Boris Johnson last night called on the European Union to drop its demands to allow Brussels to subsidise industries across Europe while denying the UK the same rights.
Michel Barnier, the EU’s chief negotiator, has called for Brussels aid to be exempt from any future subsidy control regime as part of a Brexit deal.
Mr Johnson told Ursula von der Leyen, president of the European Commission, that the exemption would allow the EU to unfairly support European industries while putting UK firms at a competitive disadvantage.
The issue has been brought into focus by a €750 billion EU pandemic recovery fund and other payments that will be used to directly support many industries in countries that are significant rivals with the UK, such as France, Italy and Spain. While similar forms of government aid to industry would be subjected to subsidy control scrutiny, EU payments in the next Brussels budget would be excluded.
Michael Gove, the cabinet office minister, told MPs it was not something the UK could agree to. “You would have a situation where the EU, at the level of the 27 [member states] could provide [financial] support, let’s say, for the production of electric vehicles,” he said. “But if the UK said we too want to use government money to pump-prime that new technology, then the terms which the EU wants us to agree would mean that we would be prevented from doing so.” He added: “We think that that is a fundamental problem. The EU has sought for itself, freedom from restraints, that they won’t grant us.”
A government source said: “It is completely asymmetric and not something we can sign up to.” The source added that there were still disputes over exactly how the level playing field provisions in the deal would work after the UK backed down over its insistence that there should be no right in any circumstances for one side to impose unilateral tariffs on the other.
In an attempt to increase pressure on EU leaders, Downing Street made it clear that in the event of a no-deal Brexit the UK would not return to the negotiating table and would instead trade on WTO terms “for the foreseeable future”. A Downing Street source said: “The prime minister has always been the loudest voice in the room on this. If we don’t get a deal now we won’t be going in January to restart talks. That’s not going to happen.”
Earlier in the day Mr Barnier struck a more optimistic tone, telling a behind closed doors meeting in the European Parliament that a deal could come as early as today but would be “difficult”, with a breakthrough more likely at the weekend. He told senior MEPs — a conference of the chairmen of political groups and committees in the EU assembly — that while there was progress on fair competition rules fishing remained a serious obstacle.
He said Britain had shifted on the level playing field to accept a sanctions mechanism in the event of “systemic divergence” from common standards by either side. The government has also now conceded, said Mr Barnier, on the principle of “cross suspension”, which means that a fishing dispute could result in retaliatory car tariffs.
He said there was now agreement on non-regression and keeping alignment with common standards over time but no agreement yet on the final detail of how the UK will enforce subsidy controls. Mr Barnier told the MEPs the EU accepted that the UK would be a sovereign coastal state with the power to cut fishing access for European boats after a transition period, thought to be at least five years. But, he said, the government was refusing to accept any linkage between future cuts to fishing quotas and possible EU sanctions in response.
Mr Barnier said that EU demands for “cross retaliation” in enforcement sanctions to include the City of London were another final sticking point.