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The UK’s chief Brexit negotiator David Frost has been told by Prime Minister Boris Johnson to walk away from trade talks with Michel Barnier unless the subsidy issue is resolved. It comes as the pair will meet this week to attempt to salvage a deal, after growing concern from the EU the UK will crash out of the bloc without one.
Mr Frost is expected to tell Mr Barnier trade talks will be stopped unless the EU drops its demand for Britain to commit to a subsidy policy.
The bloc wants Britain to continue to follow rules preventing the Government from subsidising British companies over it’s European rivals.
Sources close to the talks said the chief Brexit negotiator fears any specifics on subsidy policies will tie Britain to EU rules.
They said: “We think the right thing to focus on is how we solve disputes and solve transparency, not to tie in to continuity with something that looks like the EU’s policy.”
It comes after the EU dropped demands for Britain to be fully aligned with the bloc’s competition rules.
Mr Frost will also tell Mr Barnier the request for the UK to agree with state aid rules is unreasonable.
He will add the demand is out of line with every free trade agreement the EU has made with other countries.
The source added to the Times: “In every other agreement they’ve signed the state aid subsidy provisions focused on how we resolve disputes between the two sides rather than on the substantive content of the other side’s policy, precisely because they know it can evolve over time.”
A day earlier, the Sunday Times reported Mr Johnson had instructed his negotiator to end negotiations if the subsidy policy demand is not dropped.
The EU regards the issue as a red line, and does not want to compromise on the matter.
The Times said: “There has been a discussion about whether or not to compromise on state aid and Boris said no.”
More complications about subsidies exist as the Government is set to define their terms for a policy by the end of September, and Mr Frost has blocked any moves towards a joint agreement on legal texts until terms are defined.
The EU has said the end of the month is the deadline for any deal to be submitted.
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Mr Johnson is also facing a Brexit crisis in the Commons as 30 Tory MPs backed a campaign to ban super trawlers from Britain’s biodiverse waters.
More ecologically-minded Tory’s, along with Labour MPs Jeremy Corbyn and Diane Abbott, have supported a Greenpeace campaign on the issue.
It aims to stop ships that are more than 100 meters in length from trawling in Britain’s protected marine areas.
The government will lay out its plan for UK waters when the Fisheries Bill returns to the Commons this week, but Labour is expected to propose amendments including the super trawler ban.
Mr Barnier has accused the UK Government of “wasting valuable time” over the talks, and said a deal looks “unlikely” on August 21.
He added: “Frankly I am disappointed and I am worried.
“Too often this week it felt as if we were going backwards more than forwards.”
But Mr Frost was more optimistic, and said: “Agreement is still possible, and it is still our goal, but it is clear that it will not be easy to achieve.
“We have had useful discussions this week but there has been little progress.”
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