Initial Brussels guidelines prioritise withdrawal terms over future relations

2 hours ago by: Alex Barker in Brussels

EU leaders are preparing a tough opening stance in Brexit talks, explicitly stating that Britain must accept the bloc’s existing laws, court, and budget fees if it seeks a gradual transition out of the single market.

Draft European Council guidelines, which the EU27 leaders aim to adopt at a summit next month, lay down a flinty political response to Theresa May that prioritises withdrawal terms and the integrity of its founding principles rather than future UK relations.

A copy obtained by the Financial Times lays out the EU’s hopes of an ambitious future partnership with Britain, but it insists on a “phased approach” to negotiations. This requires Britain to make “sufficient progress” on withdrawal before EU leaders will initiate talks on future relations.

Most worrying for London, the draft unambiguously spells out conditions for a transition phase, which would minimise disruption until a trade deal is complete. If the EU’s single market legal “acquis” — its body of common rights and obligations — is prolonged at all after Brexit, the guidelines say it requires “existing regulatory, budgetary, supervisory, and enforcement instruments and structures to apply”.

While the precise drafting will be hotly debated by EU diplomats in coming weeks, the principles are supported by Paris, Berlin and other major capitals, according to several senior sources involved in preparations.

Diplomats say there is as much chance of tighter conditions being added as of the text being watered down. The draft leaves undefined, for instance, what “sufficient progress” entails on citizen rights or Britain’s financial liabilities. Full text The EU’s negotiation guidance decoded The full text of the European Council’s guidance for handling Britain’s withdrawal

Once adopted, the European Commission will propose a negotiating mandate for talks. This will be a more detailed working document framing the priorities and objectives of Michel Barnier, the EU’s chief negotiator.

The draft guidelines offer an unvarnished view of the consequences of Brexit. They bluntly state that Britain’s departure from the single market and customs union will involve disruption for the economy and citizens as new legal barriers are enforced.

Six core principles are set for the negotiations, covering both the withdrawal and transition phases.

It calls for a “balance” of rights and obligations; the “autonomy” of the EU rulemaking and “legal order”; the indivisibility of the EU’s four freedoms, including the free movement of labour; and the integrity of the single market.

“A non-member of the union, that does not live up to the same obligations as a member, cannot have the same rights and enjoy the same benefits as a member,” it states. “In this context, the European Council welcomes the recognition by the British government that the four freedoms of the Single Market are indivisible and that there can be no “cherry picking”.

In another move that will raise concern in Westminster, it calls for a level playing field in future economic relations with the UK, mentioning competition, subsidy controls and provisions against fiscal dumping — a demand in direct response to British threats on tax.

A substantial section of the document is devoted to ways to minimise uncertainty for citizens and businesses at the point of withdrawal. The draft suggests EU citizen rights would only end at the point of Brexit, not at the date of notification, as some Brexiters have suggested.

A short section also calls on the UK to honour its share of the EU’s financial commitments. It calls on Britain to “respect the obligations undertaken before the date of withdrawal”. “The settlement should cover all legal and budgetary commitments as well as liabilities, including contingent liabilities,” it states. The Commission estimates this to be about €60bn.

Finally the EU statement makes clear that it wants an agreement, because a no-deal scenario would be damaging to all sides. It says the EU-27 will nevertheless prepare for an unmanaged exit with no agreement.

“Any free-trade agreement should be balanced, ambitious and wide-ranging. It cannot, however, amount to participation in the Single Market or parts thereof, as this would undermine its integrity and proper functioning,” the guidelines state. “It must ensure a level playing field in terms of competition and state aid, and must encompass safeguards against unfair competitive advantages through, inter alia, fiscal social and environmental dumping.” Philip Stephens Brussels takes back control of Brexit All the power lies with Europe and Britain holds no cards in the coming negotiations

The guidelines are the main political vehicle for the EU’s 27 national leaders to control the Brexit negotiation process. Mr Barnier’s mandate is expected to cover only withdrawal issues; both the EU guidelines and his mandate will be updated through the Brexit process.

However, the EU is making clear that no trade deal can formally be completed with Britain under the Article 50 withdrawal process. That will require a separate mandate for a trade negotiation, agreed on a different legal basis. This would only be done once Britain has left the union, according to the guidelines.

The draft says that EU member state “stand ready to engage in preliminary and preparatory discussions” about a future relationship “as soon as sufficient progress has been made in the first phase towards reaching a satisfactory agreement on the arrangements for an orderly withdrawal.”

The guidelines say the EU is open to discussing a transition or “bridge” to any trade deal, but under strict conditions.“Any such transitional arrangements must be clearly defined, limited in time, and subject to effective enforcement mechanisms,” it states. “Should a time-limited prolongation of union acquis be considered, this would require existing Union regulatory, budgetary, supervisory and enforcement instruments and structures to apply.”

“In many ways this is an absurd exercise,” said one senior EU official involved in the process. “It is a tragedy where we have to play our role . . . reinventing things that we already have because [the British] cannot live with them.”