Germany and France have emerged as staunch opponents of a trade deal that would safeguard the City
Senior Eurosceptics have fired a warning shot at Theresa May, issuing seven new “red lines” she should not cross when she meets Jean‑Claude Juncker tomorrow to try to kickstart trade talks with the European Union.
Their demands will pile pressure on May to talk tough when she has lunch with Juncker. The meeting is designed to clear the way for the commencement of talks on Britain’s future relationship with the EU to be given approval at a Brussels summit on December 14. The government has so far signalled that it will continue to accept free movement and EU regulations during the transition and May says she wants a full trade deal.
In their letter to the prime minister, more than 30 Eurosceptic former cabinet ministers, business leaders and economists have demanded that May gives no money to Brussels — and walks out of the negotiations — unless their conditions are met.
The group, led by Owen Paterson, John Redwood, David Jones and the Tory peers Lord Lawson, Lord Vinson and Viscount Ridley, calls on May to demand a free trade agreement without tariffs by the end of next March.
They demand an end to “any jurisdiction” by the European Court of Justice in the UK and an agreement from Brussels that the UK will be free to negotiate, sign and implement trade deals during the two-year transition period, which begins in 2019. They also insist that no new EU regulations will apply during the transition and that freedom of movement is scrapped. They say the transition should last no more than two years and add that a deal on the border between Northern Ireland and the republic is in place before the end of the negotiating process.
The letter says: “If the EU refuses to agree to these terms by the end of the December council, the UK — having exhausted every avenue — should suspend its participation in the negotiations and inform the EU that, unless they are prepared to talk to us seriously about a future free trade arrangement, we will revert to World Trade Organisation terms from March 30, 2019.”
The signatories, who include businessmen such as the entrepreneur Luke Johnson and Tim Martin, the chairman of pub operator JD Wetherspoon, complain: “From the day Brexit negotiations began, EU negotiators have acted in a manner sadly unbecoming of an international body, demanding vast sums of money from the UK but declining to set out what the UK will get in return.”
Last night the former Conservative leader Iain Duncan Smith backed the call to end the authority of the European Court of Justice “once and for all”. In an article for The Sunday Telegraph, he said a new court of arbitration between the EU and UK would be needed and anything else “should be dismissed as a vain attempt to treat the UK as a client state”.
The letter came as government sources said Britain would walk away from the talks before Christmas if Brussels failed to agree sufficient progress had been made for talks to move on to trade.
Allies of the Brexit secretary, David Davis, warned that Britain may not be able to break the deadlock, with one aide claiming there was only a 60% chance the EU will allow the talks to move on. “It’s far from in the bag,” one source said.
As The Sunday Times reported in September, the government is prepared to pay a divorce bill of around £50bn to grease the wheels of the negotiations. The first £20bn will be paid during the two-year transition period, with the rest paid over a number of decades.
However, some cabinet members have now accepted the EU’s longstanding claim that a simple free trade agreement (FTA) on goods without a deal on services — along the lines of the one signed recently with Canada — is the only way to agree a future relationship between Britain and the bloc.
European countries export mainly goods to the UK, while British businesses export more services to the EU. This would leave sectors such as the City-based finance industry with limited access to the world’s biggest market.
The UK’s red lines — rejecting the jurisdiction of EU’s court and ending free migration from its member states — make it difficult to achieve more comprehensive access. A senior EU negotiator said that Tories who believed a trade deal with a provision for services was possible were simply “delusional”. He added: “They’ll discover in spring that an FTA+ is the only thing on the cards, unless they throw all their red lines overboard.”
Sabine Weyand, one of the commission’s foremost trade experts, who serves as deputy to the EU’s chief Brexit negotiator, Michel Barnier, has privately referred to the future deal as “Canada Dry”.
One cabinet minister argued that the outcome could in the long run have positive effects on the economy as it would reduce “dependence” on the City. “Post-Brexit, our industrial strategy would anyway have to be rewritten to reduce dependence on the financial industry.
“We can’t compete on taxes with small countries like Ireland, and we can’t out-resource Brazil. We will have to become innovative and competitive on the global market.”
Germany and France emerged as the biggest opponents of striking a wider trade deal. Emmanuel Macron, the French president, wants to use Brexit to move the finance industry’s centre of gravity to Paris.
Senior sources in the German finance ministry said they were reluctant to support the French position but Chancellor Angela Merkel accepted that this would be an “easy concession” to make to her ambitious French counterpart, and that it would be important for the “integrity of the single market” to show that being a member is “infinitely” more advantageous than being outside it.
“There must be a visible difference between being in the EU and being outside of it,” a minister from Merkel’s Christian Democratic Union party said.
The government wants to remain in the European Aviation Safety Agency, an EU body in charge of flight safety and standards, which is under jurisdiction of the ECJ. EU negotiators expect May to opt to remain in Euratom, which regulates nuclear material — as well as in the European Investment Bank (EIB), the bloc’s lender.
EU finance ministers are expected to propose the creation of an EIB subsidiary as early as this week. The move would allow the UK to retain ownership of its EIB share post-Brexit by circumventing legal provisions stipulating that only EU members can be owners of the bank.
EU trade experts estimate talks would last between five and seven years despite May’s call for an “implementation period” of “around two years”.
British officials have been spooked by the re-emergence of the Irish border as an issue that the EU wants fixed before trade talks can begin. On Thursday, the DUP threatened to rethink its deal with the Conservatives if it was “treated differently than the rest of the UK”. Further powers could be devolved to Belfast to allow rules in areas such as agriculture and energy to be aligned with the EU, rather than London.
Last night, a source said the Irish had got the UK to “move towards some sort of bespoke customs arrangements with Ireland” and set up a joint UK/Irish committee to thrash out the details in the months ahead. “They won’t be vetoing stage two,” the source said. “This should be enough to get the Irish green light.”
December 3rd, 2017: Times