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European Commission - Speech - [Check Against Delivery]

Speech by Michel Barnier at the European Economic and Social Committee

Brussels, 6 July 2017

Mr President, dear Georges Dassis,

Dear Members of the European Economic and Social Committee,

Ladies and gentlemen,

I am very happy to be back here today and to address your plenary session.

Many of you, as entrepreneurs, trade unionists, leaders of NGOs, or leaders of the civil society, know that Brexit means uncertainty – for citizens first, for businesses, and for jobs.

There will be no business as usual.

Today I want to talk frankly and sincerely about the need for economic and social actors to prepare and face this uncertainty. Each of you has an important role in raising awareness and making the link with civil society. And I will continue to support your work by ensuring the transparency of the negotiations.

But there are also a few certainties.

The UK will become a third country at the end of March 2019.

The UK government has defined a number of "red lines" for the future relationship:

  • no more free movement for EU citizens,
  • full autonomy over UK laws,
  • autonomy to conclude its own trade agreements,
  • no role for the European Court of Justice.

This implies leaving the single market and leaving the EU Customs Union.

On the EU side, we made three things very clear:

  • The free movement of persons, goods, services and capital are indivisible. We cannot let the single market unravel.
  • There can be no sector by sector participation in the single market: you cannot leave the single market and then opt-in to those sectors you like most – say, the automobile industry or financial services. You cannot be half-in and half-out of the single market.
  • The EU must maintain full sovereignty for deciding regulations: the EU is not only a big marketplace. It is also an economic and social community where we adopt common standards. All third countries must respect our autonomy to set rules and standards. And I say this at the moment when the UK has decided to leave this community and become a third country.

These three points were already made clear – very clear – by the European Council and the European Parliament. But I am not sure whether they have been fully understood across the Channel.

  • I have heard some people in the UK argue that one can leave the single market and keep all of its benefits – that is not possible.
  • I have heard some people in the UK argue that one can leave the single market and build a customs union to achieve "frictionless trade" – that is not possible.

The decision to leave the EU has consequences. And we have to explain to citizens, businesses and civil society on both sides of the Channel what these consequences mean for them.

Let me be clear: these consequences are the direct result of the choices made by the UK, not by the EU. There is no punishment for Brexit. And of course no spirit of revenge.

But Brexit has a cost, also for business in the EU27.

And business should assess, with lucidity, the negative consequences of the UK's choice on trade and investment. And prepare to manage them.

Mr President,

Ladies and gentlemen,

As the EU negotiator, on behalf of the European Commission and with my team, under the control of the European Parliament and the Council, and with the confidence of President Juncker, my task is to limit the cost of Brexit for the 27 as much as possible. Without ignoring that certain countries and sectors, which I know well, will be more affected than others.

This task of limiting the cost of Brexit, it seems to me, is your task as well.

We must start to prepare as businesses, social partners, trade unions and civil society for the consequences of the UK's sovereign decision.

Whatever the outcome of the negotiations will be, from midnight on 29 March 2019, as things stand, the UK will be a third country which therefore will not have the same facilities or the same rights as a Member State. That is the UK's choice, not ours.

This is true across all areas, and in particular for trade, which will never be as fluid for a country that chooses to leave the single market and the customs union. I think it is worth looking at this point more closely for a moment.

Why do our Member States benefit from ‘frictionless' trade in goods with other Member States?

  •  Because they form part of the internal market. This has made it possible to harmonise rules and ensure their mutual recognition, guaranteeing that goods legally produced in one Member State can be sold in all the others without any other formal requirement.
  • But also because, as members of the EU, they form part of our customs union, with a common external tariff and no customs controls at all between our countries.
  • What would be the point of not having customs duties if, at the same time, divergent national rules prevented the free movement of goods?
  • It is clear that only the combination of the customs union and the rules of the internal market allow this free, ‘frictionless' trade between our States. One does not go without the other.

By choosing to leave the Union, you move to the other side of the external border that delineates not only the customs union but also the area in which the rules of the internal market are adopted and implemented.

Only the combination of the internal market and the customs union guarantees the free movement of goods:

  •  The internal market without the customs union – in other words the regime of the European Economic Area for Norway, for Iceland, for Liechtenstein – still entails a system of procedures and customs controls, among other things in order to check the preferential rules of origin.
  • Conversely, a customs union agreement without the internal market – as in the case of Turkey – does not allow the free movement of goods either, since it also implies a system of procedures and customs controls, including controls to check compliance with European standards.

Lastly, I would add that a trading relationship with a country that does not belong to the European Union obviously involves friction.

  • For example, third-country traders do not benefit from the same facilities as Member States with regard to VAT returns.
  • For a third country, 100 % of imports of live animals and products of animal origin, I speak as former Minister of Agriculture, are and would remain subject to EU border controls. This is one of the challenges that we have to address in the particular and unique case of Ireland, without recreating a hard border. Moreover, before these products can be exported from a third country to the European Union, the sanitary and phytosanitary conditions for these exports to take place would have to be established. One sees clearly, to speak frankly, the constraints that this entails for the agri-food industry.

And these constraints also apply to all companies which draw their strength and vitality from the integration of production centres in Europe.

