Main points from a recent Michel Barnier speech on passporting:
* A free trade agreement, however ambitious, cannot include all the benefits of the Customs Union and the Single Market.
* On financial services, a free trade agreement may include provisions on regulatory cooperation – as is the case with Japan. This regulatory cooperation may also take the form of a regular dialogue.
* We never give up our regulatory autonomy.
* The regulatory framework we have constructed as a Union of 28, including the United Kingdom is extremely precise. We have developed a single rulebook and more integrated European supervision, which guarantee financial stability, protection for investors, market integrity and a level playing field.
* A country leaving this very precise framework and the accompanying supervision gains the ability to diverge from it but by the same token loses the benefits of the Internal Market. Its financial service providers can no longer enjoy the benefits of a passport to the Single Market nor those of a system of generalised equivalence of standards.
* This is not a question of punishment or revenge; we simply want to remain in charge of our own rules and the way in which they are applied. As it seeks to regain its decision-making autonomy, the United Kingdom must respect ours.
* Where allowed by our legislation, we will be able to consider some of the United Kingdom's rules as equivalent using a proportionate and risk-based approach, in particular for financial stability, which will remain our main concern.
*The transition period requested by the United Kingdom, for which the Commission proposed to the Member States a period of 21 months, is from the withdrawal of the United Kingdom on 29 March 2019 to 31 December 2020.
*The reply from Chancellor of the Exchequer Philip Hammond and Brexit Secretary David Davis is that they want close cooperation between EU and UK regulators after the country leaves, as part of an expansive trade deal covering financial services.
The intervention from the British government is carefully timed to make the case for a more ambitious trade agreement than the EU currently seems willing to offer, before the remaining 27 member states make up their minds.
The main difference between passporting and equivalence is that one is a right, while the other a privilege. Equivalence can be withdrawn at short notice, would probably cover fewer services and may mean the UK will have to accept rules it has no say over.
The UK hopes that when negotiations on a free-trade deal begin, it will be able to convince the EU’s 27 governments to back away from Barnier’s position.