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The EU finds Prime Minister Theresa May’s proposal for a time-limited backstop plan to avoid a hard border on the island of Ireland unacceptable, European Commission officials have told the Independent. Sources point out that a time-limited backstop would violate the UK’s previous commitment in the Draft Withdrawal Agreement for the backstop to apply “unless and until” another solution for the Irish border issue was found. One EU source is quoted saying, “It [the backstop] will apply for as long as there is no credible alternative. It can’t be time limited or it’s not a backstop.”
Elsewhere, Environment Secretary Michael Gove yesterday told the BBC Radio 4’s Today Programme that the Brexit backstop arrangement which would keep the UK aligned in the EU Customs Union should apply only for a “short time,” but did not provide a time frame. Gove explained, “It means what it says on the tin. That temporary means not permanent… The very nature of a backstop, everyone agrees, is that it should be a temporary infill to bridge the position.”
Separately, in an interview with Bloomberg yesterday, Foreign Secretary Boris Johnson said, “It’s important for people to have a sense of when it’s [the backstop] going to happen and to be able to do it as fast as is reasonably possible.”
This comes as the European Commission has yesterday published a chart on customs controls which shows that staying in a customs union is only a partial solution for maintaining frictionless trade and minimal border checks after Brexit. The UK-EU negotiations on the Irish border issue will resume today in Brussels.
The Independent Press Association
Bloomberg European Commission Bloomberg
The Governor of the Bank of England, Mark Carney, yesterday suggested that the UK economy was “up to 2% lower” than what would have been compared to previous forecasts, adding, “Real household incomes are about £900 per household lower than we forecast in May of 2016.” Carney noted however that it was difficult to say with certainty that Brexit was the sole reason for this.
Challenged about Carney’s comments, Chancellor Philip Hammond said, “On the question of future trajectory of household incomes, that will depend in part on the quality of the deal that we negotiate as we exit the European Union and we are focused on getting the very best deal for British jobs, for British prosperity for British businesses.”
Separately, Foreign Secretary Boris Johnson commented, “The Chancellor of the Exchequer has given a definitive answer on this matter, which is that it is not the case that Brexit has damaged the interests of this country.”
The Guardian I
The Guardian II
According to The Daily Telegraph, the UK has warned the EU that it is failing to honour the promises it made on the financial settlement in limiting the UK’s access to its satellite navigation system, Galileo. The UK has said it agreed not to demand repayment of British investment in the Galileo programme as part of the financial settlement calculation, on the understanding that it would continue to be a part of the system through the post-Brexit security agreement. A senior UK official told The Telegraph that the government is “considering all our options, including financial,” and said they would raise the financial settlement agreement with the EU “not to re-open the bill, but to make the point the EU is being deeply inconsistent here.”
The Daily Telegraph
In a podcast for Conservative Home, Chairman of the European Research Group (ERG) of Tory MPs, Jacob Rees-Mogg, yesterday said, “I fear we’re getting to the point where you wonder if the government really wants to leave at all,” adding that the government had to show more “backbone” and step up work for a “no-deal” scenario. Asked about the Prime Minister’s preferred “customs partnership” arrangement, Rees-Mogg added, “I’m surprised the Prime Minister is plodding on with this not very satisfactory idea.” Following Rees-Mogg’s comments, Theresa May’s spokesman James Slack rejected suggestions that the government was not committed to Brexit, saying, “We are absolutely determined to take back control of borders, our money and our laws.”
Elsewhere, Foreign Secretary Johnson yesterday said during his trip to Argentina, “The prime minister is the custodian of the plan, which is to come out of the customs union, out of the single market and to get on with it, to get on with that project with all convenient speed,” adding, “What people like Argentina, Peru, Chile, outward, free-trading countries, what they want to hear from us is that we are getting on with it with confidence and brio and zap and dynamism.”
