The European Union’s chief negotiator for Brexit has warned the City will not get a sector-specific deal on the single market and that “frictionless trade” will be impossible if the UK leaves the custom union.
Speaking to the European economic and social committee, Michel Barnier says the UK fails to understand three points on which the EU will not be moved: that the four freedoms of the single market are indivisible; that there is no sector-by-sector participation in the single market; and that third countries must respect EU autonomy to set rules and standards.
“You cannot leave the single market and then opt-in to those sectors you like most – say the automobile industry and financial services,” Barnier says.
The European Council and the European Parliament have made these points clearly, Barnier argues, “but I am not sure whether they have been fully understood across the Channel”.
“I have heard some people in the UK argue that one can leave the single market and keep all of its benefits – that is not possible,” Barnier says.
“I have heard some people in the UK argue that one can leave the single market and build a customs union to achieve ‘frictionless trade’ – that is not possible.”
Barnier adds that the consequences of Brexit are a direct result of decisions made by the UK, not the EU.
“From midnight on 29 March 2019, as things stand, the UK will be a third country which therefore will not have the same facilities or the same rights as a Member State. That is the UK’s choice, not ours.”
Barnier lists citizens’ rights, a financial settlement and the Irish border as three priorities for an orderly withdrawal and establishing a climate of trust between the UK and EU.
Barnier outlined specific examples that mean UK trade with the EU will not be frictionless if it leaves the single market and customs union.
All imports of animals and products of animal origin will be subject to EU border controls, including across the Irish border, and the UK will not benefit from the same facilities as Member States with regard to VAT returns.
“The success of the Airbus factory in Broughton, in North Wales, is largely owing to its ability to attract qualified engineers and technicians from all over Europe. And to the ease of the procedures for certification and for delivery to assembly sites in Hamburg or Toulouse.”
Barnier says British ministers continue to point the possibility of no deal.
“In a classic negotiation, ‘no deal’ means a return to the status quo. In the case of Brexit, ‘no deal’ would be a return to a distant past.”
Under no deal, the UK would face customs duties of almost 10 per cent on vehicle imports, an average of 19 per cent for alcoholic drinks, and an average of 12 per cent on lamb and fish.
Border formalities would mean items shipped to the EU from the UK would see products kept in storage for three or four days instead of a few hours, which would require manufacturers to rent further warehouse space and increase transport costs.