BRUSSELS (Reuters) – The European Union is methods to forestall Britain utilizing low taxes, state subsidies or decrease environmental and labour requirements to achieve a aggressive edge over the EU after Brexit, EU diplomats mentioned.
Documents distributed by the manager European Commission to EU nationwide envoys, which have been seen by Reuters, set out how Brussels might attempt to insert phrases into the EU-UK free commerce settlement which London needs to start out negotiating within the coming months to bind Britain into sustaining a “level playing field”.
In its presentation, made final week, the Commission mentioned key ingredient of an accord could be a non-regression clause to keep away from a “race-to-the-bottom” in requirements, resembling on labour and the setting, which could reduce business prices in Britain.
It additionally mentioned that British tax coverage – an space by which it has broad freedom at the same time as a member of the EU – was already aimed toward gaining aggressive benefits and that this would possibly effectively be stepped up after Brexit in March subsequent 12 months.
“(The) UK (is) likely to use tax to gain competitiveness -(there are) very limited legal/political restrictions to prevent this,” the Commission mentioned in its presentation, including that the U.S. tax reform might improve aggressive pressures on Britain.
“Key risk: Targeted UK tax measures to attract investment and business,” learn the doc, offered as a collection of slides to accompany a briefing by Commission officers to envoys from the 27 different EU governments.
Treaty guidelines to restrict Britain’s capability to subsidise export industries also needs to be negotiated: “The EU-UK Agreement will have to include robust provisions on State aid to ensure a level playing field with the Member States,” one other slide mentioned.
LEVEL PLAYING FIELD
The Commission proposed within the presentation that in looking for to make sure a stage enjoying subject after Brexit the EU ought to observe the precept of non-lowering of current requirements.
One of the methods to do this might be to incorporate the non-regression clause in a FTA with Britain, much like ones in commerce agreements with Japan or Canada.
“The Parties shall not encourage trade and investment by relaxing or lowering the level of protection provided by their respective domestic environmental or labour laws and regulations,” the clause within the Japan settlement says.
“To this effect, the Parties shall not waive or otherwise derogate from such laws and regulations or fail to effectively enforce them through a sustained or recurring course of action or inaction, in a manner affecting trade or investment between the Parties,” it says.
To be certain Britain abided by the settlement the EU and Britain would have to agree on a method to resolve disputes and in addition on implementing the deal, together with numerous sanctions.
The EU’s sanctions choices included the “suspension of obligations, temporary compensations, financial sanctions, cross retaliation,” and “interim measures need to be available in some areas” like state support.
The EU might additionally “blacklist” Britain as a non-cooperative jurisdiction on tax issues.
Reporting By Jan Strupczewski; Editing by Alastair Macdonald and Andrew Heavens