Hammond says free trade agreement must include financial services

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European Union President Donald Tusk will on Wednesday finally unveil negotiating guidelines for the future relationship with Britain which warn London it can not have completely free trade after Brexit.

If Britain were to join the European Economic Area, dubbed the Norway option, it would have access to the EU single market in return for accepting free movement of EU citizens and contributing to the bloc's budget, but with no say over the EU rules it must implement.

"Because of Brexit, we will be drifting apart", the chairman of European Union leaders Donald Tusk told a news conference, delivering a message that contrasted sharply with May's call for future trade to be "frictionless as possible".

"This will be the first FTA in history that loosens economic tries instead of strengthening them", Tusk said. The risks surrounding a hard Brexit will make life difficult for both parties, as London's financial center status is uncontested and many large European cities are in the race to house financial firms.

The prime minister of Luxembourg, Xavier Bettel, who joined Tusk for a press conference, said he backed the guidelines but hinted at a debate to come among the 27 member states on the offer on financial services.

The EU guidelines added that "there can be no "cherry-picking" - Brussels jargon for getting free access in certain sectors including financial services without the obligations and costs of membership, including respecting freedom of movement of people from EU countries.

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Donald Tusk, president of the European Council, today circulated a draft negotiating mandate to European governments on the future economic relationships between the EU and Britain.

"It is very much in our mutual interest to do so".

The EU's chief Brexit negotiator Michel Barnier says a trade deal including financial services "does not exist".

The EU draft guidelines contain no mention of financial services.

The leaders of the remaining 27 European Union states must then approve the plans at a Brussels summit on March 22, setting the template for European Union negotiator Michel Barnier in trade talks that could start as soon as April.

"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 United Kingdom market".

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Hammond said Brussels had originally aimed to include financial services in a free trade deal with Canada which in the end failed to provide much new market access for banks.

But he turned the screw on Theresa May by rejecting her "pick n mix" approach to getting a unique trading relationship.

"We are not going to sacrifice these principles, it's simply not in our interest", he insisted - and vowed that he would make sure that Brexit is NOT a success for us.

Last December the Bank of England proposed allowing European Union banks in Britain to continue as branches in London after Brexit - on condition of some form of reciprocity from Brussels - to avoid lenders having to find extra capital to become fully fledged subsidiaries.

"This means double regulation". This article is strictly for informational purposes only.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc.

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