The Confederation of British Industry (CBI) yesterday issued a report arguing for an enhancement of UK-US trade and investment ties when the UK leaves the EU. While stressing that “The first priority is protecting what we’ve already got by ensuring continuity in trade when the UK leaves the EU,” the report added, “Trade is not all about free trade agreements… Westminster and Washington must then focus on things that can be done now, such as mutual recognition of professional qualifications, greater regulatory collaboration, and making the case for free trade together on the international stage.” The report also calls for the UK and US to “[work] together to make the case for free trade at the World Trade Organisation, calling for greater liberalisation in trade in services.”
Elsewhere, the findings of a survey of 411 manufacturing companies published yesterday by the CBI reveal that UK factory output has decreased in the three months to May to its lowest level since April 2016. Anna Leach, the CBI’s head of economic intelligence, said, “UK manufacturing has lost some steam since the start of the year, on the back of a softening in both domestic and global growth.” But earlier on Tuesday, Bank of England Governor Mark Carney said he expected the British economy to improve after a weak first quarter in 2018.
Norwegian Foreign Minister Ine Eriksen Søreide yesterday said she would ask EU chief Brexit negotiator Michel Barnier when Norway could begin negotiations for a post-Brexit trade agreement with the UK, explaining, “Norway needs clarification on how the [European] Commission looks at the need for the UK to get authorisation to start negotiations with us.”
In a letter leaked to the Telegraph and addressed to Chancellor Philip Hammond, Environment Secretary Michael Gove writes that the government’s defeat in the House of Lords over its environmental policies was “entirely predictable and avoidable” and inflicts “a damaging blow to the Government’s environmental credentials.” Gove blamed the defeat on the failure to give to a new environment watchdog more enforcement powers, saying, “Defra argued that if we were to deliver the Government’s promises our proposals must at the very least replicate the status quo – specifically the enforcement powers of the European Commission and maintenance of the principles in legislation.” A Treasury source commented, “It is clearly wrong to blame the Treasury for this. Philip [Hammond] has worked closely with Michael to support the Government’s environmental agenda, including on plans for a plastic waste tax.”
EU Commissioner for Trade Cecilia Malmström yesterday said that the EU was still awaiting “some sort of decision” from the US regarding an exemption from steel and aluminium tariffs, as the temporary exemption granted to the EU is due to expire on June 1. Malmström suggested that the EU’s proposals for trade liberalisation in exchange for a permanent exemption were “not enough” for the US, adding, “There have been signals from the US that the [temporary] exemptions [from steel and aluminium tariffs] will not be prolonged, so either they will be imposed on us on June 1 or there will be other sorts of limiting measures.”
A new survey on attitudes towards Brexit among German companies, commissioned by the German Chamber of Commerce and Industry, has found that 91% of respondents replied to the question of possible relocations away from the UK with “no.” The survey also found that most German companies are confident of dealing with issues arising from the UK’s departure from the EU. Mathias Mueller, president of the Frankfurt Chamber, said, “In general, the issues confronting companies with Brexit are nothing new.” However, Mueller urged politicians to use the remaining time before the transition period ends in 2020 to establish a comprehensive free trade agreement with the UK. He added, “Businesses need planning security as quickly as possible, as much free movement of goods as possible and as little additional administrative red-tape as possible… My impression is that today many companies with UK business have some degree of confidence that a hard Brexit can be avoided and that the change can be managed from an entrepreneurial perspective.”
EU trade ministers have decided on a new architecture for future EU trade negotiations at yesterday’s EU Foreign Affairs Council (Trade) meeting. The Council has agreed on “splitting between separate agreements provisions related to investment,” which would require future investment deals to be ratified at the EU’s national and regional parliaments separately from free trade agreements.
The Council has also agreed to begin trade negotiations with Australia and New Zealand. The EU Commissioner for Trade, Cecilia Malmström, said, “I am looking forward to visiting Canberra and Wellington in the coming weeks to officially launch our negotiations. Starting these talks between likeminded partners sends a strong signal at a time where many are taking the easy road of protectionism.”