13 July 2018

Government publishes White Paper on future UK-EU relationship

The UK government yesterday published its White Paper on its future relationship with the EU, setting out plans for a UK-EU free trade area for goods, and greater divergence in services, abandoning the idea of mutual recognition in financial services. It also provided more detail on the “Facilitated Customs Arrangement” proposal, which would be “phased in.” Brexit Secretary Dominic Raab called the paper a blueprint for a “principled, pragmatic and ambitious future partnership between the UK and the EU,” adding that now it was “time for the EU to respond in kind.”

Separately, the EU’s chief Brexit negotiator Michel Barnier wrote that the European Commission will “now analyse the Brexit White Paper… in light of the European Council guidelines.” Meanwhile, the European Parliament’s Brexit coordinator Guy Verhofstadt tweeted that the Parliament “welcomes the UK proposal for a future Association Agreement” and that it “will analyse [the] White Paper in light of [its] priorities: citizens rights, an operational backstop for Ireland and a deep economic relationship based on the integrity of the [European Union] and the internal market.”

Irish Deputy Prime Minister Simon Coveney said, “What you will see from the EU now is a ‘take them seriously on this new position’ and a desire to get the negotiating teams into a room from next Monday afterwards. I don’t think we should go through the white paper and try to undermine it and find inconsistencies in it.” He added that this “new direction has been a step in the right direction towards a pragmatic, sensible Brexit that allow EU and the UK to trade in a way that works for everyone as opposed to a policy driven by ideology.” He said, “The EU side has always said that if Britain softened their red lines then the EU would show some flexibility. Let’s test that now.”

Elsewhere, leader of the Northern Irish Democratic Unionist Party (DUP) Arlene Foster yesterday said, “ We are content that [our red line in relation to borders between Northern Ireland and the United Kingdom] has been reflected at the Chequers summit and also by the White Paper that has been published today,” adding that Prime Minister Theresa May “will maintain what she has said all along which is that there can’t be any differential between us and the UK.”

Open Europe’s Stephen Booth spoke to LBC Radio yesterday on the government’s published proposal for future UK-EU relations.

Source: BBC Financial Times Bloomberg The Guardian I Guy Verhofstadt The Guardian II The Times Bloomberg

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Trump: UK's Brexit plan would "kill" a free trade deal with the US

In an interview with The Sun yesterday, US President Donald Trump said that Prime Minister Theresa May’s Brexit plan would “kill” a UK-US free trade deal. Trump said, “If [the UK does] a deal like that, we would most likely be dealing with the European Union instead of dealing with the UK, so it will probably kill the [UK-US] deal. Because we have enough difficulty with the European Union. We are cracking down right now on the European Union because they have not treated the United States fairly on trading.” He added that if the UK goes ahead with the plan, “I would say that that would probably end a major trade relationship with the United States.” Trump also argued that the “The deal [May] is striking is a much ­different deal than the one the people voted on. It was not the deal that was in the referendum.” This comes as May, Trump and Foreign Secretary Jeremy Hunt will hold talks today at the Prime Minister’s Chequers estate.

Elsewhere, at a dinner with Trump yesterday, May said that the UK’s departure from the EU is “an opportunity to reach a free trade agreement that creates jobs and growth here in the UK and right across the United States. It’s also an opportunity to tear down the bureaucratic barriers that frustrate business leaders on both sides of the Atlantic. And it’s an opportunity to shape the future of the world through co-operation in advanced technology, such as artificial intelligence.”

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Philip Hammond defends government proposal on financial services

Writing in the Financial Times, Chancellor Philip Hammond defended the government’s White Paper proposal on financial services, arguing that it “works for the UK, works for the EU, and works for business.” He argues that the plan put forward by the Government “is less than mutual recognition, but it is more than the EU’s equivalence regime. It is a model that preserves the stability, transparency and certainty of the former, while respecting the sovereignty of the latter.” He also says it recognises that “we [UK and EU] start from a unique point because of our present relationship with the EU. Our financial regulatory frameworks are in effect identical,” adding, “It is inconceivable that the mutual benefits of this relationship could be preserved by an ‘off-the-shelf’ model, such as the EU’s existing equivalence framework for third country financial services relationships.”

Elsewhere, Catherine McGuinness, policy chair of the City of London Corporation, called the white paper “a real blow for the UK’s financial and related professional services sector,” warning, “With looser trade ties to Europe, the financial and related professional services sector will be less able to create jobs, generate tax and support growth across the wider economy.” Chief executive of TheCityUK Miles Celic said it was “regrettable and frustrating” that mutual recognition had been dropped “before even making it to the negotiating table.” The aerospace and defence lobby group ADS said the White Paper as “a good step” in order to address industry concerns, while the EEF manufacturers’ association said it’s “pleased with the focus on a simple movement of goods, the protection of the integrated supply chain and a lack of friction at the border.”

