Britain has threatened to walk away from trade negotiations with the European Union if sufficient progress hasn't been made by June, raising the stakes just days before the country begins crucial talks with its largest export market.
Negotiators will sit down Monday for the first round of discussions on a trade deal between the United Kingdom and the European Union after the two sides staked out sharply divergent positions this week on what should happen when a Brexit transition period expires at the end of 2020.
The British government on Thursday committed itself to pursue a basic free-trade agreement that would maintain zero tariffs and quotas on goods but still introduce new friction at borders, an outcome long feared by the business. Prime Minister Boris Johnson said the “broad outline” of such an agreement must materialize quickly.
“If that does not seem to be the case at the June meeting, the government will need to decide whether the UK's attention should move away from negotiations and focus solely on continuing domestic preparations to exit the transition period in an orderly fashion,” the government said in its negotiating mandate.
Failure to reach an agreement could subject companies in the United Kingdom to steep new tariffs, threaten their supply chains and make their products and services more expensive. UK business groups have strenuously warned the government against such an outcome.
Trade negotiations rarely begin with both sides singing from the same hymn sheet, yet tensions between the European Union and the United Kingdom have increased dramatically in recent weeks, with Brussels accusing London of reneging on key aspects of an earlier political agreement on how trade should be handled after Brexit.
Johnson has made clear he does not intend to follow the bloc's rules and regulations or accept any oversight from the European Court of Justice, positions that are reflected in the official UK negotiating mandate. Instead, the prime minister wants a deal similar to the one the European Union has with Canada. That deal offers tariff-free trade in most goods, and removes barriers in some services, without requiring Canada to align tightly with EU standards.
Brussels, meanwhile, insists that Britain must agree to a set of rules to secure preferential access to the bloc's huge single market and that it's not prepared to merely trust that the United Kingdom won't cut food safety or environmental standards in the future to gain a competitive advantage. Michel Barnier, the chief EU negotiator, points to commitments Britain has already made.
According to the political declaration that accompanied the treaty governing Britain's exit from the European Union, both sides agreed that their future relationship must ensure “open and fair competition, encompassing robust commitments to ensure a level playing field” by upholding existing standards in the areas of competition, employment, government support for companies and climate change.
“These commitments should prevent distortions of trade and unfair competitive advantages,” the declaration continued.
In a speech on Wednesday, Barnier made clear that Johnson would not be granted a trade deal that mirrors the agreement between the European Union and Canada because Britain is on the bloc's doorstep and the two have a much larger trading relationship.
“Our relationships with the UK and with Canada are worlds’ apart,” he said, noting that a flight between Brussels and London takes 70 minutes while flying to Ottawa requires more than 10 hours in the air.
That view was rejected Thursday by UK minister Michael Gove.
“The EU has … argued that the UK is a unique case owing to its geographical location. Proximity is not a determining factor in any other [free trade agreement] between other neighbouring states with large economies. It's not a reason for us to accept EU rules and regulations,” he said.
Even if Brussels and London are able to make early progress in negotiations, several other contentious issues including fisheries policy threaten to derail talks. Britain wants complete oversight over its fishing grounds, with annual negotiations over how much access should be granted to EU fishing fleets.
Companies that have already endured nearly four years of uncertainty since the Brexit referendum in 2016 are desperate for closure.
Allie Renison, head of Europe and trade policy at the Institute of Directors, said in a statement that only a quarter of her organization's members think there is enough time left to secure a satisfactory agreement, and for their businesses to adjust.
“Both sides must now work flat out from now to bridge the gap and secure a deal,” she said.
James Frater contributed to reporting.