave the Euratom treaty without an agreement would mean immediate problems for the import of nuclear material, whether for nuclear power plants or hospitals.

“That would mean leaving the single European sky agreement, and no longer being able to mutually recognise pilot qualifications or get take off or landing clearance. And what would happen to the food products imported into the United Kingdom? There would immediately be customs controls, perhaps taxes. That’s why I want a deal.”