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Trump confirms US’ commitment to NATO after emergency meeting

NATO leaders yesterday held an emergency meeting after US President Donald Trump had attacked other leaders for their countries’ failure to spend more on defence. Commenting on reports that T had threatened to pull out of NATO without a pledge by other countries to increase defence spending, Trump said, “The United States commitment to NATO is very strong, remains very strong, but primarily because everyone, the spirit they have, the amount of money they’re willing to spend, the additional money that they will be putting up, has been really amazing to see.” He said other leaders had “agreed to substantially up their commitment,” adding, “NATO is now much stronger than it was two days ago.”

Other leaders did not however confirm Trump’s comments. Speaking after the meeting, Italian Prime Minister Giuseppe Conte said Italy was not planning to increase its defence spending, while French President Emmanuel Macron stressed that members had only “agreed to raise spending as they agreed in 2014.” On a similar line, German Chancellor Angela Merkel said, “We know that we need to do more – and that we’re already doing so. The change in trend has long since begun.”

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Stricter rules for European banks are “precondition” for reforming Eurozone, German finance minister says

German Finance Minister Olaf Scholz yesterday said that an agreement on stricter banking regulations in Europe “is the precondition for achieving progress in other areas.” Member states had recently agreed on new rules, Scholz said, calling on the European Parliament to help make them into law. Should these rules not be implemented, other planned reforms, such as the further development of the European Stability Mechanism, will not be possible, Scholz warned.

Meanwhile, European Commissioner for the Euro Valdis Dombrovskis  yesterday announced that Eurozone finance ministers were discussing the accession of Bulgaria to the Exchange Rate Mechanism II, a pre-stage for full accession to the currency area.

Elsewhere, new forecasts published by the European Commission reduce expected growth across EU economies in 2018 by 0.2%, from 2.3% to 2.1%. Economic Affairs Commissioner Pierre Moscovici said that “risks [to EU economies] are many on the external side,” while also warning of “policy uncertainty in some member states.” Moscovici added that “The uncertainty surrounding the outcome of the Brexit transition agreement weighs on confidence.”

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German interior minister: “A lot of positive feedback” on plan to reduce secondary migration

Following yesterday’s meeting of EU Interior Ministers in Innsbruck, Austria yesterday, German Interior Minister Horst Seehofer said he had received “a lot of positive feedback” on his proposal to send back to other EU member states the asylum seekers who had been registered there first. He said he had “some optimism that together we can manage to solve [the issue of irregular] migration within the EU,” yet added, “None of this will deliver sweeping success […] unless we manage to restore order on our external borders.” He also put the possibility of national solutions back on the table, saying, “The less we achieve on the European level, the more we have to take measures on national level.” His Italian counterpart Matteo Salvini, on whose cooperation Seehofer depends in reducing secondary migration, told media, “To the polite question of my German colleague Seehofer, who asked me to take back migrants from Germany, I equally politely responded: No, thank you.” Salvini added that his focus lies on closing the EU’s external borders, saying, “When the departures [in Northern Africa], the arrivals [in the EU] and the deaths [in the Mediterranean] are drastically reduced, the will be no more problems within the EU’s internal borders.”

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European market regulator tells firms to prepare for hard Brexit

Europe’s market regulator, the European Securities and Markets Authority (ESMA), yesterday warned businesses to make preparations for a ‘no-deal’ Brexit scenario, adding, “As there is no assurance that a transition period will be agreed upon, entities need to consider the scenario where a hard Brexit would take place on 30 March 2019.” In a statement, ESMA urged “entities wishing to relocate to the EU27 to submit their application for authorisation as soon as possible to allow it to be processed before 29 March 2019,” also warning, “Unless an application is received in the month of June/July, there is no guarantee that authorisation will be achievable before [Brexit].”

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Russian counter sanctions against EU extended until 2019

Russian President Vladimir Putin yesterday signed a decree to extend until 31 December 2019 the Russian counter sanctions which restrict the imports of certain goods, mostly agricultural and food products, from the EU as well as the US, Canada, Australia, and Norway. This comes as the EU Council last week decided to prolong economic sanctions against Russia until 31 January 2019.

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Unilever under criticism by UK shareholders over move to Netherlands

Nick Train, one of the biggest shareholders of the Anglo-Dutch Unilever corporation, yesterday said the company should “give serious consideration over the summer as to whether the proposal [of Unilever to move its headquarters from the UK to the Netherlands] is in their interest.” The planned move, to which 75% of Unilever’s UK shareholders would need to agree, risks the company’s inclusion in the FTSE100 index. The Financial Times cites other major shareholders complaining about Unilever being “almost belligerently unreceptive” to concerns its UK shareholders have about the move, particularly about the risk that they “will become forced sellers of the shares for some of our clients at a time and a price not of our choosing.” The newspaper cites further complaints that Unilever “showed no intent to listen to shareholders — almost the opposite. I don’t see how they are confident that will get it through [the vote passed]. I think they are in trouble.” A Unilever spokesperson responded that they were confident that they could remain listed in London despite the move, adding, “We continue to engage extensively with our investors and shareholders.”

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