EU to demand right to punish UK if it fails to shadow Brussels rules

The EU will demand the right to punish Britain if the government fails to shadow the Brussels rulebook in the future, member states have agreed, as Boris Johnson was warned that the bloc would not be hurried into a deal on the future relationship.

A final draft of the EU’s negotiating position agreed by ambassadors on Monday, ready for ministerial sign off on Tuesday, establishes the bloc’s developing environmental, social and workers’ standards as the baseline for a trade deal.

EU laws would not need to be adopted line-by-line by Westminster as they develop. But Brussels would retain the right to apply tariffs or other sanctions if any divergence between the two sides over time led to “disruptions of the equal condition of competition”.

“It is about equality of outcomes,” one senior EU source said.

France was alone in holding out for the guarantees that go beyond mere “non-regression” from the current shared regulations.

The bloc will demand that the British government apply EU state aid rules in their entirety as they evolve, in the one instance where Brussels is demanding complete alignment over time.

The EU’s state aid regime limits the levels of subsidies that can be given to industry.

Michel Barnier, the EU’s chief negotiator, has admitted that such a policy is a “red rag” to the UK.

The leaked agreement, obtained by the Guardian, states that “the envisaged agreement should uphold common high standards, and corresponding high standards over time with union standards as a reference point”. The EU also wants to establish a “governing body” to oversee a deal that “should be empowered to modify the level playing field commitments in order to include additional areas or to lay down higher standards over time”.

The hardening of the EU position came as Johnson was warned that the French government would not be “blackmailed” into a trade deal that risk its long-term economic interests.

The prime minister’s decision to rule out an extension of the transition period after 31 December 2020 has put pressure on both parties to work swiftly on a deal or face huge extra costs on trade when the UK leaves the single market and customs union.

But speaking before a meeting of EU ministers on Tuesday, France’s EU affairs minister, Amélie de Montchalin, used a TV interview to say her country would not “sacrifice” the future of French industry, farming and fisheries to secure a swift deal.

“Just because Boris Johnson wants an agreement at all costs on 12/31 does not mean that we will sign a bad agreement for the French under the pressure of blackmail or time pressure,” De Montchalin later tweeted.

Johnson has said he will not take up the option of extending the transition period for “up to one or two years”, as envisaged in the withdrawal agreement. He has said he will accept tariffs and quotas on goods if a deal is not agreed in time.

The UK is likely to publish its plans on Thursday after the EU’s adoption of its negotiating mandate for the European commission. The talks on the future relationship are expected to start next week.

Emmanuel Macron’s government has been outspoken in internal EU discussions on the need to keep the UK “dynamically aligned”. “It is not that they think the British government will lower their standards but that EU policymakers will forever be looking over their shoulder, and we will hold back on the advances we want to make for fear of the competition on our doorstep,” said one diplomatic source.

The UK has so far rejected any deal that involves alignment on policy or Britain remaining under the jurisdiction of the European court of justice, saying that a Canada-style trade deal, with looser provisions on ensuring a competitive level playing field, is the most appropriate option.

EU diplomats were keen to agree Barnier’s mandate by their self-imposed 25 February deadline to avoid potential British accusations of being unprepared or wasting time.