Brexit: EU won’t sign trade deal if UK starts deregulation race to the bottom, Brussels warns

The EU will refuse to approve a trade deal with Britain if the UK uses Brexit as an excuse to downgrade workers’ rights or deregulate its economy, the European Commission’s chief negotiator has warned.

Michel Barnier said any move to water down environmental and social protections would be seen by other EU countries as “unfair competition” and would mark the end of talks.

After toughening his stance by flagging more obstacles in the way of a deal, Brussels’ top negotiator also warned that some UK government ministers did not understand quite how bad a “no deal” situation with the EU would be – urging other politicians who understood the consequences to convince those at the top.

His comments were made public the same day the second round of Article 50 talks broke up after yet again failing to make a significant breakthrough, despite high hopes on the British side. Mr Barnier warned there was a “fundamental divergence” between the UK and EU on a number of issues.

Other consequences of leaving the EU begun to solidify today as Brexit Secretary David Davis again returned from Brussels empty handed; with fresh warnings that UK subjects could lose the right to move abroad and also access state healthcare when in EU countries. There was also further doubt cast by officials on whether the UK would be able to run souped-up criminal record checks against those from the EU entering Britain once it had left the bloc.

Mr Barnier said today that the British Government was still failing to provide sufficient “convergence” on either the UK’s exit bill or the future rights of citizens, while Brussels sources say the Commission is frustrated that the UK is refusing to engage at all on the issue of Britain settling its Brexit divorce bill.

Despite having little to show for the talks British ministers struck a far more positive tone, with David Davis today telling journalists that he believed the two sides had come to better understand one another’s positions. International Trade Secretary Liam Fox also this morning stepped up the hubris, telling the BBC that “the free trade agreement that we will have to do with the European Union should be one of the easiest in human history”.

Downing Street has said Theresa May “stands ready” to turn Britain into a deregulated offshore tax haven after Brexit if there is no deal in Article 50 negotiations, a position also backed by her Chancellor Philip Hammond.

The pair are under pressure from their own party to take this position, as some right-wing Conservatives believe that the UK could find a new competitive edge after Brexit by scrapping workers’ rights and environmental legislation.

Environment Secretary Michael Gove has said Britain could ditch parts of the EU’s habitats’ directive to make it easier to build on protected heathland, while backbencher Jacob Rees-Mogg has said the UK could go “a long way” to cutting standards after it leaves the EU.

Mr Barnier made the comments a week ago in a meeting with the House of Lords European Union committee, the transcript of which has been released today.

Speaking to the committee, Mr Barnier said: “The mechanics of this divergence should not lead to unfair competition, because if we do not answer this question – of course, you can help us to find solutions to this because you have so much expertise, skill and competence, and you can help us to have a level playing field – I can tell you that there will be major difficulties in obtaining ratification of any future agreement in all countries, because there will be campaigns against the negotiations. 

“It will be said that Brussels is conducting negotiations with the UK to downgrade environmental and social standards, for example, which will lead to more tax competition. If that happens, everything is over. I do not want that. I want us to make progress.”

Liam Fox thinks the deal should be one of the ‘easiest in human history’ (EPA)

He continued: “In the speech I gave last week that you referred to, I talked about the idea that I have heard from some ministers in the UK debate that it would be better to say “no deal” in some instances. I think we really need to explain what ‘no deal’ would mean. So perhaps the House of Lords could explain exactly that. We really have to weigh up the consequences. It is certainly not the option I would choose.”

Opposition parties said the lack of progress on the talks was worrying. Keir Starmer, Labour’s Shadow Brexit Secretary, said: “The lack of progress in these negotiations is deeply concerning and does not bode well for the future.”

Warning the talks might not move onto trade in October, as hoped, he added: “That will trigger deep concern for businesses and communities across the U.K, who need much greater certainty and reassurance than they are getting from this Government.”

And the Liberal Democrat Brexit spokesman, Tom Brake, said: “It’s now been 113 days since Article 50 was triggered and we have seen almost zero progress on even the most basic issues.

“With each day that passes, the likelihood of a catastrophic, disorderly Brexit increases.”


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