The British MEP ripped into Michel Barnier’s transition plans, which some critics, including Brexiteer Jacob Rees-Mogg, have called a “vassal state” Brexit.
Speaking on the Today programme, Mr Hannan said: “The way in which Michel Barnier envisages the transition period is as full membership without a veto.
“In other words, that we’d be subject to absolutely everything that we are subject to now.
“The payments, the law, free movement, all the rest of it. Even the inability to trade outside the EU except on Brussels’ terms. But that we would lose our ability to block new legislation.”
Mr Hannan warned the transition period proposed by Mr Barnier would be “worse than being a full member”. He said: “If that’s the deal then, frankly, I think we’d be better off walking away and doing something ourselves.”
Brexit secretary David Davis came under scrutiny after agreeing a two-year transition period where Britain is effectively set to stay in the single market and customs union during the transition.
The Financial Times revealed how the EU plans to make Britain abide by ECJ law during the transition while excluding it from any decision-making.
The five-page document says the final withdrawal agreement “should provide for a mechanism allowing the union to suspend certain benefits deriving for the UK from participation in the internal market where it considers that referring the matter to would not bring in appropriate time the necessary remedies”.
The EU could essentially have the power to put restrictions on airline operating rights or cross-border financial services.
The Government responded to the claims made in the document and dismissed it as a “draft” that is still to be negotiated.
Following a meeting with Brexit Secretary David Davis in February, the EU’s chief Brexit negotiator Michel Barnier said there are three “substantial” disagreements remaining with the UK over plans for a transition period after Brexit.
He added: “If these disagreements persist the transition is not a given. To be frank I am surprised by these disagreements. The positions of the EU are very logical.”