Britain has been warned the prospect of “frictionless trade” with the European Union post-Brexit is “not possible”.
In a stark rejection of Theresa May’s negotiating position, the EU’s chief Brexit negotiator Michel Barnier said it appeared the Government had still not understood the bloc’s position on the single market.
The Prime Minister has said she wants trade with the EU to be “as frictionless as possible”, while Brexit Secretary David Davis has said a new trade deal should deliver the “exact same benefits” as single market membership.
But Mr Barnier said Mrs May’s “red lines” for a future trade relationship meant the UK was definitely leaving the single market and the customs union.
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He told an EU committee in Brussels that only membership of both of these elements of the EU permitted the current “frictionless” trading arrangements.
Mr Barnier said he was unsure the EU’s refusal to grant piecemeal access to the single market and insistence on controlling standards in the single market “have been fully understood across the channel”.
In response, the PM’s official spokesman stuck by the Government’s stance, saying: “We’ve set out our relationship that we seek … we want an agreement that allows for trade that is as frictionless as possible … that is the best for both sides”
“Our position is clear and we set out to negotiate a deal which is in our best interests and that of the EU.”
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He said there would be “negative” consequences to Britain’s decision to leave, but not from any attempt by the EU to “punish” the UK.
Brexit would create a “loser/loser situation” for both sides, according to Mr Barnier, who added that this would be made worse if the two sides failed to agree a deal.
He stressed that Brussels had made clear to the UK that the EU’s “four freedoms” – including freedom of movement – are indivisible, that there can be no sector-by-sector participation in the single market and that the EU will keep full sovereignty over its rules and regulations.
“These three points were already made very clear by the European Council and European Parliament, but I am not sure whether they have been fully understood across the Channel,” Mr Barnier said.
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“I have heard some people in the UK argue that one can leave the single market and keep all of its benefits. That is not possible.
“I have heard some people in the UK argue that one can leave the single market and build a customs union to achieve frictionless trade. That is not possible.
“The decision to leave the EU has consequences and I have to explain to citizens, businesses and civil society on both sides of the Channel what those consequences mean for them.
“These consequences are the direct result of the choice made by the UK, not by the EU.
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“There is no punishment for Brexit and of course no spirit of revenge.
“But Brexit has a cost, also for business in the EU27, and businesses should assess with lucidity the negative consequences of the UK choice on trade and investment and prepare to manage that.”
Mr Barnier said time was tight to reach a deal by the end of March 2019 deadline under Article 50, remarking that “time flies”.
The French politician said he was ready for the talks to fail, but said “no deal” would be damaging, especially for Britain, and saw “no reasonable justification” for it.
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“A fair deal is far better than no deal,” he said, turning around a phrase popularised by Mrs May that “no deal is better than a bad deal”.
Mrs May has previously threatened to walk away from exit talks if she views the offer on the table as a “bad deal”, but such a prospect is deemed be less likely in the wake of Mrs May losing her majority at the election.
Mr Barnier called for a quick agreement on the priority issues in the Brexit negotiations that started last month so as to build a “climate of trust”.
Doing so would allow trade negotiations to begin as soon as possible, he said.
The EU has stood firm its insistence that talks on the future trading relationship between Britain and the bloc can only begin once significant progress has been made on other issues, like citizens rights and the so-called “exit bill”.