Tom Goodenough

Michel Barnier’s Brexit trade deal warning

Michel Barnier’s Brexit trade deal warning
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The furore over the Brexit divorce bill has been such that it is easy to forget that it isn't the only major sticking point in talks with the EU. Theresa May looks set to up Britain’s offer this week (from €20bn to around €40bn), in the hope that more cash on the table will unlock the next stage of negotiations. But Michel Barnier’s speech today should serve as a warning to the British government: things won’t necessarily get easier when the Brexit divorce bill is sorted. In fact, Barnier makes it clear that talks could get even more difficult.

The EU’s chief negotiator hinted that Britain would still miss out on a trade deal if it doesn’t agree to tie itself down to a ‘European model’ after Brexit. Here’s what Barnier said:

The UK has chosen to leave the EU. We respect this choice. Does it want to stay close to the European model? Or does it want to gradually move away from it? And the UK’s reply to these questions will be very important, and even decisive, because it will shape the discussion on our future relationship, and shape also the condition for ratification of that partnership in many national parliaments, and obviously in the European parliament.

I don’t say that to create a problem. I just say that to avoid problems, to say clearly what are the conditions for the success of ratification in this second stage of the negotiation.

Barnier’s message was delivered softly but make no mistake: this is still a warning. It also comes at a critical time for the British government, when ministers appear to be becoming more confident in suggesting that Brexit will enable Britain to forge its own way and do things differently.

This is, of course, one of the big reasons people voted for Brexit in the first place: there is little point in leaving the EU if Britain has to stick by the same rules as it does currently, without the chance of actually having a say-so in them. Boris Johnson and Michael Gove made this point about the big opportunity afforded by Brexit in their leaked memo to the PM, in which they said:

It is critically important to improve our country after we leave the EU. It requires a final EU deal that allows us a wide degree of regulatory freedom.

Philip Hammond has, until recently, appeared to resist this way of thinking. Over the summer, the Chancellor said the UK will remain ‘recognisably European’ and that Britain’s ‘social, economic and cultural model’ will stay largely the same in the years to come. This weekend, though, he showed signs he was leaning more towards the Boris/ Gove way of thinking. On Peston on Sunday, he said that Brexit would offer the chance for Britain to ‘explore regulatory innovations’. This comment went down well with Brexiteers as it suggested that the more difficult customers in the Cabinet were coming round to a more positive view of Brexit, finally seeing it as a chance to ditch the status quo and change things for the better.

Barnier, however, wants to shake the UK government out of this way of thinking. He said that if the UK wants a trade deal (or ‘ambitious partnership’, in Brussels’ speak) it would have to find ‘common ground in fair competition, state aid, tax dumping, food safety, social and environmental standards’. This would mean, in practice, that the government's hands would be tied if it did want to opt for a Brexit shake-up. Barnier's examples here are no accident: they touch on a number of areas where Brexit supporters have suggested there would be ample opportunity to move away from the status quo and do things differently.

Many Brexiteers have made the point that the UK and EU reaching a trade deal should be easy given that both currently abide by the same rules. But Barnier turned this argument on its head today, saying that: ‘For the first time ever in trade talks, the challenge will be to limit divergence of rules rather than maximise convergence’. In short, the EU wants assurances that Britain will continue to play by – and mirror – its rules even after it leaves. For those hopeful of a Brexit deal being agreed, this is not good news. It gives an insight into Brussels’ way of thinking: don’t even think about trying to change things if you want to avoid a 'no deal' scenario, is the message from Barnier.

This puts the British government in a bind: it can follow the Brussels’ blueprint and waste an opportunity to make positive changes after Brexit. Or it can view Brexit as a welcome chance to veer away from the EU’s way of doing things – in line with the Boris/ Gove memo – and put a possible Brexit deal in jeopardy.

Whether agreement on Britain’s divorce bill is reached before Christmas, it seems there is no sign that Brexit talks will get any easier in the new year.