10 July 2018

Speech by Michel Barnier at the European American Chamber of Commerce

 [...]The cost of Brexit will be substantially higher for the UK than for the EU. But Brexit is clearly a "lose-lose" situation for both.

On both sides of the Channel, businesses, including subsidiaries of US firms, should analyse their exposure to the other side and be ready, when necessary, to adapt their logistical channels, supply chains and existing contracts.

They should also prepare for the worst case scenario of a "no deal", which would result in the return of tariffs, under WTO rules.

The "no deal" is not our objective. By the way, you do not need a negotiator for no deal. We are negotiating to avoid the "no deal", but it still cannot be excluded.

Our objective is to reach an agreement by October on the UK's orderly withdrawal from the EU. This would allow proper time for the British and European Parliaments to vote on the Withdrawal Agreement before the UK actually leaves the EU on 29 March 2019.

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2/ Over the last few months, we have made progress in the negotiations, as you can see in this draft Withdrawal Agreement which we have published – more or less 80%.  [...]

3/ We want an ambitious future relationship with the UK – not only in trade, but also in police and judicial cooperation and foreign policy, security and defence.

However, the basis for such cooperation between the UK and the 27 EU countries will necessarily be different.

Therefore, the level of integration will have to be lower than it is today. [...]

Outside of this common “ecosystem” of regulation, supervision and enforcement, there can be no passporting. The UK has recognised this point, in Ms. May's Mansion House speech.

But the UK still wants continuity. It would want the EU to accept UK standards by means of a system of mutual recognition.

The UK needs to understand that the EU cannot accept such mutual market access without all the safeguards that underpin it.

This would go against all our objectives:

• First, ensuring financial stability,
• Second, protecting investors,
• Third, securing market integrity
• And fourth, maintaining a level playing field.

These objectives would not be reached if financial institutions could passport in the EU and serve clients based on a licence by the supervisors of a third country.

I do not know of any country in the world that would accept such a loss of sovereignty.

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Ladies and gentlemen,

That being said, I think that we should have a close relationship with the UK, also in financial services.

This is our common interest.

I see a number of ways to achieve this.

First, the EU Single Market is open to third countries, in general, to the US, and also to the UK. And it will remain so.

In the EU, free movement of capital is open to third countries.

As regards market access to provide financial services, the European Council made clear that our future Free Trade Agreement with the UK should include the right of establishment, with EU rules applying.

Secondly, the EU has a long history of relying on the regulation and supervision of third countries.

This is what the G20 calls deference, what you call in the US substituted compliance, and what we call in the EU equivalence.

To date, the EU has adopted more than 200 so-called equivalence decisions covering more than 30 foreign jurisdictions, including of course the US. This integrates financial markets and facilitates the work of financial operators in the EU and the foreign jurisdiction.

Today, to be very clear, we are in the EU the most open jurisdiction in the world for financial services.

Why would this equivalence system, which works well, including for the US industry, not work for the UK? Why?

Thirdly, in order to draw lessons from the financial crisis and limit the risks in the future, EU countries collectively developed more effective financial regulation and supervision. [...]

Full speech

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