May’s frictionless EU trade plan after Brexit dealt blow by key ally

Theresa May’s plans for a Brexit deal that delivers frictionless trade with the EU have been dealt a blow by a key European ally who has said there will be more bureaucracy after leaving the bloc.

The Danish prime minister, Lars Løkke Rasmussen, said after talks with his UK counterpart in Copenhagen that there would be an inevitable price to pay for Britain leaving the single market.

Following a bilateral meeting with May, he told reporters at a joint press conference: “We should avoid too many changes in our relations and I am totally in favour of an enhanced trade agreement between the EU and UK.

Staying in the single market and customs union

© ReutersThe UK could sign up to all the EU’s rules and regulations, staying in the single market – which provides free movement of goods, services and people – and the customs union, in which EU members agree tariffs on external states. Freedom of movement would continue and the UK would keep paying into the Brussels pot. We would continue to have unfettered access to EU trade, but the pledge to “take back control” of laws, borders and money would not have been fulfilled. This is an unlikely outcome and one that may be possible only by reversing the Brexit decision, after a second referendum or election.

The Norway model

Britain could follow Norway, which is in the single market, is subject to freedom of movement rules and pays a fee to Brussels – but is outside the customs union. That combination would tie Britain to EU regulations but allow it to sign trade deals of its own. A “Norway-minus” deal is more likely. That would see the UK leave the single market and customs union and end free movement of people. But Britain would align its rules and regulations with Brussels, hoping this would allow a greater degree of market access. The UK would still be subject to EU rules.

The Canada deal

© PAA comprehensive trade deal like the one handed to Canada would help British traders, as it would lower or eliminate tariffs. But there would be little on offer for the UK services industry. It is a bad outcome for financial services. Such a deal would leave Britain free to diverge from EU rules and regulations but that in turn would lead to border checks and the rise of other “non-tariff barriers” to trade. It would leave Britain free to forge new trade deals with other nations. Many in Brussels see this as a likely outcome, based on Theresa May’s direction so far.

No deal

Britain leaves with no trade deal, meaning that all trade is governed by World Trade Organization rules. Tariffs would be high, queues at the border long and the Irish border issue severe. In the short term, British aircraft might be unable to fly to some European destinations. The UK would quickly need to establish bilateral agreements to deal with the consequences, but the country would be free to take whatever future direction it wishes. It may need to deregulate to attract international business – a very different future and a lot of disruption.

“I hope if there’s willingness … we will close a deal which will be as close to what we know now as possible. But we have to be realistic and we have to realise that there will be changes. Leaving the single market comes with a price tag and unfortunately the price tag is also a Danish price tag.

“That is the reality of life. There will be more bureaucracy in future, unfortunately.”

The European council president, Donald Tusk, has already told the UK that it should not expect frictionless trade outside the single market. “Friction is an inevitable side-effect of Brexit,” he said in March.

Rasmussen, whose country is generally regarded as sympathetic toward the UK having also joined the EU in 1973, insisted Brussels was simply aiming to be “realistic and fair” in the negotiations.

May also signalled that the government’s goal of cutting net annual immigration to below 100,000 would remain in place after Brexit.

She said: “We recognise the concern that people in the UK have about this issue of net migration into the UK, which is why we set ourselves the target … and want to continue to work to ensure that we address that particular target.”

Her position was in stark contrast to that of her home secretary, Amber Rudd, who repeatedly refused to confirm to the Commons home affairs committee last month that she was aiming to meet the target by the next election.

The two leaders also discussed fishing rights, and May promised that Denmark, whose boats regularly fish in British waters, would get “fair and reciprocal access” after Brexit.

Britain is braced for tough negotiations with Brussels after delaying the decision over who will control and have access to its territorial waters. The government is also facing calls at home from an increasingly belligerent fishing industry to restrict the number of foreign boats.

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