Brexit Bulletin: What About This Trade Deal?

(Bloomberg) -- Today in Brexit: Trump is making positive noises about a trade deal, but it’s still a long way off.

What’s Happening?

Donald Trump is talking up the prospects of a “big Trade Deal” with the U.K., just as soon as Britain casts off the “shackles” of European Union membership. He tweeted on Monday that the two sides are already starting to talk.

It’s a very useful message for the pro-Brexit hardliners, such as Boris Johnson, whom Trump wants to win the Conservative leadership race. But how realistic is any such deal and when could it even happen?

1. Not until the U.K. has quit the EU. That might be in October — or later. Even once the U.K. has left, if it does so in an orderly manner, then the next step would almost certainly be to sort out a trade deal with the bloc first. How tightly the U.K. agrees to bind itself to EU rules will determine how much freedom it has to trade with other countries. Remember: Any loose deal with the EU that allows freedom to trade elsewhere would exclude Northern Ireland.
2. The only way an agreement with the U.S. would happen quickly is with a no-deal Brexit. In that scenario (which isn’t that straightforward), Britain would be a supplicant. With so little leverage and with an inexperienced negotiating team, it would get a pretty raw deal. Trump is encouraging the U.K. to play hardball with the bloc and threaten to walk away.
3. Any U.S. trade accord wouldn’t get anywhere near replacing the current setup with the EU. The frictionless trade of the single market wouldn’t be replicated, and most trade economists reckon distance does matter.
4. The U.K. public is uneasy with some of the conditions that would probably be attached to a U.S. trade deal. A poll last year showed an overwhelming majority of Britons want to maintain food standards, for example.
5. The public would also be pretty skeptical of letting U.S. companies have better access to the National Health Service. A pledge to improve the NHS was one reason people voted for Brexit. Putting a national treasure on the negotiating table — as the U.S. would probably demand — could be politically toxic.

Today’s Must-Reads

• Trump spurs on Brexit in London visit, diving into U.K. politics
• Candidates for the Tory leadership are behaving as if the last three years didn’t happen, argues Robert Shrimsley in the Financial Times
• Tory rivals are competing to be the least Conservative in a race turned on its head, writes Rachel Sylvester in the Times.

Brexit in Brief

McVey’s Vision | Esther McVey, the pro-Brexit former minister and leading figure of the “Ladies for Leave” campaign, said a prime minister doesn’t have to let Parliament thwart a no-deal withdrawal. She suggested in an interview with the BBC that Prime Minister Theresa May left herself exposed to such ploys by presenting legislation and motions to Parliament. “I’m sure people will try and frustrate the will of the British people,” she said, but “the prime minister has the ability to ensure things don’t happen to frustrate things.”

French Vexation | President Emmanuel Macron said on Monday that Oct. 31 should be the “final, final” deadline, and he doesn’t want the new European Commission having to deal with Brexit. Earlier in the day, a junior economy minister said repeated extensions and uncertainty were worse than no-deal. As France renews its stance as the hardliner in Europe, most officials in Brussels still believe the bloc wouldn’t chuck the U.K. out if it wanted more time.

Boris Launched | Johnson launched his campaign with a cheery and optimistic video message that buffed his credentials as the man able to win over those who don’t normally vote Tory. He reiterated his pledge to take the U.K. out of the bloc on Oct. 31 with or without a deal.

Trump Today | May and Trump meet business leaders and hold a news conference this afternoon. Protests are in the works, and Labour Party leader Jeremy Corbyn plans to address the crowds around the same time that Trump and May speak.

On the Markets | The pound has lost 4% in a month on concern that a hardline Brexit-backer will try to take the U.K. out of the EU without a deal. It traded at $1.2667 early on Tuesday.

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