Britain talks tough: but the reality is we are the new whipping boys of international trade

Britain is beginning to see the inevitable result of talking tough to bigger and more dangerous opponents. They talk tougher still. For the moment, in higher UK government circles, the belief that the EU needs us more than we need them remains strong. This can be the only possible explanation for Javid's implicit suggestion at the weekend that the UK is going for a hard Brexit.  It only elicited a harder response from the EU.  Be our guest -  but you will not get a Mutual Recognition Agreement. This was reported in The Telegraph on Wednesday by Peter Foster,  their Europe editor, who is soon to move to the FT.

You can read his article without the paywall HERE.

Foster says the EU will not offer us even a Mutual Recognition Agreement on conformity assessment unless we agree to a trading partnership with close regulatory alignment. He quotes an anonymous EU diplomat saying:

“Why would we rush into providing the UK a competitive edge to have the UK as an authorised testing lab on our shores?” added the source, noting that if the UK shifted towards a closer relationship, then agreeing MRAs might still be possible.

There is, if anything, a hardening of positions on both sides and brick by brick a wall is being built in the English Channel.  It does not bode well.

Meanwhile, Stefaan De Rynck, the EU chief Brexit negotiator's most senior adviser, speaking at an event in London this week, said "there should be no misunderstanding' about the complexity of what lies ahead as the two sides prepare to hammer out the terms of their future partnership." 

He also said the British government needs a "dose of realism" on what can be achieved by the end of 2020.

In Davos, Paolo Gentiloni, the EU economy commissioner, said the EU wanted the “best possible” relationship with the UK and added, "We can’t have zero tariffs and dumping together. We can have zero tariffs and zero dumping."  This is a clear indication of the thinking in Brussels. If we want zero tariffs and zero quotas we will have to accept level playing field commitments and no dumping. He went on:

“We have a very short time for negotiation. Eleven months for a free trade agreement is really very short, if we look to other free trade agreements.”

But he also said a deal was "still possible" in such record time, albeit it was "not easy".

But the Prime Minister's official spokesman later hit back saying: "The EU agreed with the UK that they would reach a comprehensive future partnership agreement with us by the end of 2020 and we expect to achieve that. The EU made a formal commitment to get this completed by December 2020 and we expect that to happen."

This is just not true. Article 126 of the WA says the transition period is up to 31st December this year but Article 132 allows it to be extended by one or two years. We have set our face against any extension beyond the end of this year. The political declaration makes no commitment at all. It does signpost the way towards "an ambitious, broad, deep and flexible partnership across trade and economic cooperation with a comprehensive and balanced Free Trade Agreement"

The nearest it gets to a commitment is when it talks about "the clear intent of both Parties to develop in good faith agreements giving effect to this relationship and to begin the formal process of negotiations as soon as possible after the United Kingdom's withdrawal from the Union, such that they can come into force by the end of 2020."

Intent is hardly a commitment. I suppose the EU will say we might get a simple deal by the end of the year provided the UK agrees to all our demands but we know that isn't going to happen - well, not until December - if it happens at all.

We are alienating the EU at the same time as trying to cosy up to the USA but even that is not going well. Javid has reconfirmed we will introduce the digital tax on big US internet companies in April, despite the US trade secretary threatening to put tariffs on UK car exports. Another row is brewing about an imminent decision on the use of Huawei in our 5G network. The US is not happy about it.

For all the tough sounding rhetoric, (not least from Liz Truss - Liz Truss!) I expect we will back down on both decisions. Mutjaba Rahman tweeted:

So I see UK-US talks are going well. So much for using them as leverage against EU

The United States would consider "arbitrary" taxes on British car firms if the UK government imposed a digital tax on big U.S. technology firms, Treasury Secretary Steven Mnuchin said.

— Mujtaba Rahman (@Mij_Europe) January 22, 2020

And it isn't just these two issues either:

Apart from Hauwei, Digital Services Tax, US food, NHS / drugs, investor state dispute settlement, technical standards, geographical indications and whether the UK gets anything in return there are hardly any trade issues between UK and US preventing a deal... https://t.co/0HmoE7T6Ye

— David Henig (@DavidHenigUK) January 23, 2020

Reuters have highlighted how the EU will use access to the SM for our financial services sector as a lever to gain access to British coastal waters.

"Sources from three international banks fear that access will depend on a broader trade-off such as Britain allowing fishing in its waters — a concession they feel the government is reluctant to make.

“We’re now hearing very explicitly — it’s not even the rumour mill — the European Commission has said these are politically linked to progress in phase-two negotiations,” one banking source told Reuters."

Welcome to our new international role - whipping boys for Washington and Brussels.

By the time you read this by the way I will be in a mini-bus approaching London, along with about a dozen others from the various Yorkshire pro-EU groups, to attend a grassroots conference about our future role. The event is a sell out with around 450 delegates scheduled to be there. Dominic Grieve is among the speakers. Should be very good. I'm really looking forward to it.