U.S. Markets open in 2 hrs 8 mins

Boris Johnson, Ursula Von Der Leyen Set Out Rival Red Lines for Post-Brexit

Alex Morales and Ian Wishart

(Bloomberg) -- Boris Johnson and Ursula von der Leyen set out rival red lines for their visions of a post-Brexit deal in the first clash of a negotiation set to be thornier than the fraught talks to secure Britain’s divorce from the bloc.

At their first face-to-face meeting since von der Leyen took office as president of the EU Commission Dec. 1, the prime minister stressed that Britain won’t extend the country’s post-Brexit transition period beyond the end of the year, and that he wants to broker a Canada-style free trade accord, his office said.

Crucially, Johnson said that “any future partnership must not involve any kind of alignment” with EU rules and standards or be subject to the jurisdiction of the European Court of Justice. Earlier, von der Leyen had set out the EU’s stall, saying it will be “impossible” to get a full deal before Johnson’s year-end deadline, adding that every decision taken would come with a “trade-off.”

“Without the free movement of people, you cannot have the free movement of capital, goods and services,” von der Leyen told an audience at the London School of Economics. “Without a level playing field on environment, labor, taxation and state aid, you cannot have the highest quality access to the world’s largest single market.”

The remarks set the scene for a fraught year of negotiations after nearly three years of bad-tempered talks on the U.K.’s EU withdrawal. There will be just 11 months left to finalize the partnership deal before the status quo transition period runs out at the end of December, leading potentially to another threat of a cliff-edge change in trading rules at the start of 2021.

Time Is Tight

The time is “very, very tight,” von der Leyen said at the LSE. “It’s not all or nothing, it’s a question of priorities,” she said.

While Johnson’s desire is for a free trade deal along the lines of one already negotiated by the EU with Canada, his time-line makes the goal problematic. According to the EU, the Canadian agreement was its most ambitious ever trade deal but took seven years to negotiate. Under its provisions, 98% of goods traded between the two are free of tariffs, and there is also some trade in services and convergence of certain standards.

For now, Johnson told von der Leyen that his “immediate priority” is to get the Withdrawal Agreement passed into law and implemented by Jan. 31. On Wednesday, the House of Commons held the second of three days of debate on the bill, with the government, buttressed by the 80-seat majority won by Johnson’s Conservatives in last month’s election, successfully defeating several attempts to amend the legislation.

Once the separation is complete, negotiations will formally open on the future trading relationship, with Johnson telling von der Leyen he wants to start them “as soon as possible after January 31.”

Red Lines

But the negotiations could be even trickier than settling on the terms of Britain’s divorce proved to be. They’ll cover areas as diverse as the trade in goods and services, security cooperation, data sharing, fishing quotas and the rules under which European nationals can work in Britain.

The U.K. premier laid out some further red lines. He told the commission chief that Britain will maintain control of its fishing waters and immigration system. He also reiterated a pledge that the country would maintain “high standards” on workers’ rights, animal welfare, agriculture and the environment, even while refusing to be aligned to the EU.

Johnson’s press secretary told reporters Wednesday that the U.K. doesn’t want to negotiate under the principle of “nothing is agreed until everything is agreed,” which characterized the first phase of talks. This suggested a phased approach is possible, potentially leading to a slimmed down trade agreement.

Speaking on the edge of the City of London’s financial center, the commission president made a point of singling out how Johnson’s negotiating position will impact the U.K.’s financial services industry’s easy access to European markets.

“This is over,” she said. “All will change.” Instead, she said, British firms may get more limited access on a sector-by-sector basis.

Despite the differences, Johnson’s office described the meeting as “positive,” while von der Leyen said the EU is ready to broker a partnership that is “unprecedented in scope.”

“We are ready to design a new partnership with zero tariffs, zero quotas, zero dumping,” she said. “We should be optimistic.“

To contact the reporters on this story: Alex Morales in London at amorales2@bloomberg.net;Ian Wishart in Brussels at iwishart@bloomberg.net

To contact the editors responsible for this story: Tim Ross at tross54@bloomberg.net, Robert Jameson

For more articles like this, please visit us at bloomberg.com

©2020 Bloomberg L.P.