Michel Barnier, the European Union's chief Brexit negotiator, gave a speech to entrepreneurs, trade unionists, and leaders of NGOs at the European Economic and Social Committee on Thursday, spelling out some hard truths for both the UK government and the Labour party.
Here's five key things he said:
1. The kind of “frictionless trade” the UK wants isn't workable.
British prime minister Theresa May and her team are fond of saying the UK wants “frictionless trade” with the EU after Britain leaves the union. Barnier, however, says this is not possible.
“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,” he said.
Barnier isn’t making a point of principle, but stating the direct consequences of the UK’s red lines, which include halting free movement, full autonomy over UK laws, autonomy to conclude its own trade agreements, and no role for the European Court of Justice.
“This implies leaving the single market and leaving the EU’s customs union,” Barnier said, adding: “Let me be clear: These consequences are the direct result of the choices made by the UK, not by the EU. There is no punishment for Brexit."
As an example, Barnier noted that for non-EU members:
100% of imports of live animals and products of animal origin are and would remain subject to EU border controls. Moreover, before these products can be exported to the European Union, the sanitary and phytosanitary conditions for these exports to take place would have to be established. The constraints that this entails for the agri-food industry are clear.
He also pointed out that the success of the Airbus factory in Broughton, in North Wales, was in large part due to the single market, including the freedom of movement of people, highlighting "its ability to attract qualified engineers and technicians from all over Europe, and the ease of the procedures for certification and for delivery to assembly sites in Toulouse or Hamburg."
But Barnier's speech will make for difficult reading for the Labour party too. Its leadership has stated that under its plans the UK would leave the single market while retaining the benefits of membership thanks to "tariff-free access". Barnier's speech makes quite clear that there is more to trade than tariffs.
2. The UK can have “frictionless trade” if it remains in the single market and the customs union.
In his speech Barnier explained why frictionless trade is only possible through the combination of being members of both the customs union and the single market.
It is the two together that make it possible to harmonise the rules and ensure mutual recognition of them, guaranteeing that goods legally produced in one country can be sold in all the others without any other formal requirement. They also provide a common external tariff as well as no customs controls at all between member states.
“By choosing to leave the union, you move to the other side of the external border that delineates not only the customs union but also the area in which the rules of the internal market are adopted,” Barnier said.
Crucially, Barnier explained the consequences of being in only one of the two arrangements:
- The internal market without the customs union – in other words the regime of the European Economic Area – still entails a system of procedures and customs controls, among other things, in order to check the preferential rules of origin.
- A customs union agreement without the internal market – as in the case of Turkey – does not allow the free movement of goods either, since it also implies a system of procedures and customs controls, including controls to check compliance with European standards.
3. No deal would be a really bad deal.
Barnier directly challenged another mantra from May and her ministers: that “no deal is better than a bad deal”. He then explained the consequences of that outcome:
“No deal” would mean that our trade relations with the United Kingdom would be based on World Trade Organization rules. There would be customs duties of almost 10 % on vehicle imports, an average of 19 % for alcoholic beverages, and an average of 12% on lamb and fish, for which the vast majority of British exports go to the EU.
While leaving the customs union would in any case involve border formalities, “no deal” would mean very cumbersome procedures and controls, without facilitation, which would be particularly damaging for companies that operate on a “just in time” basis.
Barnier also gave the example of UK-based manufacturers of sports equipment or industrial parts whose products are currently immediately shipped to the single market. For these companies, no deal would mean:
- Keeping their products in stock for three or four days instead of a few hours
- Renting warehouse space
- An increase in transport costs, with a greater logistical risk
"I want to be very clear on this point: In a classic negotiation, ‘no deal’ means a return to the status quo. In the case of Brexit, ‘no deal’ is a return to a distant past," Barnier said.
Barnier had previously warned that no deal would lead to nuclear fuel shortages, truck queues at Dover, and serious disruption to air traffic.
On Thursday he said there was “no reasonable justification for the ‘no deal’ scenario. There is no sense in making the consequences of Brexit even worse.”
“To my British partners I say: 'A fair deal is far better than no deal',” Barnier added.
4. The UK is leaving the EU in March 2019.
Although Brexit means uncertainty, there are some guarantees. “The UK will become a third country at the end of March 2019,” Barnier said.
This is a very important point. Unless 28 governments decide otherwise, the UK is leaving the EU in 2019 whatever the outcome of the negotiations.
There is often a mischaracterisation that a transitional arrangement would mean an extension of the status quo until a final deal is in place. This is not the case.
The EU has made clear that any interim deal would need to be negotiated. An EU official told BuzzFeed News last month: “There are conditions for a transitional deal: We need to know where we’re going, it has to be a time-limited arrangement, and it has to be legal.” Negotiating guidelines agreed earlier this year by the EU27 make clear that their key principles would also apply to any interim deal. The UK will not be allowed to cherry-pick the bits of the EU it likes best, even on a temporary basis.
“The real transition period began on 29 March 2017, the day on which the UK presented its notification letter,” Barnier said on Thursday.
The EU's chief Brexit negotiator added that he hoped sufficient progress could be made on protecting EU citizens' rights, the UK's financial commitments (the so-called "Brexit bill"), and finding a solution to avoid a hard border between Northern Ireland and the Republic of Ireland by the autumn.
The two sides would then be able to start preparations for building a new partnership.
“Once we have a clearer picture of the form this new relationship will take, we will be able to discuss the possibility of transitional measures,” Barnier said.
5. Whatever the outcome of the negotiations, Brexit will have significant consequences.
Barnier told the audience that with Brexit there would be “no business as usual”, and that companies and organisations should prepare for the uncertainty ahead.
“We must face the facts,” Barnier said.
He added: “Even if we secure the agreement I am working towards, the UK’s decision to leave the union will have significant consequences.”
For his part, the EU’s chief Brexit negotiator also reiterated his commitment to ensuring the necessary transparency throughout the negotiations.