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The EU rejects Theresa May’s “pick ’n’ mix” Brexit plan

Britain’s trade proposal is dismissed in Brussels as more cherry-picking


Thanks but no thanksThe EU rejects Theresa May’s “pick ’n’ mix” Brexit plan

Britain’s trade proposal is dismissed in Brussels as more cherry-picking

IF THERESA MAY had hoped that the EU would respond positively to the conciliatory tone that she took in her speech on March 2nd outlining Britain’s desired future trading relationship, she did not have to wait long to be disappointed. Five days later Donald Tusk, president of the European Council, issued draft guidelines for the forthcoming trade negotiations that flatly rejected her central proposal.

Mrs May had put forward the idea of “managed divergence” from the EU’s rules, in exchange for sector-by-sector access to its single market and to EU regulatory agencies such as those for medicines, chemicals and airlines. The draft guidelines dismiss this as cherry-picking that would undermine the single market.

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Mr Tusk derided it as a pick ’n’ mix approach. He insisted that, because of Mrs May’s red lines of leaving the EU’s single market and customs union, stopping free movement of people and escaping from the European Court of Justice, the only plausible option was a free-trade deal similar to Canada’s. He suggested it should be ambitious and cover all goods, but be more limited for services (also implying it will not cover financial ones). It would not be possible, he argued, for Britain to combine the benefits enjoyed by Norway, which is outside the EU but in its single market, with the limited obligations of Canada.

This dusty response contrasted with the praise for Mrs May’s speech from all sides of her Tory party in Westminster. Iain Duncan Smith, a hardline Brexiteer, was cheered when he declared that cake was for eating and cherries for picking. Anna Soubry, a pro-European, was just as warm, saying there was no doubting the prime minister’s determination to get the best deal for her country. Yet the problem for Mrs May is that she cannot simultaneously unite her cabinet and MPs while satisfying the demands of her EU partners.

Why are the Europeans taking such a tough line on trade? One reason is that, despite Mrs May’s promises to observe the EU’s rules on state aid and competition, and to align with many of its regulations, European leaders fear that a post-Brexit Britain might seek a competitive advantage by undercutting EU standards. A second is doctrinal. The EU thinks that granting Britain sectoral access to the single market, bolstered by some mutual recognition of standards, would undermine the entire ecosystem of the market, which must be taken as a whole. Mujtaba Rahman of the Eurasia Group, a consultancy, says the EU worries that, if Britain gets a special sector-by-sector deal, other countries (perhaps including some current EU members) might then demand the same treatment.

Then there is the unsolved problem of the border between Northern Ireland and the Irish Republic. In her speech Mrs May recognised that Britain had a responsibility to propose some way of avoiding a hard border. But the EU thinks her vague talk of a customs arrangement and of technological solutions would not do this, which is why it has proposed keeping Northern Ireland in a regulatory and customs union instead. The prime minister’s suggestion this week that the border between Canada and the United States might be a model did not go down well, as this would imply precisely the physical infrastructure, checks and controls that all sides promise to avoid.

British officials think that, by insisting on little more than a Canada-style agreement, the EU is being too rigid and legalistic. Yet the single market is above all else a legal construct. So it is not surprising that Mr Tusk’s draft guidelines should be so hostile to the concepts of regulatory divergence and mutual recognition with non-members. European lawyers also note that full or even associate membership of most of the single market’s regulatory agencies is impossible for countries that are in neither the EU nor the linked European Free Trade Association.

Even so, the British argument to be a special case has some merit. Mrs May herself pointed out that all free-trade deals are bespoke, so they include elements of cherry-picking. Britain is unique in starting from a position of applying all single-market rules. The Norway/Canada contrast cuts both ways. What the EU is offering Britain may combine the trade benefits of Canada with many of the obligations of Norway, such as limits on state aid and pro-competition rules. And, as Philip Hammond, the chancellor, said in a speech soon after Mr Tusk published his guidelines, both sides would benefit from mutual trade in financial services. He even hinted that Britain would reject any trade deal that did not include them.

The big hope for Mrs May is that the EU’s 27 other members do not stay united. Several countries fret about losing access to the large British market. David Davis, the Brexit secretary, has been visiting national capitals to exploit this fear. Yet as Stefaan de Rynck, an EU negotiator, said in London this week, unity has been surprisingly strong. It worked during the Article 50 divorce negotiations last year. Ireland is relying on it to back up its efforts to avoid a hard border. Mr de Rynck says even countries that sell a lot to Britain believe preserving the single market is more important.

Mr Tusk’s draft guidelines are due to be approved at an EU summit on March 22nd-23rd. Neither side wants a big row there, when Mrs May is also likely to secure agreement in principle on a transitional period to avoid a cliff-edge Brexit in a year’s time. But there are only six months left to draw up the outlines of a trade deal. Unless she redraws her red lines, which the EU says would produce a more generous offer, the deal is unlikely to be a lot better than Canada’s. And if she does redraw them, that would destroy the fragile consensus within her party. No wonder she failed to answer a post-speech question from a German reporter, who asked if Mrs May still thought Brexit was worth it.

This article appeared in the Britain section of the print edition under the headline "Thanks, but no thanks"

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