European Union lead negotiator Michel Barnier has warned that the bloc is still preparing for a No Deal Brexit, particularly if Britain will not let the EU dictate how it administers state aid.
“If the UK wants an open link with us for the products – zero tariffs, zero quotas – we need to be careful about zero dumping at the same time,” the Frenchman said in Stockholm, Sweden.
“I hope that this point is and will be correctly understood by everybody. We will ask necessarily certain conditions on state aid policy in the UK,” he warned.
Most countries around the world agree to certain restrictions on the extent to which national governments can come to the aid of national industries through subsidies, tax breaks, and so on, in rules outlined by the World Trade Organization (WTO) — but the European Union goes much further, making it even more difficult for member-state governments to favour domestic firms for government contracts, assist ailing steel plants, etc.
The EU has been clear that one of its negotiation objections during the upcoming “transition” period — in which Britain will be out of the EU in name but an EU member-state without institutional representation in practice while a trade deal is negotiated (or not) — is to make Britain agree to continue to follow EU state aid rules.
The bloc has also indicated that it wants to exercise some control over the extent to which Britain can cut its taxes in the name of a so-called “level playing field” — fearing that a less bureaucratic, lower tax Britain would be too competitive compared to a European Union notorious for red tape and inflexibility.
“If Prime Minister Johnson does not want an extension of the transition period beyond the end of the year – and yesterday when we met him with [President of the European Commission] Ursula von der Leyen, he told us very clearly that he does not want such an extension – we will have less than 11 months to conclude a deal,” Barnier warned.
“If we fail, the transition period will end on 1 January 2021 without any arrangements for a new future relationship in place,” he continued — in other words, if United Kingdom in the European Union cannot agree a trade deal by the end of the “transition”, they will revert to a “No Deal” trade relationship based on WTO rules.
“[This] would mean the return of tariffs and quotas: a total anachronism for interconnected economies like ours,” he said.
“Of course, this is not what the EU wants. But it is nonetheless a scenario that everyone must continue to prepare for – at EU level, but also at national level, and here in Sweden.”
However, many Brexit campaigners — most notably Brexit Party leaders Nigel Farage and Richard Tice — have long argued that WTO-based “Clean Brexit” is in fact be the most desirable form of Brexit if the EU will not agree a simple free trade agreement based on zero tariffs and mutual recognition of standards, given it would give Britain maximum control over domestic policy and maximum flexibility to turn the country into a commercial powerhouse.