EU gets primed to attack with stubborn position on UK trade

The European Union’s remaining 27 governments agreed to pursue a tough line in the post-Brexit negotiations with the U.K., seeking early concessions on fishing rights and state aid that put them on collision course with Boris Johnson’s government.

Diplomats from national capitals have set out a list of demands they want to see Britain meet as condition for any deal on the two sides’ future relationship, according to a summary of a series of meetings in Brussels obtained by Bloomberg. The EU will next week decide its formal negotiating mandate for the talks based on these guidelines.

Britain’s exit from the EU on Friday starts the clock on an 11-month negotiation encompassing trade, security, finance and fishing. Officials in Brussels are bracing for tough months ahead as the two sides try to reconcile their desire to reach a trade deal with Johnson’s eagerness to break free from what he views as anti-competitive EU rules. If the two sides can’t agree, the U.K. will start next year doing business with the world’s biggest single market on the far more restrictive World Trade Organization terms.

“We have to rebuild everything with the U.K.,” EU chief Brexit negotiator Michel Barnier said in Dublin on Monday. “If we have no agreement, it will not be business as usual and the status quo: we have to face the risk of a cliff edge, in particular for trade.”

Johnson has ruled out extending the talks beyond the end of 2020 and is pushing for a comprehensive trade agreement similar to that struck between the EU and Canada. The EU has warned that the U.K.’s future access to the single market depends on how far Johnson agrees to abide by the bloc’s rules.

At the meetings, diplomats representing national governments and officials from the European Commission, which will conduct negotiations on their behalf, hammered out their initial demands. According to the document, they include:

• Maintaining the current “distribution keys” for divvying up fishing areas around the U.K.—something that looks nothing like giving Britain back control over its waters
• Dismissing the “existing precedents” of the EU’s current free-trade agreements—because the U.K.’s size and proximity means there’s a “risk of unfair competition by undercutting standards.” That’s a blow to Johnson because it means the EU thinks the Canada model, which allows divergence, won’t work
• Insisting the so-called level playing field—the EU’s strict demand that the U.K. adhere to its rules in areas like state aid and labor protection to prevent it getting a competitive advantage—is a “precondition” for any deal
• Ruling out separate negotiations on individual issues so that there’s an over-arching agreement, not a series of mini-deals as wanted by the U.K.: This could see agreement in one area hinging on concessions in another
• Demanding full protection and enforcement of its intellectual property rights and no automatic recognition of U.K. standards
• Requiring that any rules on allowing citizens to live and work in each other’s territories should be based on “full reciprocity.” The U.K. won’t be allowed to discriminate in favor of one EU country over another
• Allowing the U.K. to take part in EU projects, as long as they pay for them and accept it won’t have any “decision-making power”

In financial services and data-sharing, the EU has made no concessions to the U.K., requiring cooperation based on equivalence and adequacy respectively. That means the EU could pull the plug on any agreement whenever it sees fit.

But amid the toughness, the document contains elements that will hearten the U.K. and reveals the path to an eventual deal. The governments say they want an ambitious agreement on services and cooperation on public procurement as well as the continuation of digital trade and free movement of capital and payments. They also want to maintain cooperation on energy supply.

The EU wants to prioritize negotiations on aviation to ensure continued connectivity, and is hoping for an ambitious security deal based on “reciprocity and proportionality.” That could see the U.K. still taking part in some foreign missions.