EU wants zero-tariff Brexit deal, but will fine anticompetitive behavior

Brussels’ draft text for an agreement with the UK also demands jurisdiction for the bloc’s top court.

Brussels is willing to establish a zero-tariff area for goods with the U.K. but it will impose fines on unfair competitive behavior, according to a draft text for a future relations agreement with the U.K.

The 441-page document — sent by the bloc’s chief Brexit negotiator, Michel Barnier, to EU countries and the European Parliament ahead of the negotiating round next week and seen by POLITICO — proposes to “establish a free trade area in trade in goods” in which “customs duties on goods originating in the other party shall be prohibited.”

On services, Brussels aims “to establish a favorable climate for the development of trade and investment.” The proposal also seeks to avoid non-tariff trade barriers and promote public procurement and digital trade.

However, referring to “the geographic proximity and economic interdependence and connectedness” of both partners, the proposal says that the parties should “agree to establish robust commitments” to ensure fair trade.

It proposes strict clauses on the so-called level playing field for keeping equal social, environmental and competition standards, stressing that the agreement “can only deliver benefits in a mutually satisfactory way if it prevents distortions of trade and unfair competitive advantages.”

To police these clauses, the EU proposes an arbitration tribunal that can issue rulings and impose fines. According to the text, if one party fails to comply with a ruling, the other side could “impose a lump sum or penalty payment,” whose size would depend “on the seriousness [of the violation] and the duration both of the non-compliance.”

When EU law is concerned — for example in the area of state aid — then the Court of Justice of the European Union should have a say, the text insists. The U.K. has constantly rejected this proposal.

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The U.K. will also send its draft deal proposal to the EU next week, Cabinet Office chief Michael Gove said Monday.