Trade barriers between the UK and EU are likely to deepen despite the resolution of a diplomatic stand-off over Northern Ireland creating a “new spirit” in relations, the EU’s Brexit negotiator warned on Monday.
“Trade can no longer be as frictionless and dynamic as it was before. This inevitably means additional costs for businesses on both sides,” said Maroš Šefčovič, vice-president of the European Commission.
“Over time, increased divergence may bring even more costs and it will further deepen the barriers to trade between [the] EU and the UK,” he told the EU-UK Forum annual conference.
The UK has repeatedly said it wants to set its own regulations in areas such as artificial intelligence and financial services, which Brussels argues would require greater checks and controls on imports.
UK ministers had hoped that the recent Windsor framework deal to solve a post-Brexit dispute over trading arrangements in Northern Ireland would lay the foundation for closer relations with Brussels.
James Cleverly, UK foreign secretary, told the conference he wanted to collaborate more closely with Brussels on migration, security, energy, climate change and international development.
“I want us to move forward in the same spirit of mutual confidence and ambition for our relationship and to work closely with you on other areas of mutual interest,” he said.
But in a several areas, Brussels has made clear that the UK will be treated much like any non-member state. These include collaboration with the EU on science programmes, electric vehicle tariffs, repatriating euro clearing to the EU and financial services co-operation.
Mujtaba Rahman, Europe managing director at consultancy Eurasia Group, said the commission did not share the UK’s view that since prime minister Rishi Sunak had delivered the Windsor framework, the EU should show goodwill elsewhere.
“Brussels sees little reason to reward the UK simply for delivering on its treaty commitments. The fact is, life as a ‘third country’ outside the EU is tough, as the ongoing friction over e-passport gates, Horizon, euro clearing and rules of origin clearly demonstrates,” he said.
Negotiations over the UK’s “associate membership” to the EU’s €95.5bn Horizon research programme, agreed as part of its post-Brexit Trade and Cooperation Agreement, remain deadlocked over talks on cost.
The UK is joining the 2021-27 flagship research programme two years in. While Brussels has offered to cut Britain’s participation fee to account for the two lost years, London has pushed for a bigger discount.
“We bring a lot to the table. The benefits of collaboration are self-evident,” said Cleverly. However, Šefčovič insisted that the EU offer was “very good”.
Šefčovič also damped hopes that a review of the TCA in 2026, which the Labour party often cites as a chance to improve economic relations, would bring substantial change. The review “does not constitute a commitment to reopen the TCA or to renegotiate the supplementary agreements”, he said.
Both of the main UK political parties have ruled out rejoining the EU single market or forming a customs union with the EU.
Šefčovič also expressed concern over the rights of EU citizens in the UK and protection of the “level playing field”, a treaty commitment under which UK companies will not undercut their rivals in EU countries by lowering standards or business support.
The EU negotiator added there were still concerns about the Retained EU Law bill, which would remove EU regulations from the UK statute book. Sunak has paused progress of the bill but not scrapped it.
Passing the legislation would mean fundamental parts of the Withdrawal Agreement and TCA “would be thrown into the shredder”, Šefčovič said — a reference to a campaign video Sunak made in which he vowed to shred EU-era laws.
Meanwhile, an influential European parliament committee on Thursday will warn that it is “highly concerned” about a recent UK law loosening rules on genetically-modified food.
“Regulatory divergence . . . could result in the entry of genetically modified products into the EU with disparate safety controls or without proper labelling,” a draft report states.
Even in other areas where there has been progress, for example the activation last month of a long-delayed EU-UK memorandum of understanding on financial services, commission officials are clear there will be no special deals.
Asked at the conference about how the UK could improve access for professional and financial services, Stefan Fuehring, the lead EU official overseeing the TCA, said the rules were clear.
“All you have to do is establish in the EU and then you avoid many of the problems,” he said.
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