Brexit Bulletin: Fox and Friends
Trade Secretary Liam Fox can’t wait to strike out on his own, negotiating and signing the post-Brexit deals that he believes will herald a new era in Britain’s glorious trading history.
Right now, though, the U.K. remains a full member of the European Union, and that means – oh, drat – there’s just no way the British can stand alone and protest President Donald Trump’s unilateral tariffs on steel and aluminum. Under EU rules, only the bloc itself has the authority to handle external trade talks. And the EU has drawn up plans, ahead of a formal trade dispute, to hit the U.S. with new duties. So, for now at least, the U.K. is happy to leave that matter to Brussels.
Fox will be traveling to Washington this week and told Parliament on Monday he was clear on his remit: “I will be making the case for the U.K. as part of the EU,” said Fox, an ardent Brexiteer. “Our current membership of the European Union means that the European Commission will be coordinating the European response.”
Just four days ago, Fox said the U.K. would seek its own exemption from Trump’s tariffs: “We will, of course, be looking to see how we can maximize the U.K.’s case for exemption under these particular circumstances,” he said. That position has now been clarified.
Fox and Trump share a sort of optimism over trade, even if they disagree about how free it should be. Fox said in 2017 that a post-Brexit trade deal with the EU “should be one of the easiest in human history;” Trump recently tweeted that trade wars “are good and easy to win.”
It seems we’ll have to wait until after Brexit to see the pair trade blows.
Check the Small Print | Chancellor of the Exchequer Philip Hammond is expected to avoid major fiscal pledges in a budgetary statement today. But Brexit-watchers should look past the economic forecasts and deficit projections. An annex to the main document is thought to contain the first official forecasts for the size of Britain’s Brexit divorce bill. That could be as high as £75 billion or as low as £25 billion, depending on how hard a Brexit the U.K. and EU ultimately negotiate, says Simon French, chief economist at Panmure Gordon & Co Plc.
Before Brexit | Preparing for Brexit may end up costing the U.K. £2 billion ($2.78 billion) over the formal two-year Article 50 period, according to research by the Institute for Government. There’s also been a sharp rise in the numbers of civil servants working on Brexit issues at key government departments, wiping out job cuts since 2010, the IFG said.
The Time Is Now | Government ministers “and those who should know better” should come clean about their Brexit concerns, Labour lawmaker Chuka Umunna and his Tory counterpart Anna Soubry wrote in an op-ed for the London Evening Standard. “History will not be kind to those who led us into the referendum on the EU,” the pair wrote.
‘Significant Threats’ | Would-be investors in the U.K. are being put off because of twin fears about a hard Brexit and the opposition Labour Party’s desire to nationalize swathes of the economy, Paul Drechsler, president of the Confederation of British Industry, Britain’s biggest business lobby group, told senior leaders in London on Monday evening.
Maltese Warning | The biggest post-Brexit risk to the U.K. economy would be disruption of cross-border services, Maltese Prime Minister Joseph Muscat told a London conference. “Coming up with some form of mutually acceptable free trade agreement in goods is probably achievable over the medium term,” he said. “Creating a similar arrangement of trade in services is much trickier.”
Border Problem | Avoiding a hard Irish border is proving “very difficult” given the U.K.’s red lines of leaving the customs union and single market, Ireland’s deputy prime minister, Simon Coveney, told Bloomberg. “We want a more comprehensive solution that can solve all these problems, but at the moment, it’s very difficult to see how that could work unless the British government changes its approach,” he said. “So far they haven’t been willing to do that.” Separately, Irish Central Bank Deputy Governor Ed Sibley warned that many financial firms remain unprepared for Brexit.
Gibraltar | Brexit offers Spain and the U.K. a chance to decide on a new status for Gibraltar that’s in the mutual interest of all parties, according to the Elcano Royal Institute, a think tank whose biggest donor is the Spanish government.
On the Markets | The pound rose on Monday after Brexit Minister Robin Walker said the U.K. and EU were “very close” to sealing a deal on a Brexit transition period. It was at $1.3897 in early trading on Tuesday.
European Commission President Jean-Claude Juncker came under fire from lawmakers for appointing Martin Selmayr, his German chief of staff, to the institution’s top civil-service post. The appointment “destroys all the credibility of the European Union as a champion of integrity and transparency in public administration,” pro-EU Dutch Liberal Sophie in ’t Veld told EU lawmakers.
Nigel Farage – still an MEP – called it “the perfect stitch-up – it smacks of nepotism, unaccountable government, abuse of public funds. Thank God the U.K. is leaving.”
©2018 Bloomberg L.P.