8 May 2018

Financial Times: Theresa May to push ahead with customs partnership proposal

The Financial Times reports that Prime Minister Theresa May is pushing ahead with plans for a customs partnership with the EU, warning Brexit supporting colleagues that the alternative could be parliament calling for a full UK-EU customs union. The proposal would see the UK charge EU tariffs on all imported goods and apply a rebate on those that are sold in the UK. However, Foreign Secretary Boris Johnson yesterday told The Daily Mail that the customs partnership was a “crazy system”, adding, it would mean that “if the EU decides to impose punitive tariffs on something the UK wants to bring in cheaply, there’s nothing you can do. That’s not taking back control of your trade policy.” He also said it would make it “very, very difficult to do free trade deals.”

This comes after Business Secretary Greg Clark this weekend rejected reports that the customs partnership proposal was off the table. He also suggested it could take until 2023 to implement new customs systems, saying “I think it would be a mistake to have to move from one situation to another and then to a third…It may be possible to bring [the long-term customs arrangements] in over that period of time.” The chair of the Conservative European Research Group, Jacob Rees-Mogg, criticised Clark’s statement as “scare stories from Project Fear.” Rees-Mogg added that for the customs partnership plan to work goods will have “to meet all the single market regulations as well, and therefore the customs partnership is in a sense…single market as well as customs union.”

Meanwhile, Theresa May wrote in the Sun on Sunday of her “absolute determination to make a success of Brexit, by leaving the single market and the customs union and building a new relationship with EU partners that takes back control of our borders, our laws and our money.”

Open Europe’s Henry Newman appeared on the paper review on Ridge on Sunday and argued it would be a mistake for the UK to put the customs partnership back on the table. He also wrote in The Spectator that it is time for the government to end the circular discussions on customs unions, and was quoted in Politico’s London Playbook, The Daily Mail and The Guardian.

Source: Financial Times The Times The Guardian The Sun on Sunday The Spectator Politico London Playbook The Daily Mail The Guardian

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Lords to debate Single Market amendment to Withdrawal Bill

The House of Lords will today debate an amendment to the EU (Withdrawal) Bill that would keep the UK in the European Economic Area (EEA), which would allow for continued membership of the EU single market. The amendment is expected to receive cross-party support, and the Observer reports that over 40 Labour peers are prepared to back it. However, Labour’s shadow trade secretary, Barry Gardiner, said this weekend that post-Brexit EEA membership would leave the UK a “rule-taker”, adding, “We would have to be bound by the what’s called the acquis, the regulations – but we would have no say in making those regulations.”

Elsewhere, according to The Times, senior European officials have said that Labour’s economic policies are prompting the EU’s insistence on strict “level playing field” regulations. One EU source said, “The idea that Conservatives would legislate a race to the bottom is a myth and no one really believes it, even if some Tories have helped create it. The real fear is state subsidies under a Jeremy Corbyn government.”

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The Guardian: Irish government will not relax its stance on border issue at the last minute

The Guardian reports that the Irish government are concerned about the perception in Westminster that Ireland will backtrack at the last minute on the Irish border question. A source close to the Irish Taoiseach, Leo Varadkar, is quoted saying, “Westminster is mistaken if it thinks the Irish government will move. And it has no understanding of Leo Varadkar. He is someone who will do the right thing for Ireland. They think we’ll get to the last point of the negotiations – and the border will be the last thing – and we’ll move, and we won’t.”

This comes after reports last week that senior civil servants have drafted plans to increase border checks at airports and sea ports on trade between Northern Ireland and Great Britain in order to avoid a hard border on the island of Ireland. According to the Guardian, the proposals would see the introduction of “red and green channels” and the requirement for traders to provide information pre-shipment. Enforcement would require “a system of random and intelligence-/data-based checks” on goods entering through the green channel, and rigorous “red channel checks” with “draconian penalties for noncompliance.” The document adds, “The degree to which these protections are needed would depend on the degree of regulatory divergence that would apply sector by sector, and clearly that may evolve over time from the status quo of regulatory uniformity.”

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US steps up trade dispute with China

The US has escalated its trade dispute with China by calling on Beijing to cut the bilateral trade deficit by $200 billion, open the Chinese economy further to US investment and remove foreign ownership caps. The US has previously demanded China cut the bilateral deficit by $100 billion. In response, China has called for the US to drop its objection to China being treated as a market-economy in the World Trade Organisation. Chinese President Xi Jinping’s top economic adviser, Liu He, will travel to Washington next week to hold trade talks.

Elsewhere, the European Central Bank yesterday warned that a significant escalation in protectionism and international trade tensions could undermine global recovery. It notes, “Heightened uncertainty could spill over more broadly, adding to volatility in global financial markets.”

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Department for International Trade to cut trade promotion jobs

According to the Financial Times, the Department for International Trade (DIT) is set to cut hundreds of officials who help UK companies with promoting exports to emerging markets such as China and Brazil. The cuts are reportedly caused by a budget shortfall due to the increasing costs of employing negotiators to strike post-Brexit free trade deals. A source is quoted saying, “A budget problem has arisen because DIT has not got enough money from the Treasury to do everything it needs,” adding, “As a result, hiring trade negotiators is putting a strain on things and means the costs of expansion can only be met by cutting the number of people on the ground.”

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Scientists “scoping out possibilities” for British satellite system, says Defence Secretary

Defence Secretary Gavin Williamson writes in today’s Daily Telegraph that the UK “should not fear or doubt [its] ability to go it alone or seek new partnerships” in case it no longer was able to participate in the EU’s Galileo satellite network after Brexit. “We have the expertise, the technical know-how, and crucially the will to succeed,” Williamson writes, adding, “That’s why it is right our brilliant defence scientists and military experts have started work scoping out the possibilities of developing our own satellite system while we continue talks with the European Commission over our future role in Galileo.” The new project is estimated to cost at least £3bn, with the British government reportedly also seeking legal advice on whether it can recoup the £1.2bn it already invested in the European satellite system since its inception in 2003.

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Merkel says further risk reduction necessary for completion of banking union

Speaking yesterday, German Chancellor Angela Merkel said, “On the issue of the banking union, for us it is clear that only when risks are reduced can we talk about agreeing a banking union.” She also called for the European Stability Mechanism (ESM), the Eurozone’s bailout fund, to “remain under parliamentary control of the national parliaments,” adding, “The ESM is an inter-governmental facility.” She added that while Germany and France had different visions of Eurozone reform, they agreed on most fundamental European issues.

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Increased possibility of new Italian elections

The possibility of fresh Italian elections have grown after the final round of negotiations between the two lead parties, the Five Star Movement and the League, failed to deliver an agreement. The leader of the Five Star Movement, Luigi Di Maio, said, “From today we’re fighting an election campaign and we’ll tell people about these two months of lies.” The leader of the League, Matteo Salvini, said, “I’m doing everything I can to give a government to this country…The next time, at the election, it will be a referendum, either them or us.” Both parties have called for elections to be held on 8 July if no government can be formed before then.

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