With little fuss, negotiators have worked up a short draft text that would go into a declaration on future relations, which outlines parameters for a post-Brexit trade negotiation.
One of the big potential flashpoints of Brexit talks has as a result become an area of relative consensus — at least for the time being.
“This has gone from being one of the most feared paragraphs [of the declaration] to something that is no longer so daunting to do,” said one EU diplomat handling Brexit.
The financial sector is the UK’s biggest source of exports and tax revenue. But the outbreak of harmony is the result of Britain’s prime minister scaling back her ambitions.
To the dismay of City figures who had sought deeper relations, Theresa May’s Chequers plan brought the EU and UK’s negotiating positions closer together by paring back expectations for a future free trade agreement.
Both sides are now aiming for a more arm’s-length relationship, with cross-border trade in financial services managed through so-called “equivalence” decisions, taken independently by each side.
Such equivalence arrangements make it easier for non-EU institutions to do business in Europe in specific areas, as long as their home countries are deemed by the European Commission to have similar standards of oversight.
The emerging consensus on financial services is also helped by the nature of the text under discussion. The declaration on future relations is a political statement of intent running to a few dozen pages in total. It marks the start of a long negotiation, which could run beyond the end of Britain’s transition in December 2020, rather than a finale in which big concessions are made.
One EU official joked that financial services proved “easy” in the declaration because “there was nothing to negotiate”.
The text is expected to outline common ambitions for the talks on regulatory ambition and the right of establishment for companies — standard elements of EU free trade deals when it comes to financial services. Unspecific commitments to work on systems for equivalence could also be included. [...]
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