By Alastair Macdonald and Robert-Jan Bartunek
BRUSSELS (Reuters) - The European Union wants a transition period after Brexit to end no later than the last day of 2020, according to the European Commission's negotiating directives agreed on Wednesday.
That date, coinciding with the end of the EU's seven-year budget period and 21 months after Britain departs the EU, had long been expected as the target end point of the transition.
But this was the first official confirmation that it is the goal of the Union's negotiators.
British Prime Minister Theresa May had sought a transition lasting around two years. EU chief negotiator Michel Barnier, speaking at a news conference after the EU executive had agreed the terms, said the 2020 deadline was logical and would avoid complications in the next 2021-2027 EU budget period.
The four pages of new directives for Barnier were in line with guidelines issued by EU leaders at a summit on Friday and will form the basis of talks on the transition that he hopes to start next month. He has said in the past he hopes a free trade pact could be ready to take effect in January 2021.
The directives spell out that Britain will effectively remain in EU institutions, bound by all their rules including new ones, while not having a say in their making.
The EU will also offer Britain a non-voting place at some meetings where decisions may affect specific issues and will set up special arrangements for a UK role in setting annual EU fishing quotas.
The directives also spell out more clearly that EU treaties with other countries and international organizations will no longer apply to Britain during the transition period.
However, the document adds: "Where it is in the interest of the Union, the Union may consider whether and how arrangements can be agreed that would maintain the effects of the agreements as regards the United Kingdom during the transition period."
This has been important to Britain since it could mean that it no longer benefits automatically from free trade agreements which the EU has with, say, Canada or South Korea, while it would still have to apply EU trade policy -- for example collecting EU customs duty at UK ports.
Barnier said he understood that Britain was working with other countries to try to retain the advantages of some of the nearly 750 international agreements to which London is currently party as an EU member.
Among elements spelled out more in the directives than in the leaders' guidelines last week was a repetition of a previously agreed EU position that everything applying to Brexit for Britain would also apply to other British territories.
Brussels has said the Spanish government must agree any future arrangements with Britain that affect the British territory of Gibraltar on Spain's southern coast.
Asked about his previously expressed view that a future trade deal may offer little automatic access for the City of London's financial services firms to the EU market, Barnier repeated that free access would be unprecedented as far as he was aware.
"I remind you that I'm not aware of any free-trade deal in the past between the European Union and third countries that would have allowed privileged access for financial services," he told a news conference.
British negotiators have said Britain's size and proximity give it the leverage to negotiate a more ambitious relationship with the EU than any other state.
During the transition, Britain will maintain access to the European single market, Barnier added. "Britain will keep all the benefits, but also all the obligations of the single market, the customs union and the common policies," he said, ruling out "a la carte" terms.
Barnier welcomed agreements made earlier this month on issues such as the Irish border, citizens' rights and the divorce settlement.
"We are not at the end of the road," he said. "But it is an important stage of this road towards an orderly withdrawal rather than a disorderly one."
(Additional reporting by Robin Emmott and Philip Blenkinsop; Writing by Alastair Macdonald; editing by John Stonestreet)