Saturday, 21 July, 2018

SCENARIOS - Trade options for United Kingdom financial services after Brexit

SCENARIOS - Trade options for United Kingdom financial services after Brexit SCENARIOS - Trade options for United Kingdom financial services after Brexit
Melissa Porter | 07 March, 2018, 19:56

The guidelines that European Union Council President Donald Tusk has drafted offer Britain little what it is hoping for from its future relations with the bloc after it leaves next year.

Joining Norway, Iceland and Liechtenstein in the EEA is not seen as a viable option for Britain, given that the government has ruled out free movement of EU citizens, continued contributions to the EU budget and acceptance of EU rules it might not agree with.

"I am clear not only that it is possible to include financial services within a trade deal but that it is very much in our mutual interest to do so".

Canada took several years to negotiate its "CETA" free trade deal with the European Union and it only has a minimal section on financial services.

In a rebuff to Britain, the EU's draft guidelines for a trade deal released on Wednesday will only offer financial services firms in London a limited ability to sell many of their services to European companies.

On Tuesday, France said there was little chance of securing a free trade deal for financial services that would provide the degree of access sought by the sector.

"It does not surprise me remotely that what they set out this morning is a very tough position", Hammond said.

The document says the "four freedoms" of the single market - the free flow of goods, services, money and people - are "indivisible" and "there can be no "cherry picking" through participation based on a sector-by-sector approach, that would undermine the integrity and proper functioning of the single market".

The UK would like a mutual recognition system so financial services will still have access to the European Union on the premise that regulatory standards are at the same as current global rules.

It adds: "Such an agreement can not offer the same benefits as membership and can not amount to participation in the single market or parts thereof".

"The EU has never negotiated the same arrangement twice".

The guidelines formally rule out special access to the single market for United Kingdom financial services after Brexit, following May's admission last week that privileged access would not be possible. "It has bespoke relationships with Turkey, Canada, Singapore, South Korea, Switzerland".

As the EU shows its hand, British finance minister Philip Hammond will try in a speech in London to convince European leaders it is in their "mutual interest" to include the City in any post-Brexit agreement.

Today's guidelines came as MEPs published their separate proposals yesterday calling for a much closer Ukraine-style association agreement. According to the document, financial services may be provided under "host state rules".

In general, it says her speech was "more a domestic communication battle than (something) proposing real substance and ways forward".

However, Labour pointed out that TTIP negotiations had ultimately collapsed. The General Agreement on Trade in Services, or GATS, is the WTO agreement governing trade in services.

There is also a desire for a close security agreement in "light of the geographic proximity and shared threats faced by the union and the UK", and "in the fields of security, defence and foreign policy there should be no gap in the EU-UK cooperation as a outcome of the UK withdrawal from the union", the guidelines stipulate.