In draft negotiating guidelines for Brexit negotiations unveiled on Wednesday, the EU ruled out “mutual recognition” of standards between the UK and EU.
“Such an agreement cannot offer the same benefits as Membership and cannot amount to participation in the Single Market or parts thereof,” the report reads.
The six-page document instructs the EU chief negotiator Michel Barnier on how to deal with the UK in the next phase of talks and rules out British membership of agencies such as the European Medicines Agency after Brexit.
Underscoring the fact that the UK will only get a third-party trade agreement, the President of the European Council, Donald Tusk, told reporters on Wednesday that there will be no “pick-and-mix approach for a non-member state.”
Brussels rejects Theresa May’s vision for a post-Brexit relationship based on mutual recognition, but Brussels is not bracing for trade-barriers.
The EU draft guidelines offer the UK free trade for goods, as it has offered to Canada, but not for services.
The EU has a surplus on trade in goods; the UK’s economy is largely dependent on services. The British Prime Minister wants to include services to fit the needs of the British economy. “If this is cherry-picking, then every trade arrangement is cherry-picking,” Theresa May said in her speech.
Trade in goods will be as “frictionless as possible,” in tune with Theresa May’s call. However, Donald Tusk made clear that bilateral trade would be “more complicated and costly than today, for all of us.”
Later on Wednesday the British finance minister Philip Hammond called the EU guidelines a tough starting point, expressing his certainty that negotiations would move Brussels towards a much better deal than Canada, which would include financial services. Hammond said that “third country equivalence” would give access to the Single Market without limiting UK sovereignty.
London is not expected to maintain passporting rights for its financial institutions but hopes to secure regulatory equivalence. That expectation is in rune with a report recently circulated by the New Direction institute.
Instead, Brussels is pointing into a double-regulation regime, which means that UK-based companies will need to open subsidiaries in Europe to continue their operation. Brussels has made clear that this is inevitable as the EU and the UK will no longer share a common regulatory and judiciary framework.
The guidelines published on Wednesday read as follows:
“Divergence in external tariffs and internal rules, as well as the absence of common institutions and a shared legal system, necessitates checks and controls to uphold the integrity of the EU Single Market as well as of the UK market. This, unfortunately, will have negative economic consequences.”
The guidelines have not as yet been approved by the 27, but the document is not expected to change significantly.