EU’s Barnier hits UK’s Johnson with Brexit trade ultimatum

Bloomberg

The European Union’s (EU) chief Brexit negotiator, Michel Barnier, handed British Prime Minister Boris Johnson an ultimatum, warning there will be no trade deal unless the UK agrees to the bloc’s demands on fair competition and fishing.
“The trade deal will be associated with a fisheries agreement and a level playing field, otherwise there won’t be any agreement at all,” Barnier told reporters in Brussels. “If we want to achieve in the short period demanded by Mr. Johnson, we can’t have backtracking.”
He spoke days before the two sides are due to open formal trade negotiations that will decide whether Britain will continue to enjoy tariff-free access to the bloc’s single market.
If they fail to reach agreement by Johnson’s year-end deadline, Britain will default to trading with the EU on terms set by the World Trade Organization, meaning the return of tariffs and quotas.

Playing Fair
The EU is demanding a so-called “level playing field” that would align British rules and standards with those of the EU to prevent the UK potentially gaining an unfair advantage by undercutting the bloc.
Responding to Barnier, an official in Johnson’s office described the idea of a level playing field as a “construct” that is not in the EU’s other trade deals. Johnson’s spokesman James Slack said the UK will not give up control of its fishing waters in trade talks — but is willing to discuss who can fish in them.
“Our overriding priority is to retake control of our laws,” Slack told reporters in London as Barnier spoke in Brussels. “The British public were promised we will take control of our fishing waters and that’s what we’re going to do.”
The EU does have level playing field conditions in other trade deals — including its tariff-free agreement on goods trade with Canada that the UK wants to replicate — but they aren’t as stringent. The EU says it needs to be tougher with the UK because the British economy is so close and so large.
That is reflected in the final negotiating mandate European ministers approved. In it, the bloc requires the UK to broadly follow any future changes in EU rules on competition policy, environmental protections, tax, and labour law.

Time Pressure
The document demands that the UK “should uphold common high standards, and corresponding high standards over time with Union standards as a reference point.”
Barnier also insisted that the UK needs to fulfil the commitments it made as part of its withdrawal deal that prevent the return of customs checks on the border with Ireland. Earlier this week, though, it emerged that the UK is refusing to ask ports to get ready to implement new checks on goods moving between Britain and Northern Ireland. The EU argues that these inspections are needed if checks are to be avoided on goods moving south into
Ireland.

“All of this is part of a treaty that has been ratified by the House of Commons, and it’s already become British law,” Barnier said.
Barnier also warned of the “time pressure” Johnson has imposed on the talks by ruling out any extension of the negotiating period beyond the end of 2020. That means, Barnier said, “you can’t do everything.”

EU rules hurt UK trade more than tariffs
Bloomberg

Rules and regulations will compound the problem of tariffs for UK exporters looking to keep selling to the European Union after Brexit.
Economists at the UN’s Conference on Trade and Development estimate that the impact of tariffs plus non-tariff measures such as sanitary regulations, pre-shipment inspections or quality control measures is 2.5 times larger than just tariffs.
They dual burden could lead to a 14% drop in exports to the bloc, compared with a 2015 baseline.
Authors Ben Shepherd and Ralf Peters said in the report published on February 25 that there is a “significant European Union membership effect” over and above zero tariffs.
Arrangements “that do not involve Single Market membership or something very close to it would see these gains disappear, with potentially significant trade and welfare implications for both parties,” they said.

Even in the case the U.K. agrees a “standard” free-trade agreement with the EU, exports could drop by 9%.
While Prime Minister Boris Johnson has stressed that one of the benefits of leaving the EU is not having to adhere to its regulations, U.K. exporters will still need to meet its standards if they want to sell their products within the bloc, which is by far the biggest destination for trade.
The UNCTAD report noted that non-tariff barriers disproportionately hit smaller companies.
Officials in London and Brussels have until the end of this year reach a trade deal or the two economies default to trading on terms set by the World Trade Organization, meaning the returns of tariffs and quotas.
Even if the UK manages to clinch an FTA but is no longer in the customs union, it’ll have to meet rules of origin requirements proving goods are indeed British, according to the Institute for Government.