22 January 2018

UK could have a bespoke arrangement between full single market access and a free trade deal, says Emmanuel Macron

In an interview with Andrew Marr, French President Emmanuel Macron said that the UK could secure a bespoke trade deal with the EU, but that “this special way should be consistent with the preservation of the single market and our collective interests.” He added, “There should be no cherry picking in the single market…because that is dismantling of the single market…As soon as you decide not to join the [EU’s] preconditions, it’s not full access.” He defined the EU’s preconditions as continuing to contribute to the bloc’s budget and remaining under the jurisdiction of the European Court of Justice. Macron described the future UK-EU relationship as “something perhaps between this full access [to the single market] and a trade agreement.” On financial services, he also stressed, “Full access for financial services to the single market is not feasible, given the functioning of the single market.”

The French embassy later issued a clarification of the president’s comments, saying in a statement, “The president makes it very clear in his interview that conditions for accessing the single market are strict and non-negotiable. As an alternative to this full access, he specifically mentions an ambitious trade agreement of the type negotiated with Canada (obviously adapted to the UK, as every bilateral trade agreement is unique) but not a cherry-picking approach whereby the UK would have the advantages of access to the European single market without what is required in return.”

Elsewhere, Italy’s under-secretary for European affairs, Sandro Gozi, has said it would be difficult for the UK and EU to conclude a “Canada plus plus plus” deal, because it would mean “something similar to the single market without having the obligations of a member.” He also said, “It is very difficult to leave the single market and then get a deal in financial services that gives you the same advantages of being a member of the single market.”

Source: The Guardian Financial Times The Sunday Express

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The Times: EU plan to increase pressure on the UK in trade negotiations

The Times reports that European Council President, Donald Tusk, is drawing up a negotiating strategy to incentivise the UK not to leave the EU single market and customs union. According to The Times, under this plan the EU would reject proposals for a bespoke sectoral deal when trade negotiations begin, and would insist that leaving the EU customs union and single market will mean the UK can only benefit from a limited trade deal. EU negotiators reportedly believe this could increase pressure on Prime Minister Theresa May to opt to remain close to the EU, and in particular believe there is no parliamentary deal to pull out of customs arrangements. The Times also reports that Chancellor Philip Hammond and Business Secretary Greg Clark back a rethink of the government’s position on leaving the customs union. However, Foreign Secretary Boris Johnson said yesterday, “The prime minister was clear in her Florence speech we are leaving…Staying in the customs union means effectively staying in the EU.”

Elsewhere, the Financial Times reports that Remain voting cabinet ministers are calling on the Prime Minister to explore whether continued “Norway-style” payments into EU cohesion funds and particular EU programmes, could help secure a Brexit deal.

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CBI head calls for UK to stay in the EU customs union

The head of the Confederation of British Industries (CBI), Carolyn Fairbairn, will today call for the UK to stay in the EU customs union, saying, “There may come a day when the opportunity to fully set independent trade policies outweighs the value of a customs union with the EU; a day when investing time in fast-growing economies elsewhere eclipses the value of frictionless trade in Europe. But that day hasn’t yet arrived.” She will add, “Remaining a member of a customs union for as long as it serves us to do so is consistent with the result of the [Brexit] referendum and would be good for EU firms too.” Fairbairn will also argue that continued customs union membership would “a long way towards solving the border problem in Ireland.”

Separately, in an interview with The Daily Telegraph, Cabinet Office Minister David Lidington ruled out the UK remaining in the existing EU customs union and the single market, but suggested it could establish a separate bilateral customs union. He also said, “There’s going to be a need for a system of cooperation within the continent of Europe including the UK that covers both economic and political cooperation.” Lidington also suggested that “the EU itself is going to change…we may be looking in a generation’s time at an EU is configured differently”, and future generations would have to decide what relationship the UK should build with such a future system. But he added, “I think it’s a red herring to say perhaps we will change our minds about going back into the EU in something that looks at all like the thing that we’re leaving today.”

Elsewhere, Labour Shadow Chancellor John McDonnell said on the Marr show on Sunday, “We would like to keep the benefits of the single market. That’s subject to negotiation … It would not be the same single market, but access to a single market.” On financial services, he added, “I actually think there is a deal to be had. Because it isn’t just the City of London and the financial sector in London benefiting our own country, it benefits Europe as a whole, because it brings together the opportunities of investors joining together and investing in Europe as well as Britain.” This comes as a new poll by Opinium for The Guardian has found that 56% of Labour supporters want Labour to back continued membership of the customs union and single market, against 13% who oppose this and 30% of those who are unsure. 51% also support a second referendum, against 23% who oppose it.

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City of London Corporation: UK financial services expected to suffer limited Brexit job losses

The head of policy at the City of London Corporation, Catherine McGuinness, has said that job losses in the financial services industry due to Brexit are expected to be at the lower end of previous estimates. McGuinness said, “The signs are positive…It is clear that the government is not only listening but has understood our position. Now we have to persuade the EU27 to strike a deal which works for this sector.” She also said that the Bank of England’s recent proposal for many European bank branches in London to continue operations without converting into subsidiaries was a signal of the UK’s continued openness to foreign investment. McGuinness added, “We will get less [access] than what we have at the moment, whatever the settlement, and you can’t see the EU agreeing to anything else,” but said a deal was “absolutely possible” if there was the political will on both sides.

Separately, former Conservative Treasury Minister Lord O’Neill said the economic hit dealt to the UK by Brexit could be “dwarfed” by an uplift in economic growth. Lord O’Neill attributed higher growth rates to “parts of the country, led by the North West [of England] … doing way better than people seem to realise or appreciate,” as well as export-led growth, saying, “The rest of the world is also doing way better than many people would have thought a year ago, so it makes it easier for the UK.” He warned, however, “If we go for a really hard Brexit or a no-deal Brexit, we’ll probably suffer more than that three percent.”

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German Social Democrats agree to coalition negotiations

Germany’s Social Democrats (SPD) yesterday decided to take up formal coalition negotiations with Chancellor Angela Merkel’s conservative bloc of Christian Democrats (CDU) and Christian Social Union (CSU). The decision was taken by vote at a special SPD party conference, with 362 delegates voting in favour of coalition talks and 279 against, with one abstention. Party leaders will meet tonight to agree on a roadmap for the upcoming negotiations, with the Conservatives having declared they want to see the new government in place before Easter. There will be another vote once coalition negotiations are over, as all SPD members will be asked to give their approval to the final coalition agreement. The party’s youth wing today declared it would continue to campaign against a new coalition with CDU and CSU, and try “to explode the results at the members’ vote.”

Open Europe’s Leopold Traugott appeared on Al Jazeera last night and CNBC this morning to discuss the outcome of the vote. He was also cited by CNN and French newspaper Liberation.

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Head of British Army warns Britain must "keep up" with Russian threats

The head of the British army General, Sir Nick Carter, will warn that Britain’s ability to respond to Russian threats will be “eroded if we don’t keep up” and invest in defence. In a speech today, General Carter is expected to say, “The threats we face are not thousands of miles away but are now on Europe’s doorstep. We have seen how cyber-warfare can be both waged on the battlefield and [used] to disrupt normal people’s lives. We in the UK are not immune from that.”

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