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According to The Daily Telegraph, Brexit Secretary David Davis has told Prime Minister Theresa May that her “third way” plan on customs is unworkable. Under this proposal, known as the facilitated customs arrangement, the UK would collect tariffs for the EU on all goods destined for sale in the European market, but could charge different tariffs at the point of import on goods sold in the UK. Transport tracking systems could reportedly identify the final destination of 96 percent of goods arriving in the UK. The remaining 4 percent would also be subject to EU tariffs.
In a letter to the Prime Minister, Davis reportedly warned that the new modifications did not respond to the EU’s concerns about Britain, as a third country, effectively policing their border. However, a spokesperson for Prime Minister Theresa May has said that businesses support the strategy. They also said the facilitated arrangement “ensures a friction-free border in Northern Ireland while at the same time allowing businesses to benefit.”
Elsewhere, MPs from the European Research Group (ERG), a group of Conservative Eurosceptic MPs, met with the government’s chief whip Julian Smith yesterday to warn they would vote down any Brexit agreement that “doesn’t deliver” on promises to ensure an independent trade policy and leave the EU single market. Meanwhile, the Guardian reports that Remain-leaning cabinet ministers are concerned about the narrow focus on customs issues at the Chequers meeting and have warned May not to leave out the financial services sector out of the discussion. This comes as Environment Secretary Michael Gove yesterday dismissed the idea that Prime Minister Theresa May could face ministerial resignations after this week’s cabinet summit at Chequers to agree the UK proposal for the future relationship.
Separately, a new survey by the Institute of Directors has found that 54 percent of businesses would support a customs arrangement that prevents any additional trade friction, even if that took longer to put into effect. 55 percent of businesses preferred minimal divergence from the EU’s regulations in order to maintain current level of market access, against 12 percent who preferred to adopt alternative regulatory standards after Brexit.
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Jaguar Land Rover (JLR) has issued a warning that failing to reach a Brexit deal would cost £1.2bn a year in trade tariffs, making it unsustainable for the company to keep its production in the UK. Ralf Speth, JLR chief executive, also stressed that the company needs certainty as soon as possible to ensure it can keep investing a planned £80bn over five years. Speth said, “I don’t want to threaten anybody, but we have to make transparent the implications of the move. We want to stay in the UK,” but added, “We have to decide whether we bring additional vehicles, and electric vehicles with new technology with batteries and motors into the UK… We have other options. If I do it here and Brexit goes in the wrong direction, then what is going to happen to the company?”
Elsewhere, retail lobby group the British Retail Consortium has addressed a letter to Prime Minister May and EU Chief Brexit negotiator Michel Barnier asking them to avoid a no deal Brexit “at all costs.” The letter warns that such a scenario could lead to “food rotting at ports,” with a “dramatic” impact on consumers.
According to a report by the Institute for Public Policy Research on the distributional consequences of Brexit published yesterday, a ‘no-deal’ Brexit would be most harmful for those living outside of London, particularly in Northern Ireland, Wales, the Midlands and the north-east. The reports argues that these regions disproportionately rely on goods and food exports to the EU and “are more likely to be hit by an increase of prices due to new trade barriers,” while London and the South East “are likely to become more resilient to Brexit-related economic shock.” It also states that Brexit “is likely to put greater pressure on people in poorer income groups” and that “many low-paid sectors are expected to be hit, especially under a hard [no-deal] Brexit.”
Elsewhere, a report by Oliver Wyman consultancy found that consumer prices would increase all over the UK after Brexit, adding that almost £1,000 a year would be added to household spending under the scenario of a ‘no-deal’ Brexit. The report also concluded that Northern Ireland would be the region hit worst by increased costs.
