BREXIT: EU READY TO CAVE IN OVER DEAL
EU negotiators are set to admit defeat in their battle to kep Britain tied to Brussels as they attempt to break the deadlock in Brexit talks.
Sources say Michel Barnier is ready to soften demands for the UK to maintain the bloc’s state aid laws as the price for a free trade agreement.
The European Union’s chief negotiator is instead considering a dispute settlement mechanism.
It would allow Boris Johnson full control over cash injections and tax breaks for British firms after the transition period expires in December.
The Frenchman had been ordered by member states to force Britain to align to Brussels’ anticompetition regime.
The compromise would hand the Prime Minister complete control over the UK’s state subsidies, and environmental standards and workers’ rights as part of the bloc’s demand for a level playing field.
An EU diplomat said: “The room for compromise lies in something that will let the UK decide on its own since ‘regaining sovereignty’ is such a big Brexit thing.
“We would reserve the right to decide on any consequences vis-a-vis access to the single market for UK companies as a result.”
The EU’s free-trade agreements with Canada, South Korea and Japan feature similar dispute settlement tools.
Downing Street is adamant that Mr Johnson is only seeking arrangements that Brussels has already agreed with other countries.
But the plan would rely on the Prime Minister publishing his plans for Britain’s state aid regime in the coming weeks, something Mr Barnier believes is key to ending the impasse.
A second EU diplomat said the UK would need to agree on a broad outline of subsidies policy with Brussels.
The source said: “There must be a solid framework with independent oversight. If they agree to settle on broad rules for granting state aid and this to have this independent institution, then we have a deal.”
But an EU official said: “We can’t see Boris Johnson signing up to dynamic alignment, the UK is going to have its own system.
“The EU isn’t disputing that at all, it’s not trying to shape Britain’s state aid regime.
“We’ve just got to find a common understanding that we’re both committed to how we will do thing.” David Frost, the PM’s chief negotiator with Europe, will resume negotiations in Brussels on August 17. Both sides have also agreed to hold further rounds of negotiations in September and October. European sources claim the so-called level playing field and access to Britain’s fishing grounds remain the most contentious issues without an agreement.
But they are confident the two sides can overcome their differences in order to find an agreement before Mr Barnier’s final Halloween deadline.
A UK Government spokeswoman said: “We have been consistently clear that we are looking for a future relationship based on precedent with a free trade agreement at its core.
“What we cannot have is a relationship which requires alignment, or one that constrains us to the EU’s rules. Our priority throughout the process has always been the return of our sovereignty.
“Our offer on subsidy control is closely modelled on similar arrangements the EU has agreed with countries such as Canada, rooted in World Trade Organisation rules.”