The success of the Airbus factory in Broughton, in North Wales, is largely owing to its ability to attract qualified engineers and technicians from all over Europe. And to the ease of the procedures for certification and for delivery to assembly sites in Hamburg or Toulouse.

Ladies and gentlemen,

So, even if we secure the agreement we are working towards, the UK's decision to leave the Union will have significant consequences. It is my duty to say this; since at the start I said that we should say the truth.

For these negotiations to succeed, and we sincerely want them to succeed, we will have to move through the successive stages one by one and keep our calm. There will never be any aggressiveness or arrogance on my part. And I recommend all to adopt the same attitude.

But we must face the facts.

And we want to be ready for all eventualities, including ‘no deal', a possibility that has been mentioned again recently by several British ministers.

What would be the consequences of that scenario?

Here also, I want to be very clear: in a classic negotiation, ‘no deal' means a return to the status quo. In the case of Brexit, ‘no deal' would be a return to a distant past.

  •  ‘No deal' would mean that our trade relations with the United Kingdom would be based on World Trade Organisation rules. There would be customs duties of almost 10 % on vehicle imports, an average of 19 % for beverages and tobacco, and an average of 12% on lamb and also fish, for which the vast majority of British exports go to the EU.
  • While leaving the customs union would in any case involve border formalities, ‘no deal' would mean very cumbersome procedures and controls, without facilitation, which would be particularly damaging for companies that operate on a ‘just in time' basis.

For a manufacturer of sports equipment or industrial parts based in the UK, whose products are at present shipped to the single market immediately, this would mean in practical terms:

  • keeping their products in stock for 3 or 4 days instead of a few hours,
  • renting warehouse space,
  • an increase in transport costs, with a greater logistical risk.

In practice, ‘no deal' would worsen the ‘lose-lose' situation which is bound to result from Brexit. And I think, objectively, that the UK would have more to lose than its partners.

I therefore want to be very clear: to my mind there is no reasonable justification for the ‘no deal' scenario. There is no sense in making the consequences of Brexit even worse.

That is why we want an agreement. That is why the 27 Member States and the European Parliament want an agreement. To my British partners I say: a fair deal is far better than no deal.

For instance, in the great port of Zeebrugge, where I will be going shortly for a working visit and for which the UK is the primary market with 17 million tonnes of roll-on roll-off traffic in 2016, I cannot imagine, in the well-understood interest of the UK, Flanders and Belgium, an interruption of supply or a highly efficient organisation being called into question.

Ladies and gentlemen,

Mr President,

The best way of reaching an agreement is to create a climate of trust by tackling in the first instance three topics which we regard as priorities and which are inseparable because these are the condition of the orderly withdrawal that the UK has chosen: citizens' rights, the financial settlement and the border issue, especially the Irish border.

I hope that rapid and sufficient progress will be made on these three topics together - and I mean on these three topics together - so that we can begin work as early as this autumn on the preparations for building our new partnership which, I hope, will provide a framework for economic exchange and cooperation between the UK and the EU on various matters of common interest, including security, fight against terrorism and defence.

Once we have a clearer picture of the form this new relationship will take, we will be able to discuss the possibility of transitional measures.

March 2019 is 20 months away. Time flies. Whatever the outcome of these negotiations, the message I would like to share with you, that I would like you to convey on the ground is this: the real transition period began on 29 March 2017, the day on which Theresa May presented the notification letter.

Ladies and gentlemen, Mr President,

I would like to add a special message for each one of you. You are the Economic and Social Committee of the 28. The level playing field is here - on competition, environmental standards, consumer rights, taxation and social rights.

You have played your part in establishing all the ‘rules of the game' that enable our competitive social market economy to function, and it is you who uphold them on the field of play, with the diversity that exists between your groups.

I don't know the details of the British positions on our future partnership. I certainly don't want to jump to conclusions. But I know that you will be vigilant - as I will - to ensure that any trade agreement with the United Kingdom will guarantee fair competition and the protections we regard as essential. In fact it is vital if we want to maintain the unity of the 27 and, when the time comes, when we conclude a free trade agreement, a free and fair agreement, successfully submit the treaty underpinning our future relationship for ratification by the European Parliament and the parliaments of the 27 Member States.

The preparations for the negotiations with the UK have helped us build up a very strong sense of unity among the 27. It is now up to us to invest this unity in a more constructive agenda than Brexit, if I can say it like that.

There is no shortage of projects, and they will feed your debate, like the ones in the European Parliament and the Committee of the Regions, as shown by the White Paper on the Future of Europe and the initiatives tabled by the European Commission and President Juncker week after week. Among other initiatives, I would like to mention:

  • the pillar of social rights presented by Marianne Thyssen and Valdis Dombrovskis,
  • all the fiscal and state aid initiatives taken by Margrethe Vestager and Pierre Moscovici ,
  • the advances in European defence proposed by Federica Mogherini, Elzbieta Bieńkowska and Jyrki Katainen,
  • the ambitious ideas that have just been put forward by Günther Oettinger on the European budget, or still on European research by Carlos Moedas.

These examples, remind us that, in the words of common sense said by Angela Merkel, “the future of Europe is much more important than Brexit”.

So my message this morning is this: let us prepare for Brexit so that we can approach it calmly, since that is the decision of the United Kingdom. We prepare for this, objectively. Then we will be able to concentrate on what is most important, as your President said: the future of Europe.


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