A poll of 250 asset managers conducted by US financial services provider State Street has revealed that 75 percent of those surveyed have already started revising their global distribution strategies, including hiring staff in new locations, in the wake of Brexit, with a further 19 percent planning to do so in the next five years. According to the survey, Luxembourg and Ireland are the countries set to most benefit from asset managers’ expansion in new locations, with the UK expected to remain the third biggest global market for distribution of asset managers. David Suetens, head of State Street in Luxembourg, said, “The UK remains a very important investment market and people will need to consider how to continue to have access to that [after Brexit].” He also added that Brexit was only part of the reasons behind asset managers’ plans, saying, “Brexit is an element, but not the only element… The investment industry faces pressure from falling fees and more regulation. A cross-border platform helps create scale and efficiency, opening distribution to different markets.”
Elsewhere, Chicago’s Cboe Global Markets and the London Stock Exchange Group have announced that they will open European Union stock trading venues in Amsterdam ahead of next March Brexit date.
Austria’s Minister for Transport, Norbert Hofer, yesterday warned that “it would without doubt be a catastrophe” if there were new border controls introduced on the Austrian border with Italy. This comes as the Austrian government said it was considering increased checks at its southern borders in case Germany went ahead with its plan to introduce similar checks, following a deal between German Chancellor Angela Merkel and her Interior Minister and leader of the Bavarian Conservative CSU Horst Seehofer. Meanwhile, the European Commission has warned the Austrian and German governments that they will need to consult Brussels before implementing any bilateral agreement on immigration.
This comes as Seehofer today meets with Austrian Chancellor Sebastian Kurz and Interior Minister Herbert Kickl to discuss “the future establishment of [bilateral] agreements” on refugees. Ahead of the meeting, Austrian Foreign Minister Karin Kneissl said that the Austrian government does not know the details about such agreements, adding, “We’re waiting for details about what exactly they mean, and how Germany intends to proceed.”
Elsewhere, Hungarian Prime Minister Viktor Orbán will meet Merkel today to discuss a possible bilateral agreement on migration. Earlier this week Orbán said in an interview that “Hungary will not conclude a bilateral agreement with Germany until there is an agreement between Germany and Austria.”
Separately, speaking during a visit to Nigeria, French President Emmanuel Macron said that the idea of EU regional disembarkation centres to process migrant asylum application in Africa “can fly, just if some African governments decide to organise it.”
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Polish Prime Minister Mateusz Morawiecki yesterday called on the European Commission to “stop lecturing” Poland on its judiciary changes, saying that it was “disappointing” that the Commission decided to launch a rule of law infringement procedure against Poland. Speaking at the European Parliament plenary session, Morawiecki said, “I have to think whether or not the European Commission is really an honest broker… We’ve made a great deal of efforts to reach out a hand … Today I think we’ve come to a point in time where we’ve made changes.” He added that Poland “is deeply rooted in the rule of law” and it would “respect the judgement” of the European Court of Justice.
European Budget Commissioner Günther Oettinger yesterday warned that “there will be a trade war” between the EU and the US. Oettinger called on the EU to further strengthen its internal market and to speak with one voice on the global stage in response, saying, “Europe needs to be capable of doing global politics. We are far away from this.” He also said he wished for a joint EU foreign policy with one foreign minister, and a European army.
Following agreement in the Council of the EU, MEPs yesterday approved by 397 votes to 207 changes to the 1976 EU electoral law governing European elections. MEPs agreed to allow internet voting, allow EU citizens to vote from non-EU countries, put in place tough penalties for those who vote in more than one country, and introduce mandatory thresholds. The reform approved by the MEPs is a watered-down version of more ambitious plans that were rejected, which included the formal adoption of the Spitzenkandidaten system and the introduction of transnational lists. The proposal will now need the official sign-off of the Council and ratification by national parliaments.
At Open Europe’s joint event with Reuters, “The significance of London’s financial cluster for mainland Europe,” which took place in Brussels on June 19, panellists pointed out that the City of London will remain important for EU businesses after Brexit, and that the City’s global status is not only a result of EU membership. The speakers also argued that diminishing the City’s role after Brexit would not be in the EU’s interest and that disaggregating the City across the EU would lead to reduced efficiency and increased costs for European businesses. Open Europe’s Dominic Walsh reviews the main conclusions of the event in a new blog.