Britain only left the European Union Friday, but battle lines are already being drawn over what their future relationship will look like.
Both sides are preparing for talks on a new partnership – governing everything from trade and transportation to security and communications – and on Monday Prime Minister Boris Johnson and EU negotiator Michel Barnier outlined their priorities. Their differences could not have been more stark and have set the stage for a difficult series of negotiations on a tight time frame.
Mr. Johnson gave a passionate defence of free trade, comparing Britain to Clark Kent, ready to “leap into the phone booth and emerge with his cloak flowing as the supercharged champion of the right of the populations of the Earth to buy and sell freely among each other.” He insisted that the United Kingdom would not be aligned with EU regulations and said he wanted a trade deal based on the Canada-EU agreement.
“There is no need for a free-trade agreement to involve accepting EU rules on competition policy, subsidies, social protection, the environment or anything similar, any more than the EU should be obliged to accept U.K. rules,” he said in a speech at the Old Royal Naval College in Greenwich. “We have made our choice: We want a comprehensive free-trade agreement, similar to Canada’s.”
Mr. Barnier said Britain’s access to the EU market would depend on how closely the country followed the bloc’s regulations, to ensure British businesses did not gain an unfair advantage. “We must now agree on specific and effective guarantees to ensure a level playing field over the long term,” Mr. Barnier said in a speech in Brussels. “That means mechanisms to uphold the high standards we have in social, environmental, climate, tax and state aid matters today and in their future developments. … We’re going to be paying very close attention and be very demanding when it comes to the quality and the credibility of this level playing field mechanism.”
Both sides also released documents outlining in detail what they want from the talks, which must be concluded by Dec. 31. Britain formally left the EU Friday but remains essentially inside the bloc’s single market until then. Both sides are supposed to use the transition period to negotiate arrangements on trade, transportation, security, foreign policy, communications and data sharing. If none of that is in place by the end of the year, Britain will be completely outside the EU as of Jan. 1, 2021, and trade will be governed by World Trade Organization terms, which would involve tariffs and non-tariff barriers. “We’ll work to avoid that, but if we can’t manage a deal by the end of the year, there will be a cliff edge on many fronts,” Mr. Barnier said.
The EU has made it clear that Britain’s size and proximity mean a trade deal will be different than the Canada-EU agreement. In its document released Monday, the EU said the U.K. must follow the bloc’s rules on state aid, employment standards, environmental regulations, tax matters, climate change and competition rules. It also wants the European Court of Justice to have a role in settling disputes.
That goes beyond the 2016 Canada-EU agreement, known as the Comprehensive Economic and Trade Agreement, or CETA. It deals mainly with eliminating tariffs, opening up government procurement and creating an independent dispute settlement system. Canada and the EU have also agreed to co-operate on various regulatory standards, but that’s far from the level of alignment the EU wants from the U.K. And CETA doesn’t cover most financial services, which form a large part of the British economy.
The Canada-EU deal took eight years to negotiate and has yet to be ratified by every EU member country, which is required. Jason Langrish, executive director of the Canada Europe Roundtable for Business, which was involved with CETA, said the deal is not “terribly effective in terms of dealing with services, technical barriers to trade or border issues.” He also noted that Canada is firmly outside the EU’s single market, which isn’t a major issue for Canada since its most important trade relationship is with the United States. “But I do not think it sufficient in the case of an economy [such as Britain’s] where half its external trade is with the EU and the level of professional services access is highly important and considered to be a competitive advantage,” he added.
British business groups have also been adamant that the country keep trade with the EU as seamless as possible. The Society of Motor Manufacturers and Traders, which represents the auto industry, said last week that under WTO rules British auto exports would face a 10-per-cent tariff in the EU, which would cost the industry £4.5-billion ($7.7-billion) annually. “The challenge over the next 11 months is going to be significant,” said SMMT chief executive Mike Hawes.
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