Boris Johnson on Monday said he was prepared to sever links with the EU without a trade deal if Brussels insisted on tying the UK closely to its standards, in spite of the government’s own estimates that it could inflict long-term damage on the economy.Mr Johnson insisted Britain favoured a “Canada-style” trade deal, removing tariffs and quotas on trade with the EU. But the prime minister said the UK could “prosper mightily” even if a free-trade agreement was not in place by the end of a transition period on December 31 that came into effect after the country’s formal withdrawal from the bloc last Friday.The pound fell by as much as 1.4 per cent against the dollar to $1.3011, and also slipped against the euro, after the prime minister said his government was ready to walk away from talks with the EU without a deal on a future trading relationship.His opening salvo in the negotiations came as the European Commission warned that the UK would not secure an extensive trade deal if it insisted on diverging from EU standards on issues such as state aid, the environment and workers’ rights.Michel Barnier, the EU’s chief Brexit negotiator, said: “The UK answer will be fundamental to the level of ambition of our future relationship and the UK must know this,” he said. “It will be up to the UK to decide.”Mr Johnson insisted during the general election campaign last year that there was “absolutely zero” chance of the UK failing to agree a Canada-style trade deal with the EU before the transition period ends.But Mr Johnson said he was ready to contemplate Britain trading with the EU “like Australia”. Canberra has no free-trade agreement with the EU, but is seeking one.In November 2018 the government’s own analysis suggested that such a “no trade deal” outcome could knock 7.7 per cent off Britain’s growth over the next 15 years, blowing a hole in Mr Johnson’s plans to revive the country’s economy.The National Farmers Union has warned that trading with the EU on World Trade Organization terms like Australia would lead to very high tariffs on exports to the EU, citing 48 per cent on lamb and 84 per cent on beef.
But Mr Johnson insisted the EU should agree a Canada-style deal: “We are not leaving the EU to undermine European standards,” Mr Johnson said. “We will not engage in any kind of dumping, whether commercial, or social or environmental.Brussels’ draft mandate for the future relationship talks, published on Monday, called on the UK to continue to “ensure the application” of EU state-aid rules in the UK. Britain would also be required to stay in line with EU environmental and labour market rules as they stand at the end of Britain’s post-Brexit transition period.In exchange, the EU would be prepared to offer the UK what it describes as a “highly ambitious” trade deal including tariff-free, quota-free trade in goods. The EU also said that the trade deal it is offering would cover services, in an effort to minimise barriers in sectors such as telecoms and management consultancy. Brussels also insisted that the European Court of Justice must have a role in settling any disputes that arise in the future relationship over how to interpret EU law. Mr Johnson signed up to this in a political declaration he agreed as part of the UK’s withdrawal treaty with EU leaders last year, but on Monday he rejected any role for the ECJ. The EU is also demanding access to UK waters for its fishing industry on a similar basis as to now. Mr Barnier said that this issue was “inextricably” linked to the trade talks. Mr Johnson said he was willing to “consider an agreement” on fishing but “it must reflect the fact that the UK will be an independent coastal state”.