Tusk: UK dreaming on post-Brexit trade

Ultimately, he says, the UK’s relationship with the EU would be determined by the govt’s ‘red lines’

By BLOOMBERG

BRUSSELS • European Union (EU) President Donald Tusk warned the UK that it can’t expect frictionless trade outside the bloc’s single market, lowering again Prime Minister Theresa May’s expectations a day before she’s due to deliver a major speech on her vision for the post-Brexit relationship.

“Friction is an inevitable side-effect of Brexit,” Tusk told an an audience of business leaders in Brussels yesterday, shortly before leaving for London to meet May in Downing Street. It’s the latest in a string of developments this week that’s highlighted May’s obstacle- strewn path to getting a satisfactory Brexit deal.

With less than a month until a crucial summit when May wants to reach agreement on a transition period and start discussing future trade, Tusk’s intervention is another sign the EU won’t compromise its main principles. The UK government has said it wants as little friction as possible in the post- Brexit trading relationship, but the EU says it can’t enjoy the same benefits as if it were still a member.

The draft of the final Brexit deal, published by EU chief Brexit negotiator Michel Barnier on Wednesday, angered the UK government, with May saying an option to keep Northern Ireland in the EU’s customs union and parts of the single market was unacceptable.

“Until now, no one has come up with anything wiser than that” to prevent a hard border re-emerging between the two Irelands, Tusk said, adding that he would ask May to come up with her alternative during their meeting later yesterday.

Ultimately, the UK’s relationship with the EU would be determined by the government’s “red lines”, he said, reiterating that with Britain ruling out continued freedom of movement and oversight by the European Court of Justice, it couldn’t expect close ties.

“We acknowledge these red lines without enthusiasm and without satisfaction, but we must treat them seriously, with all the possible consequences,” said Tusk, who’s drawing up guidelines for negotiations on the post-Brexit links to be unveiled next week. “Everyone must be aware that the UK red lines will also determine the shape of our future relationship,” he said, in a remark that hints at a free-trade agreement similar to the EU’s deal with Canada, rather than anything with closer ties.

At a meeting between envoys of the remaining 27 countries in Brussels on Wednesday afternoon, Barnier said there’s no guarantee an agreement on transition terms will be reached this month, according to a person familiar with the discussion.

Opposition Labour leader Jeremy Corbyn raised the pressure on May on Monday when he said he backed the UK remaining in the customs union, a move that would largely solve the problem of keeping the Irish border invisible and make it easier for the UK to trade with the EU. On Wednesday, former Prime Minister John Major called for a free vote in Parliament over whether to hold a second referendum for the sake of the “wellbeing of the people”.

Tony Blair, Major’s successor as prime minister, was scheduled make a speech in Brussels yesterday in which he would call on the rest of the EU’s leaders to help lead Britain “out of the Brexit cul-de-sac and find a path to preserve European unity intact”.

Speaking to BBC Radio 4 before his speech, Blair said the EU would never give the UK the same access to the single market as it enjoyed as a member.

“It is not a question of a tough negotiation or a weak negotiation, it literally is not going to happen,” Blair said.

Meanwhile, UK manufacturing lost a bit of steam last month, with growth slipping to an eight-month low.

IHS Markit’s manufacturing Purchasing Managers Index (PMI) eased to 55.2 from 55.3 in January. While the figure was better than forecast and still implies expansion, Markit said it suggests a “marked downshift” in the pace of growth so far this year.

Markit offered some positive news on manufacturing, with employment and new orders both improving in February, and inventories declining. Still, it said the overall figures were mixed, and they suggest production growth is running at a 0.4% quarterly pace. That’s far lower than the rate signalled by the PMI for the fourth quarter, it said.