EU will protect its interests and load Brexit costs on to UK, says negotiator

Brexit trade disruption and adjustment costs are inevitable, EU negotiator Stefaan De Rynck said yesterday (11 June).

Speaking at a DCU Brexit Institute webinar on Brexit, COVID-19 and the transition period, the senior advisor to Michel Barnier said the UK needs to accept the negative economic consequences of its decision to leave the EU.

Disruptions

He said there will inevitably be disruptions for UK products coming into the EU, in customs formalities, and sanitary requirements, and more friction for service providers.

The EU will not be lowering its standards in the construction of new international law in the Brexit negotiations, Mr De Rynck said.

“In six and a half months from now, no matter what type of agreement we strike with the UK, there will be adjustment costs. No free trade agreement, no matter how ambitious it is, can change that.”

Cost

These demands can only be seen as unreasonable if the cost of Brexit is to be put on the EU rather than the UK, he said.

“It’s the UK’s choice, so therefore we need to protect our interests and protect our greatest achievement, a single market, and limit the economic damage on our side.

However, despite his tough message, De Rynck said he could see a ‘trajectory of compromise’, but only if the UK becomes more realistic in its approach.

But the political declaration last October remains the only valid starting point, he warned, and the EU needs a lot more details from the UK on how it will translate its legal obligations into operational realities, in terms of customs and product standards.

'Proper balance'

The pace will need to accelerate before year-end, he warned, so that the agreed departure protocol can be fully operational on 1 January with all legal obligations fully respected.

To find the necessary compromise, the UK must accept a proper balance of rights and benefits on the one hand and obligations and legally-binding constraints on the other, he said.

“What are the substantive obligations on a level playing field that the UK is willing to accept, on environmental standards, social standards, taxation, climate change?” he asked.

“What is the domestic enforcement that the UK foresees and what is the dispute settlement in the agreement?”

Refusing

He said that all these issues are in the political declaration, referred to as common standards and enforcement mechanisms.

However, he said that it is not helpful that the UK is refusing to engage in legally-binding constraints with the EU, as a matter of principle.

The UK must move beyond this political blockage, he said.

Distortion

State aid is a particularly thorny issue, he said, for economies that are so close together.

“The possible distortion of competition due to unfair state aids on the other side is simply a fundamental issue, and therefore we will need to have very solid guarantees on those issues.” De Rynck said.

And respect for the European Convention on Human Rights will be the bedrock of security co-operation because it is the basis for data protection and privacy, De Rynck said.

“Those are the issues that block us from making progress in the current talks,” he said.

Hybrid

He added that the UK must make a clear choice on the free trading agreement model, because a hybrid model would be advantageous for the UK and disadvantageous for the EU.

But the UK needs to accept the negative economic consequences of that, he said.

“The UK has built up a very strong position as a member of the single market in services financial services, business services, legal services, and exports a lot of those and has a surplus in trade and services with the rest of the EU,” he said.

Leaving the single market means leaving behind the fundamentals on which that economically advantageous position has been constructed, De Rynck said, adding that those advantages cannot be reproduced.

Hub

The EU has to look at whether it is in its interests to continue recognising the UK as an important hub for certification in goods and declaring conformity with EU standards.

“Clearly, it is not,” he said, since the UK could export tariff-free, quota-free to the EU, but also be free to source components from different elements of the world market.

The EU will resist the UK’s becoming a manufacturing hub for the bloc, he said, and the UK has no automatic entitlement to get precedence on this.

Cherry-picking

“The [trade] precedents have a different meaning for a country that is so close to us and is integrated in our supply chain, compared to what has happened with third countries far away from us,” he said.

“We cannot allow that kind of cherry-picking because that would mean that we put in danger the integrity of the single market and the good functioning of the single market.”

De Rynck said that the integrity of the single market is a tremendously important asset in terms of the recovery from COVID-19.