A year and a half after the EU referendum, the full British cabinet has held its first formal discussion on the final relationship the UK should seek from the European Union.
According to Downing Street, Prime Minister Theresa May – backed up by the Brexit minister David Davis – said she wanted a special trade arrangement with the EU representing a “significantly more ambitious deal” than the bloc’s current free trade agreement with Canada.
The British government’s intentions put it at odds with the EU’s chief negotiator Michel Barnier, who has insisted in recent interviews that the UK cannot have a bespoke trade deal.
Telling her cabinet that both sides needed to be “creative”, the prime minister reportedly said that it was crucial for the UK to be able to set rules that were advantageous for the country and that enabled ambitious trade deals with other nations.
She rejected as “democratically unsustainable” remaining part of the European Economic Area (the “Norway option”), as that would mean the UK having to obey EU laws. May’s spokesman said government policy would follow the prime minister’s speeches at Lancaster House and in Florence.
Ministers have played down reports of a rift between those in favour of staying broadly aligned to the EU to maximise access to the Single Market – such as the finance minister Philip Hammond and interior minister Amber Rudd – and so-called “hard Brexiteers” pushing for greater divergence to enable international trade deals, including foreign minister Boris Johnson and environment minister Michael Gove.
Michel Barnier has reminded the UK of the EU’s position – that there will be no “cherry-picking” for the UK. “We won’t mix up the various scenarios to create a specific one and accommodate their wishes, mixing, for instance, the advantages of the Norwegian model, member of the single market, with the simple requirements of the Canadian one. No way. They have to face the consequences of their own decision,” he told Prospect magazine.
The bloc’s chief negotiator reportedly showed EU leaders a paper last week showing that the UK’s “red lines” over the economy meant the only option was a Canada-style trade deal.
The agreement struck between Brussels and Ottawa in 2016 allows for free trade in goods, but not services. Brexit secretary David Davis has called for a “Canada plus plus plus” deal with the EU to include financial services.
Don't take no for an answer
Barnier said this week that Britain could not have a special deal for the City of London. “There is no place (for financial services). There is not a single trade agreement that is open to financial services. It doesn’t exist,” he said, arguing that it was unavoidable that British banks and financial firms would lose “passports” allowing them to trade freely in the EU.
On Tuesday, Downing Street did not confront these points directly, but appeared confident the objections could be overcome. “This is the beginning of phase two negotiations. You would expect the commission to be setting out their position,” the prime minister’s spokesman said.
EU leaders gave the go-ahead for Brexit talks to advance at this month’s summit. Negotiations in the New Year are expected to consider firstly the UK’s request for a two-year transition, followed by future trade relations.
The UK is due to leave the EU in March 2019 and legislation is currently passing through Parliament.