Brexit battle starts for real as UK and EU lay out their wishes on trade

Anna Rosenberg

Brexit battle starts for real as UK and EU lay out their wishes on trade

Sterling fell more than 1% Monday after the U.K. Prime Minister Boris Johnson said he wouldn’t accept EU standards as a price to pay in order to secure a free trade deal.

The United Kingdom left the EU officially on Friday, but it has yet to agree a new relationship with the EU. Both sides laid out separately on Monday what they want from a future trade deal but positions appear so far apart that economists have not excluded the possibility of an abrupt breakup at the end of the year.

“I would put it at 20% at the moment,” Anna Rosenberg, head of Europe and the U.K. at the advisory firm Signum Global, told CNBC Monday. “We have to track how talks pan out. If tensions rise and they seem to break down, I will revise it up,” she added.

The U.K. is currently in a transition period, during which EU law and rules are still applicable across the country, and the U.K. government can prepare trade deals with other nations. During this period, London also aims to develop new trade arrangements with Brussels. Failure to reach a new trade deal would bring higher costs for U.K. and European exporters.

“There’s no doubt there is also considerable difference between the parties,” David Henig, a U.K. trade policy expert at the think tank ECIPE, told CNBC. “There is a possible deal that removes tariffs in return for some level playing field provisions, but equally no deal remains a distinct possibility,” he said.

A Canada-like agreement?

 

“We have made our choice: we want a free trade agreement, similar to Canada’s,” U.K. Prime Minister Boris Johnson said Monday.

The EU reached a free trade agreement with Canada back in 2016. This deal took seven years to negotiate and has yet to be fully ratified by national parliaments in Europe.

Also, speaking Monday, the EU’s chief negotiator said there is not enough time to put together a similar deal with the U.K.

“Yes, that is the objective,” Michel Barnier said about reaching a free trade agreement with the U.K. “But we are constrained by the decision, if it’s confirmed, the decision of Boris Johnson to leave the single market and the customs union at the end of this year.”

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