Boris Johnson to Put U.K. on Collision Course With EU Over Trade

Stuart Biggs and Alex Morales

(Bloomberg) --

Prime Minister Boris Johnson will put the U.K. on collision course with the European Union on Thursday when he lays out his government’s red lines before talks start on a post-Brexit trade agreement next week.

The EU said Tuesday that no deal will be possible unless Britain signs up to so-called level playing field provisions meant to ensure it doesn’t gain a competitive advantage by undercutting the bloc’s regulations. But Johnson’s office made clear only full independence will do -- and insisted the premier would walk away and trade with the U.K.’s closest markets without a formal deal if necessary.

“At the end of this year we will regain in full our political and economic independence,” the prime minister’s spokesman James Slack told reporters. The U.K. wants a free-trade agreement similar to the one Canada has with the EU, but he said a looser arrangement like Australia -- which has no FTA with the bloc -- would “be OK as well,” though he conceded there would be “some friction.”

Britain’s position leaves the two sides facing a fundamental clash. For the EU, it’s essential that the U.K. should sign up to European rules on fair competition, and officials in Brussels are likely to regard Johnson’s rejection of this as a betrayal of the pledges he made in the political declaration, the legally non-binding part of last year’s divorce agreement.

The pound fell to the lowest in two weeks against the euro, and was little-changed against the dollar.

Johnson’s government, which will publish its negotiating mandate Thursday, is expecting tensions with the bloc over competition and state aid rules, according to a U.K. official. It also expects difficulties over fisheries -- a contentious issue that EU chief negotiator Michel Barnier said this week must be resolved before a deal can be struck.

Brexiteers in Johnson’s Conservative Party argued during and after the 2016 Brexit referendum that a trade deal with the bloc would be straightforward because both sides start from the same point in terms of rules and regulations. But the picture has changed significantly, especially after Johnson secured a landslide majority in December’s general election.

Red Lines

The prime minister’s key priority is to secure complete separation from the EU, ruling out any jurisdiction for the bloc in return for frictionless trade. U.K. negotiator David Frost said in a speech last week that the democratic consent of the British public could “snap dramatically and finally” if voters are forced to stick to EU regulations after Brexit.

Johnson’s government has made clear it is willing to reinterpret issues the EU regards as already settled, such as the transfer of goods between mainland Britain and Northern Ireland, which will have a special status with a foot in both trade systems.

The U.K. said it has no intention of building infrastructure at ports to check goods entering Northern Ireland -- and therefore the EU’s single market -- a position that triggered an instant warning over “backsliding” from European leaders including Irish caretaker Prime Minister Leo Varadkar.

Read more: Johnson and Barnier Clash Over Who Sets Rules for Brexit Trade

But Johnson’s team have argued that the EU has backtracked on its own commitments, including the offer of a Canada-style free-trade deal, which London says contains no competition rules of the type the EU is demanding from the U.K.

The EU argues in return that a commitment to maintaining a level playing field on trade is necessary because Britain is much closer to the bloc than Canada.

“We have heard Prime Minister Boris Johnson give assurances the U.K. will never engage in a race to the bottom, that it would not seek to undermine European standards, that the U.K. would in fact maintain higher standards than the EU -- and to be frank we are ready to believe this,” Barnier said Wednesday. “But that means it should not be a problem for the U.K. to agree on a number of ground rules.”

The gulf between the two sides means they will inevitably talk at cross purposes when negotiations begin Monday -- at least until one or both agree to compromise as the clock counts down on the transition period, which is scheduled to end Dec. 31.

(Adds pound reaction in fifth paragraph)

To contact the reporters on this story: Stuart Biggs in London at sbiggs3@bloomberg.net;Alex Morales in London at amorales2@bloomberg.net

To contact the editors responsible for this story: Tim Ross at tross54@bloomberg.net, Thomas Penny, Robert Jameson

For more articles like this, please visit us at bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2020 Bloomberg L.P.