LONDON (Reuters) - The European Union’s chief Brexit negotiator Michel Barnier told Britain on Monday that the time had come for Britain to make a choice on what sort of relationship it wanted with the bloc after Brexit.
Britain has ruled out staying in any customs union with the EU after Brexit, but the nature of its trading relationship with the world’s biggest trading bloc has split Theresa May’s government and Conservative Party.
Barnier, speaking after talks in Downing Street with Prime Minister May and Brexit Secretary David Davis, bluntly called on Britain to clarify how it saw the future relationship with the EU after it leaves on March 29, 2019.
“The only thing I can say: without a customs union and outside the single market, barriers to trade and goods and services are unavoidable,” Barnier told reporters in Downing Street. “Time has come to make a choice.”
“We need also clarity on the UK proposals for the future partnership,” Barnier said.
Britain, Davis said, wanted a comprehensive free trade agreement and a customs agreement to make trade as frictionless as possible while being free to strike free trade deals with swiftly growing countries across the world.
Davis said the talks with Barnier had been constructive and that he was confident Britain could get agreement on a time-limited transition period by the March economic council which is scheduled for March 13.
With little more than a year left before Britain’s March 2019 exit from the European Union, May’s party remains deeply divided over what sort of relationship should be built between the EU and the world’s sixth-largest economy.
Such are the divisions within May’s government, that the debate over the extent of Britain’s possible post-Brexit participation in an EU customs union has taken place in public with key ministers offering a range of views.
“The conditions are clear: Everyone has to play by the same rules during this transition,” Barnier said. “The certainty about the transition will only come with the ratification of the withdrawal agreement.”
Membership of the, or a, customs union after Brexit, would prevent London from striking trade deals with countries outside the EU in future.
While May has repeatedly said that Britain will leave the customs union, some ministers hope that Britain could remain in some sort of bespoke customs arrangement with the EU after Brexit.
May’s spokesman told reporters that Britain would leave the customs union and would not be a member of a customs union with the EU after Brexit.
“We are very keen that we continue to have an extremely good and close relationship, that relationship be on economic and other grounds, and that it will continue in long term,” Davis said.
“It’s perfectly clear what we want to do and there is no doubt about it,” Davis said.
Negative news around Brexit negotiations and surveys indicating a slowing British economy are sapping investor confidence in sterling GBP=D3, with it dipping 0.8 percent to $1.4005 on Monday, its lowest since Jan. 30.
A customs union means that its members apply the same tariff to goods imported into their territory from elsewhere and apply no tariffs to goods from other members. It also limits checks and other bureaucracies at borders between members.
Unless Britain negotiates a new trade deal with the EU, its exports would run into the union’s external tariffs, which average about 5 percent across all goods, including 10 percent for cars and over 200 percent on certain types of poultry.
But May is under pressure from eurosceptic members in her party to quit the trading arrangement because for them the key prize is chance to sign new trade deals with other nations such as the United States, China and India.
May will hold two cabinet meetings on Wednesday and Thursday at which she will try to heal the deep divisions among her ministers over the best way to leave the EU.
If no deal is reached by October of this year, many businesses fear Britain could face a disorderly exit that would weaken the West, disrupt the peace in Northern Ireland, imperil Britain’s $2.7 trillion (£2 trillion) economy and undermine London’s position as the only financial centre to rival New York.
Additional reporting by Kate Holton; Editing by William Schomberg and Alison Williams