U.K.’s New Brexit Gotta-Have Is ‘Mutual Recognition’

The U.K.’s aims for its post-Brexit relationship with the European Union are gradually becoming clearer. Hopes that the financial industry could hang onto "passporting” -- the system that opens the markets of 31 nations to firms based in one of them -- have withered and died, so the British now are asking for "mutual recognition.” The EU is countering with "equivalence." It’s a fight over how widely U.K. and EU rules would be able to differ while still keeping the U.K. in a favorable trade arrangement.

Because passporting is a key part of what helps make the single market, well, single, EU negotiators have taken a hard line on it. If the U.K. is leaving the single market -- and Prime Minister Theresa May has been clear that it is -- passporting is out. Britain would become a “third country,” albeit one that starts out with the same rules and regulations as the rest of the bloc. The issue is how to manage any divergence and what the consequences are.