Three reasons the EU's new Brexit guidelines spell major trouble for Theresa May

New Brexit guidelines from the EU Commission suggest trouble lies ahead for Britain in the next round of negotiations.
They focus on the key issues of immigration, regulatory issues, and transport.
The guidelines explicitly reject Theresa May's favoured approach for a future EU relationship.

LONDON — As Theresa May gathered senior ministers for a "crunch" Brexit meeting at her country retreat on Thursday, her European counterparts published guidelines which outline the severe difficulties Britain will face in the next round of negotiations.

The EU Commission, which leads negotiations from Brussels, published three new sets of "further relationship" slideshows, focusing on the key issues of immigration, regulatory issues, and transport, in a level of detail which is noticeably lacking in the UK's own Brexit preparations.

Here are three reasons the guidelines spell major difficulty in the next round of negotiations.

The prime minister and her head mandarin Olly Robbins are known to favour a "three-basket" approach to regulation after Brexit. So what does that mean? Well under the plans, Britain would divide its economic activity into three 'baskets'. Some parts of the economy would fall into the "complete alignment" basket, in which the UK would follow all EU rules, other parts of the economy would fall into the "managed mutual recognition," basket where the two sides would agree on a common set of goals but set their own rules, and the rest of Britain's economic activity would fall into a third "anything goes" basket with which the UK could do as it pleased

However, the EU's new guidelines explicitly reject that approach. "UK views on regulatory issues in the future relationship including "three-basket approach" are not compatible with the principles in the EuCo guidelines," the document states firmly.

Officials in Germany and other EU countries are reportedly hostile to the idea because they fear giving Britain the ability to "cherry-pick" which parts of their economy should be aligned to the EU would damage the integrity of the single market.

The Commission's document indicates as much. It says that its guidelines highlight the importance of "preserving the integrity of the internal market."

"If the UK aspires to cherry pick, [there is a] risk for integrity and distortions to [the] proper functioning of [the] internal market."

It also rejects the idea of a joint EU-UK decision-making process — something David Davis called for this week — and highlights the need to "avoid upsetting existing relations with third countries": giving a favourable deal to one trade partner would inevitably be seen as unfavourable to another.

David Davis called on Tuesday for a trade deal which gives Britain free, unrestricted access to European markets but where it was "not required to obey European rules." He described this approach as "mutual recognition," a system favoured by many Brexiteers who say it would allow the UK and EU to remain broadly aligned on regulatory issues while setting their own rules.

The EU Commission defines "mutual recognition" very differently. It highlighted the case of Switzerland, which has a mutual recognition agreement covering industrial goods such as cars, electronics and medical devices. But it does so largely because Switzerland complies so closely with EU rules.

Here's the key line:

"Where equivalence of substantive rules is granted, it is assessed by the EU based on Swiss full alignment with relevant acquis."

The EU's deal with Switzerland works on the basis that Switzerland is fully-aligned with "relevant acquis," which describes the enormous body of EU legislation. The UK would, therefore, be "required to obey European rules" should it seek a similar mutual recognition deal on goods.

Theresa May has stated her intention to end free movement once the UK leaves the EU, and replace it with a policy based on a bespoke free-trade agreement. The commission's document on "mobility" — meaning immigration — highlights how restrictive FTAs are regarding immigration:

Basic FTAs tend to provide an agreement between the two parties — in this case the UK and EU — to allow movement of business people and self-employed workers provided they meet certain eligibility requirements such as a certain level of salary. They do not generally cover students, academics, family members, or other groups which represent such large tranches of UK and EU immigration.

The UK's stated preference for an FTA would, therefore, place a severe limitation on its own citizens current ability to live and work in the EU, unless it could secure concessions to strike a bespoke deal.