- The EU has offered its opening gambit for a free trade deal with a post-Brexit U.K.
- The European Council president said there can be no cherry picking of the single market.
- Brussels does concede zero tariffs and quotas on the flow of goods.
The EU has set out its draft guidelines for trade talks which warn that the U.K.'s current position on Brexit will result in "negative economic consequences."
Donald Tusk, the European Council president, circulated the draft Wednesday which noted that the U.K.'s current proposals to leave the EU would "limit the depth" of a future partnership between the two parties.
The guidelines rejected the possibility of full access to the EU's single market for crucial U.K. sectors such as finance and pharmaceuticals, stating there can be no "cherry picking" through participation based on a sector-by-sector approach.
"Being outside the customs union and the single market will inevitably lead to frictions," the document said. "Divergence in external tariffs and internal rules as well as absence of common institutions and a shared legal system, necessitates checks and controls to uphold the integrity of the EU single market as well as of the U.K. market … This, unfortunately, will have negative economic consequences," it said.
The EU's customs union is a trade agreement that eliminates customs duties between EU member states. The single market is a deeper form of co-operation between member states that allows the free movement of goods, services, money, and people in the bloc. The ruling Conservative party in the U.K. currently want to exit both when the country leaves the EU.
The 6-page document on Wednesday called for zero tariffs and quotas on goods but placed a rider that the European Union should continue to have full fishing rights in British waters. The text also suggested that any dispute settlement arising from the future U.K.-EU relationship should be overseen by the European Court of Justice. Both of these issues are likely to cause concern for strong Brexit proponents in the country.
Following its release, Tusk said that as the U.K. has repeatedly stated it wants to leave the single market, the customs union and the jurisdiction of the ECJ, then only trade would be left to discuss.
"Therefore it should come as no surprise that the only remaining possible withdrawal is a free trade agreement," he said. "I hope it will be ambitious and advanced and we will do our best as we did with other partners such as Canada recently, but anyway it will only be a trade agreement," Tusk added.
The European Council president added that it would be the first free trade deal in history to loosen, rather than strengthen ties.
For aviation, Tusk suggested that an air transport agreement would need to be written up in order to maintain connectivity. The draft also suggested that in the areas of security, defense and foreign policy there should be "no gap" in co-operation and another contract should be drafted.
In an apparent olive branch, the second to last paragraph of the document said that the EU approach is in line with the U.K.'s current stated objectives and if they were to "evolve" then Brussels may reconsider its offer.
The United Kingdom is set to leave the European Union on March 29, 2019.
Silvia Amaro contributed to this report.