Brexit: Brussels rebuffs new UK proposals on state subsidies

Boris Johnson has been rebuffed by Brussels after making an eleventh hour attempt to break the Brexit logjam with new proposals on limiting state subsidies to ailing British companies.

As the latest week of negotiations began, EU sources welcomed the UK’s effort to make a compromise with a submission of a new round of “negotiating papers”, but warned that a large gap remained between the two sides.

According to Brussels sources, the UK’s paper on state aid, the most contentious of the outstanding issues, offered to lay out a series of “principles” on controlling domestic subsidies.

The EU said the paper offered hope that the UK would build on provisions in the recently signed UK-Japan deal. The trade deal with Tokyo prevents either side from indefinitely guaranteeing the debts of struggling companies or providing open-ended bailouts without approved restructuring plans.

But the paper failed to offer appropriate “governance” proposals that would allow Brussels to keep the UK to its pledges, EU sources said. The EU wanted to ensure that any commitments were seen through and that in the event of a breach, parts of the trade deal could be immediately suspended.

EU diplomats also said any agreement on such a method of regulating state aid would need to be taken “at the highest level”, as it would represent a significant divergence from Brussels’ proposal.

The EU has pushed for the UK to accept the bloc’s state aid rules, which do not allow unfair subsidies to be granted. The UK’s position would instead offer recourse in the event of trade being distorted.

“The UK-Japan deal is obviously now the basis but it isn’t yet enough and we need to have bite,” said one diplomatic source. A second source added that the proposal was as yet “more of the same” but that it was hoped that the week’s negotiation would flesh it out. “That is what matters,” the source said.

The UK has submitted five new draft negotiating documents containing legal texts on fisheries, the “level playing field”, law enforcement and judicial cooperation, civil nuclear cooperation and social security coordination. An EU official said: “We can confirm that we received additional documents from the UK. We are studying them.”

Timeline

From Brefusal to Brexit: a history of Britain in the EU

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1961

Brefusal

The French president, Charles de Gaulle, vetoes Britain’s entry to EEC, accusing the UK of a “deep-seated hostility” towards the European project.

1973

Brentry

With Sir Edward Heath having signed the accession treaty the previous year, the UK enters the EEC in an official ceremony complete with a torch-lit rally, dickie-bowed officials and a procession of political leaders, including former prime ministers Harold Macmillan and Alec Douglas-Home.

1975

Referendum

The UK decides to stay in the common market after 67% voted “yes”. Margaret Thatcher, later to be leader of the Conservative party, campaigned to remain.

1984

‘Give us our money back’

Margaret Thatcher negotiated what became known as the UK rebate with other EU members after the “iron lady” marched into the former French royal palace at Fontainebleau to demand “our own money back” claiming for every £2 contributed we get only £1 back” despite being one of the “three poorer” members of the community.

It was a move that sowed the seeds of Tory Euroscepticism that was to later cause the Brexit schism in the party. 

1988

The Bruges speech

Thatcher served notice on the EU community in a defining moment in EU politics in which she questioned the expansionist plans of Jacques Delors, who had remarked that 80% of all decisions on economic and social policy would be made by the European Community within 10 years with a European government in “embryo”. That was a bridge too far for Thatcher.

1989

The cold war ends

Collapse of Berlin wall and fall of communism in eastern Europe, which would later lead to expansion of EU.

1990

‘No, no, no’

Divisions between the UK and the EU deepened with Thatcher telling the Commons in an infamous speech it was ‘no, no, no’ to what she saw as Delors’ continued power grab. Rupert Murdoch’s Sun newspaper ratchets up its opposition to Europe with a two-fingered “Up yours Delors” front page.

1992

Black Wednesday

A collapse in the pound forced prime minister John Major and the then chancellor Norman Lamont to pull the UK out of the Exchange Rate Mechanism.

1993

The single market

On 1 January, customs checks and duties were removed across the bloc. Thatcher hailed the vision of “a single market without barriers – visible or invisible – giving you direct and unhindered access to the purchasing power of over 300 million of the world’s wealthiest and most prosperous people”.

1993

Maastricht treaty

Tory rebels vote against the treaty that paved the way for the creation of the European Union. John Major won the vote the following day in a pyrrhic victory. 

1997

Repairing the relationship

Tony Blair patches up the relationship. Signs up to social charter and workers’ rights.

31 January 1999

Ukip

Nigel Farage elected an MEP and immediately goes on the offensive in Brussels. “Our interests are best served by not being a member of this club,” he said in his maiden speech. “The level playing field is about as level as the decks of the Titanic after it hit an iceberg.”

2003

The euro

Chancellor Gordon Brown decides the UK will not join the euro.

2004

EU enlarges to to include eight countries of the former eastern bloc including Poland, Hungary and the Czech Republic.

2007

EU expands again, allowing Romania and Bulgaria into the club.

2015

Migrant crisis

Anti-immigration hysteria seems to take hold with references to “cockroches” by Katie Hopkins in the Sun and tabloid headlines such as “How many more can we take?” and “Calais crisis: send in the dogs”.

February 2016

David Cameron returns from Brussels with an EU reform package – but it isn’t enough to appease the Eurosceptic wing of his own party

June 2016

Brexit referendum

The UK votes to leave the European Union, triggering David Cameron’s resignation and paving the way for Theresa May to become prime minister

January 2020

Britain leaves the EU

After years of parliamentary impasse during Theresa May’s attempt to get a deal agreed, the UK leaves the EU.

EU officials have poured cold water on suggestions that Brexit talks are on the brink of a breakthrough that could lead to intensified “tunnel” negotiations in the coming weeks.

As British and EU negotiators met on Tuesday to resume discussions on a trade and security deal, Brussels sources cautioned against the idea the two sides were about to enter the tunnel – a period of intensified talks when negotiators meet round the clock under a media blackout.

Michel Barnier, the EU chief negotiator, thinks it is too soon to judge if the UK and EU are going to reach an agreement that would merit intensified “tunnel” talks, also known as the “submarine” in Brussels argot.

“We only go into the tunnel if there is going to be light at the end of it,” an EU official said. “People are getting carried away with the positive mood music before we even sit down to negotiate.”

This week is the last scheduled round of Brexit talks, which are due to conclude on Friday with a meeting between Barnier and his British counterpart, David Frost. Most time will be dedicated to three big stumbling blocks: fair competition rules for the UK to have zero-tariff access to the EU market, fishing rights, and the dispute settlement system that underpins the entire agreement.

France has been put under pressure by some member states to compromise on the “maximalist” position that the status quo on fishing quotas must continue after Brexit.

An EU diplomat said Barnier was ready to start working on a legal text, but only if he was convinced Johnson was willing to move on those points. “Everything depends on the UK approach and their willingness to signal an opening,” the source said.

The Guardian

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