Deal or no deal, EU will seek competition and state-aid clamps on UK

8 January 2019 9:36am

2 January 2018. By Matthew Holehouse.

A no-deal Brexit won’t bring the freedoms that some UK lawmakers imagine.

Should the UK end up exiting the bloc without a divorce agreement in place on March 29, the European Commission is ready to halt trucks and ground flights if it subsequently breaks from the bloc’s state-aid and competition rulebooks.

The conditions are set out in a communication on the bloc’s no-deal planning published just before Christmas.

The European Commission plans customs and regulatory checks on goods entering the bloc in the event of a no-deal, spelling havoc for British exporters and long queues at ports.

To blunt the impact, the EU executive has proposed a package of “basic connectivity,” allowing flights to and from the UK and a greater volume of haulage permits than existing conventions allow.

This reflects the fact that 45 percent of air traffic and 80 percent of road haulage operations to and from the UK are carried out by EU-based operators.

But it comes at a price.

It's on the condition that the UK enforces competition rules on violations, such as cartels and abuse of dominant position, and on mergers; that it prohibits unjustified government subsidies; and that it ensures standards in workplace rights, safety and the environment are applied that are equivalent to EU law.

The UK must also maintain an independent competition and anti-subsidy authority.

Failure to uphold the conditions could result in the commission unilaterally suspending some or all authorizations for airlines and permits for hauliers, choking trade.

Miscalculation

The conditions should come as no surprise: the bloc’s member states have consistently agreed that the UK must be prevented from undercutting continental companies.

And yet they have been overlooked or downplayed by hawkish UK lawmakers agitating for a no-deal exit. While it fell far short of the UK government's hopes of a spree of side-deals in areas such as data and nuclear fuel, the EU contingency plan was greeted as evidence that the bloc would put cold economic interest first and allow negotiations to be “reset.”

Kate Hoey, an opposition Labour lawmaker, said today that a “clean break” would grant ministers wide-ranging powers currently exercised by the bloc, and enable a left-wing administration to “deliver truly radical policies, virtually impossible now under EU law.”

And, before resigning as Brexit secretary last November, Dominic Raab claimed that a no-deal exit would bring “some countervailing opportunities” in terms of “the immediate recovery of full legislative and regulatory control”.

Last month's announcement from Brussels gives a foretaste of the commission's response to such claims. It’s hard to imagine that a disorderly no-deal Brexit would strengthen the British bargaining hand.

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