Brexit Bulletin: Annoying the EU

  • May’s calls for ideas on trade deal irk EU officials
  • Vow to fight transition terms sets May against business

U.K. Wants `Minimalist' Customs Deal, Clarity on Future Relationship

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Theresa May is frustrating European officials with her attempts to get them to make the first move and help her define the kind of Brexit deal she should seek.

Even as chief European Union negotiator Michel Barnier continues to urge the U.K. to clarify its position, May has been asking the EU to come up with ideas on how a future relationship might work, according to people familiar with the situation. Barnier has laid out in stark terms what he says are the U.K.’s options in his now infamous stairway to Brexit. But May’s Tory party remains deeply divided on what kind of trade deal it should seek and what concessions are unacceptable.

May’s changing stance on the transition period also risks irking her opposites in the EU – as well as U.K. businesses. There was an expectation in Brussels that the U.K. would accept almost wholesale the EU’s offer on the two-year grace period as businesses are desperate to see an agreement pinned down. Brexit Secretary David Davis went as far as to say on Wednesday that he was “relaxed” about the terms of transition as it’s only two years and history will judge the government for the final agreement, not the interim one. But hardline euroskeptics are increasingly vocal in their opposition to the transition deal as they say that abiding by EU rules for two years while having no say in making them will render the U.K. a vassal state. Parts of the public are only now tuning in to what transition will mean.

May has to listen to the euroskeptics, particularly now that her position looks even shakier, and she appears to be trying to indulge them at the expense of business interests. The U.K. said yesterday that it would fight the EU on the issue of rule-taking and push back on a change the EU made to the agreement on citizens’ rights. That risks prolonging the talks on the transition deal that is the number one priority for companies, even as Davis continues to express confidence that it can be wrapped up in the first quarter.

Davis was less confident yesterday on sticking to the broader timetable, and said the deadline of October set by Barnier for completing the exit deal might slip to year-end. He made the point that the U.K. won’t want to sign the withdrawal deal until negotiators have a good idea of what kind of future relationship it will get. That’s because by the time it’s out of the club and has agreed to its parting financial settlement, it will have lost much of its leverage.

Barnier reminded the U.K. yesterday that while the withdrawal agreement will be an international agreement, the accompanying text on the future relationship will be a “political declaration,” rather than a treaty or legal deal. It’s not clear if that has yet sunk in among U.K. lawmakers, who are due to get a vote on the pact.

Brexit Latest

All Bad Options | The government’s assessments of the impact of Brexit on the economy indicate the U.K. would be worse off after Brexit under all of the scenarios contemplated, BuzzFeed reports, offering more ammunition to the soft Brexit camp in the Cabinet. Even under continued membership of the single market, growth would be 2 percent lower, according to papers the government was showing to key ministers but trying to keep out of the public domain. The scenario the government says it is seeking – something between the Norway option and the Canadian one – wasn’t modeled, Buzzfeed reported, citing a government official.

Corbyn’s Brexit | Over mugs of tea emblazoned with the Labour slogan – “For the many, not the few” – Jeremy Corbyn told a handful of business executives that his party would rule nothing out on Brexit – except a second referendum, David Hellier reports. According to one attendee, who spoke on condition of anonymity, about a third of the discussion concerned Brexit, and Labour’s top brass said their policy on the matter remained wide open. The only thing they would not countenance is another plebiscite on whether to stay in.

Jeremy Corbyn
Photographer: Simon Dawson/Bloomberg

Donors’ Revolt | Theresa May is losing the backing of Tory donors, according to The Times. At an event last week, about a quarter of the donors expressed a desire for May to go, the paper said.

Beyond Our Control | Barnier warned the U.K. that it risks the sudden expiry of the trade deals it now has access to as a member of the bloc, as three-way negotiations will be needed to ensure a smooth transition. Come Brexit day, the U.K. will leave behind some 750 international agreements the EU has struck on behalf of its member states on the date of the withdrawal, according to Barnier. “We cannot ensure in the Article 50 Agreement that the U.K. keeps the benefits from these international agreements,” Barnier spelled out. “Our partners around the world may have their own views on this,” for instance the 70 countries covered by trade deals.

Fox’s Warning | Trade Secretary Liam Fox, a veteran Brexit backer, told rebels in his party they would be “foolish” to try to oust Theresa May, as “nothing will change the electoral arithmetic.” The premier has “shown the resilience” to do the job of delivering Brexit, he told Bloomberg’s Tim Ross. He also said the EU needs to show the world it’s open for business after the pro-free market U.K. leaves.

Varoufakis Says | Former Greek Finance Minister Yanis Varoufakis called on the Labour party to embrace the Norway Plus model in Brexit talks, according to Open Britain, which campaigns for the softest possible Brexit. He made the “Marxist” case for staying close to the EU.

May in China | The prime minister will lead the largest business delegation her government has ever taken overseas when she flies to China on Tuesday, as she seeks to put her Brexit troubles aside and make progress on boosting U.K. trade, Tim Ross writes. May will take 50 business leaders – from sectors including financial services, health care, energy and infrastructure – on the three-day trip to Wuhan, Beijing and Shanghai.

On the Markets | The pound has finally returned to its pre-Brexit referendum levels and has dragged Bank of England rate-hike expectations along with it. But investors should pay attention to what policy makers are actually saying rather than leap to conclusions, Bloomberg Gadfly’s Marcus Ashworth writes.

Coming Up | Cabinet meeting at 9:30 a.m., Bank of England Governor Mark Carney speaks to the House of Lords economic committee at 3:30 p.m., EU Withdrawal Bill is debated in the Lords.

And Finally...

BINO or BRINO? Neither term has been around for long, but surely it’s time one asserted dominance. Which acronym will become the mainstream term for “Brexit in name only?” 

If the hardline euroskeptics have their way, neither will as the whole concept is swiftly forgotten.

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