Brussels warns UK over future trade relationship ambitions

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Brussels has warned the UK that its hopes of a far-reaching trade deal will be dented if London does not stick closely to EU rules, preparing the ground for tough negotiations with Boris Johnson on the two sides’ future relationship.European Commission president Ursula von der Leyen said that the UK prime minister’s decision to pull Britain out of the EU’s single market and customs union meant that future economic ties “cannot and will not be as close as before — because with every choice comes a consequence”.Ms von der Leyen, who was speaking at the London School of Economics on Wednesday ahead of a meeting with Mr Johnson, reiterated Brussels’ insistence that a tariff-free, quota-free trade deal must be underpinned by a “level playing field” of rules to protect Europe’s businesses from unfair British competition. “Without a level playing field on environment, labour, taxation and state aid, you cannot have the highest quality access to the world’s largest single market,” she said. “The more divergence there is, the more distant the partnership has to be.”Ms von der Leyen’s meeting with Mr Johnson will be the first since his December election victory, during which he made clear that Britain would leave the EU on January 31. Both sides are committed to trying to make rapid progress on a future relationship deal that would be ready for the start of 2021, when the UK’s post-Brexit transition period ends. The commission president said that the UK needed to accept that a full agreement, covering “every single aspect of our new partnership”, would not be ready by the end of the year. “We will have to prioritise,” she said. “I want to be very honest about what lies ahead of us.”Her comments reflect concern in Brussels that the British public has still not digested the realities of leaving the EU and of following Mr Johnson’s plan of an economic relationship based on a trade deal. EU officials warn that the approach will inevitably lead to the creation of a hard border for trade in goods, disrupting supply chains and resulting in lost opportunities for service providers. At the same time, the EU is wedded to securing its own priorities in the talks, including access to British fishing waters and guarantees that its companies will not face unfair competition. Mr Johnson has ruled out any extension of the transition period, but Ms von der Leyen suggested a stocktaking by the summer to assess whether more time is needed to negotiate.A comprehensive deal is “basically impossible” by the end of 2020, she said, noting that there will be “at most” nine to 10 months to hammer out an agreement given the time needed for ratification. “We might together want to take a reconsideration of the timeframe before July 1,” she said. The beginning of July is the deadline for Britain to request a transition extension. 
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Speaking as tensions escalate between the US and Iran, Ms von der Leyen devoted substantial time in her speech to the importance of foreign and security policy co-operation. The EU and UK “must build a new, comprehensive security partnership to fight cross-border threats, ranging from terrorism to cyber security to counter-intelligence”, she said. “The truth is that Brexit will not resolve any of the existing challenges for the EU nor the UK,” added Ms von der Leyen. “Even being apart and not bound by the treaties, it will require intensive co-operation.”Separately on Wednesday, Dutch central bank governor Klaas Knot said that the EU economy faced “continuing uncertainty” from Brexit given the end-2020 deadline for the transition period. He called for “a deep and comprehensive trade deal”, and said that the UK’s willingness to uphold the standards set by EU regulations would determine the market access of its financial services sector after Brexit. Ms von der Leyen also highlighted financial services as an area where “all will change” after Brexit, saying cross-border retail banking would become more complicated and that the City of London would lose its single market passport, leaving UK-based financial services firms with more limited access rights to the EU. She said the EU would approach the future relationship talks in a positive spirit, and added that she hoped the negotiations could avoid the rancour that infected Britain’s EU divorce. Britain’s exit treaty was negotiated against a background of “uncertainty” that made the situation “inevitably tense”, she said. “This is done and dusted as far as I am concerned.”

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