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Analysis

EU wants bespoke deal – just not type UK has in mind

by John Wyles | 05.02.2018

Theresa May keeps on talking about how she wants a special deal with the EU. She’s likely to get one – to stop the UK engaging in a regulatory bonfire post Brexit.

The European Commission’s strategy paper on possible defences against a rampant and economically aggressive Britain is seen as a necessary bulwark of any future relationship. Already last April the European Council insisted that any trade agreement “must ensure a level playing field, notably in terms of competition and state aid, and include safeguards against unfair competitive practices through tax, social, environmental and regulatory measures.”

The Commission is now looking at new ways to ensure that the Union’s restrictions on state aids, taxation, environmental standards and employment rights are not undermined by the UK. The EU 27 know they have to consider how to deal with a post-Brexit government led by Boris Johnson or another of his ilk in ruthless pursuit of  economic competitiveness. Discovering, as they surely will, that “global Britain” will need a survival as much as a growth strategy, they might slash taxes and light a bonfire of regulations to establish post Brexit Britain as a global competitor for inward investment. May herself pointed to such weaponry as a possible reaction to a “punitive” Brexit in her Lancaster House speech last January.

The EU already has an array of anti-dumping and other powers to deploy against third countries seeking unfair advantages in its markets. The Commission’s paper doubts that these will be enough to deal with a powerful UK economy whose existing links with mainland Europe are currently complex and beneficial for both sides.

That’s why it is looking at bespoke arrangements. For example, it is considering non-regression clauses and stricter controls than currently applied to the US, Japan and Canada. These might be included in a trade agreement or via a system of surveillance and retaliatory measures.

The Commission’s document is grist to the mill of the Brexiters’ argument that the EU is bent on revenge for the Brexit referendum result. Another view is possible. This is that the Commission is opening the door to a deal that will manage and control regulatory divergence between the Union and the UK while encouraging the widest possible exchanges of goods and services. Even if May was up for such arrangements, it’s hard to see Johnson and his cohorts swallowing it.

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Edited by Hugo Dixon