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article imageEU seeks powers to curb post-Brexit UK trade breaches

By Alex PIGMAN (AFP)     Feb 1, 2018 in World

The EU fears international rules are inadequate for post-Brexit Britain and is weighing new methods to crack down if the UK adopts unfair practices to boost its economy, said an official document seen by AFP Thursday.

European Union negotiators made their warning last week in a seminar to diplomats from the 27 remaining member states, which was devoted to how to maintain a "level playing field" after Britain leaves the bloc's single market.

"International rules do not adequately address the (potential) distortive effects of subsidies on investment, trade and competition," said a presentation to the diplomats by the European Commission, the EU's executive arm.

This means "the EU-UK agreement will have to include robust provisions on state aid to ensure a level-playing field with the member states," it added.

EU rules prevent governments subsidising companies or sectors of the economy -- so-called "state aid" -- saying it prevents fair competition.

Under the stewardship of chief negotiator Michel Barnier, the European Commission is handling negotiations with Britain for the other 27 countries.

Britain has said it will leave the EU's single market and customs union and the document is the clearest indication yet that Europe is seeking unique methods to deal with Britain on trade matters after the EU.

Concern is high among the EU 27 that London will use its divorce from the bloc to unfairly attract international investment by slashing tax and regulations as well as by breaking the bloc's strict rules against subsidies.

- Impatient Brussels -

Free trade deals or seeking arbitration at the World Trade Organization were too cumbersome and slow to address potential issues, the commission said, especially given the deep ties linking the EU and UK economies.

On taxation, the commission warned diplomats that Britain was "likely to use tax to gain competitiveness" and that Europe had "very limited" legal avenues to prevent this.

The EU pointed out that its recently adopted tax haven "blacklist" -- that includes Namibia and Guam -- could be used if Britain lowered standards.

In a separate seminar on Tuesday, EU envoys discussed the fate of Britain's crucial financial sector with diplomats insisting that the UK will lose any so-called "passporting" options after it leaves the single market.

Barnier has insisted that the EU will reject a push by London banks to maintain the "passports" that allow them to offer services across the bloc.

An EU diplomat said the discussion remained very general, with several countries -- including Germany -- reluctant to detail demands until Britain made clear its own goals in the talks.

France has however taken a tougher line in the negotiations.

Brussels is impatiently awaiting clarity from Britain on the type of trade deal it will pursue with the EU, with hopes to launch talks in March on future relations.

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