EU Is Said to Plan Vague Trade-Deal Offer in Blow to U.K.

(Bloomberg) -- The agreement on post-Brexit trade that Theresa May will bring back from Brussels is likely to be short on detail, leaving Britain in the vulnerable position of having to negotiate substantial chunks of a trade deal after it's lost much of its leverage.

According to four people familiar with the situation, the bloc is planning to keep the final wording on the agreement on the future trade relationship fairly vague. It will start working on the text over the next three months and aim to publish it before the summer, two people said.

The U.K. continues to say at least in public that it expects to secure a detailed trade deal before it leaves the EU in March 2019. It wants to do this because once it leaves the bloc it will have already agreed to pay a hefty financial settlement and so will have lost a lot of its leverage. 

EU officials say even in public that the deal it's hoping to pin down by Brexit day is mainly on the divorce issues, and on the future relationship all Britain can expect is a non-binding political statement of intent. What they haven't said in public is how much detail there will be. U.K. officials say they want at the very least a "heads of agreement" that can be smoothly turned into a full trade deal.

The agreement on the future relationship, in the form of a political declaration to sit alongside the withdrawal agreement, may run to around just 30 or 40 pages, compared with the 1,600-page trade-deal with Canada.

Read more: How the October Deal Could Unravel

There's some tension on the EU side: Some of the 27 remaining EU governments are open to setting out more detail in some sectors which could include where the U.K. agrees to remain in alignment with EU rules and standards, two of the people said. As well as tying the British government down to fixed principles it could also help build trust when it comes to fleshing out the full deal, they said.

A greater level of detail could hinge on how quickly the British government can provide a concrete negotiating position and accept the EU's conditions, one official said.

While May went some way to crystallizing her vision for the future relationship in a speech on Friday, the EU plan reflects the belief in Brussels and continental capitals that the U.K.'s position is still unclear, with significant differences between the two sides remaining.

Trade talks are meant to start at the end of this month and the EU will take a first step this week by sending to capitals a draft of its negotiating position. It will set general plans for a Canada-style trade arrangement that falls far short of the bespoke arrangement that May demands, but will leave the way open for a more generous deal if the U.K. removes some of its red lines, an official said.

“The U.K. is closing the doors on itself, one by one, and the only possible model that remains is that of a free trade agreement,” EU chief Brexit negotiator Michel Barnier said in a speech in Brussels last week. “Any vision of the future must take into account the fact that the EU cannot and will not compromise on its founding principles.”

Parts Missing

The vagueness of the political agreement on trade will mean that crucial parts of the U.K.-EU trade deal will have to be worked out during the post-Brexit transition phase, which the EU says should last 21 months and which will take effect only if Britain accepts as legally binding its divorce bill and measures to keep the Irish border invisible.

Three months of negotiations on the future relationship will start after a summit of EU leaders on March 22-23, with the European Commission planning to release a draft of the political declaration in June. The EU wants to get the wording wrapped up by October to give the U.K. and European parliaments time to approve it. Stefaan de Rynck, an adviser to Barnier, told an audience at the London School of Economics on Monday that the EU wasn't expecting full certainty on the future relationship by this stage.

In her speech on Friday, May said she wanted to leave the single market and customs union but have no new tariffs, pick and choose regulations for different Brexit sectors and take on “associate membership” status of some EU industry regulators.

The EU's draft mandate being published this week will say that unless May removes red lines -- such as membership of the customs union and acceptance of free movement of people -- the bloc is unlikely to grant the “ambitious” partnership she wants. It will implicitly rule out widespread access for British financial institutions to the EU's single market as well as the U.K.'s idea to remain close to EU rules in some areas while breaking away in others.

To contact the reporter on this story: Ian Wishart in Brussels at iwishart@bloomberg.net.

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, Emma Ross-Thomas, Nikos Chrysoloras

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