LONDON — Boris Johnson insisted the U.K. will not engage in a “race to the bottom” on competition standards after Brexit.
In a speech at the grand painted hall of the Old Royal Naval College in Greenwich, the U.K. prime minister said he wants to “reassure” Brussels over fears Britain will undercut the EU on working rights, environmental standards and state aid.
“We will not engage in some cut-throat race to the bottom,” he told an audience of ambassadors and business leaders about the trade deal he hopes to strike with the bloc and other nations around the world. “We are not leaving the EU to undermine European standards, we will not engage in any kind of dumping, whether commercial, or social, or environmental.”
But Johnson refused outright to sign up to so-called level playing field rules that govern competition standards across the bloc. “There is no need for a free-trade agreement to involve accepting EU rules on competition policy, subsidies, social protection, the environment, or anything similar, any more than the EU should be obliged to accept U.K. rules.”
Johnson insisted the U.K. wants to negotiate fishing quotas on an annual basis.
The spokesman suggested the outcome could mirror the EU deal with Canada, which specifically notes that EU and Canadian working rights and environmental protections are integrated into the deal. The Canada deal also created a level playing field over intellectual property rights and strengthened copyright protections.
In his speech, Johnson pitched directly for a Canada-style free-trade agreement with the bloc — although he insisted that if the EU was not willing to sign up to agreement without level playing field rules, the U.K. couRead More – Source [contf]
LONDON — The EU and the U.K. on Monday set out their priorities for the post-Brexit future relationship talks — buckle up for a bumpy ride.
The EU is willing to negotiate a highly ambitious trade deal, the blocs chief negotiator Michel Barnier said in Brussels, but “this exceptional offer is conditional.” Those conditions are not to the liking of Boris Johnson though, who used a speech in London to set out his own Brexit negotiating stance.
Here are five potential clashes in the upcoming talks.
1. Playing by the rules
The central area of dispute is around so-called level playing field rules. The EU is worried the U.K. might lower labor and environmental standards and boost state aid to its companies, effectively becoming a competitor with an unfair advantage.
Barnier said it is up to the U.K. to answer the “fundamental” question of the future relationship: “Will it continue to adhere to the EUs social and regulatory model?” According to Barnier, the U.K.s answer “will be fundamental to the level of ambition of our future relationship.”
“The Government will not agree to measures in these areas which go beyond those typically included in a comprehensive free-trade agreement.” — Boris Johnson
But Johnson said in his speech on Monday that “there is no need for a free-trade agreement to involve accepting EU rules on competition policy, subsidies, social protection, the environment, or anything similar, any more than the EU should be obliged to accept U.K. rules.”
He said the U.K. would maintain or even improve upon EU standards, but insisted that signing up to a treaty that mandated such alignment or copying EU laws was not an option.
However, a spokesman for the prime minister later indicated how the issue could be resolved. He suggested that level playing field safeguards could be included in the trade deal, as is the case in the blocs trade deal with Canada, but that the U.K. would go no further. In a statement setting out the U.K. negotiating position, Johnson said, “The Government will not agree to measures in these areas which go beyond those typically included in a comprehensive free-trade agreement.”
2. Troubled water
Europes fishing sector is making a big splash in Brexit negotiations. Barnier said the EU wanted “continued, reciprocal access to markets and to waters with stable quota shares.” The EUs draft negotiating mandate clearly links this to the overall free-trade agreement.
Johnson has long insisted Britain must become an independent coastal state. In his speech on Monday he said the government was “ready to consider an agreement on fisheries,” but added, “Under such an agreement, there would be annual negotiations with the EU, using the latest scientific data, ensuring that British fishing grounds are first and foremost for British boats.”
The status of Gibraltar could be a source of transition-period contention | Jorge Guerrero/AFP via Getty Images
The British negotiating mandate notes that, just like Norway, Iceland and the Faroe Islands, it wants yearly talks about how much fish can be taken out of the water and where.
3. Final say
Governance looks set to be another point of contention. Barnier said the Court of Justice of the European Union (CJEU) must be able to “continue its role in full” over areas of the future relationship that are “based on concepts derived from European law,” as well as in matters of security.
But Johnson in his written statement said a deal with the EU cannot include “any jurisdiction for the CJEU over the U.K.s laws.” It is unclear at the moment exactly what that means. According to the Political Declaration — the text on the future relationship that accompanied the legally binding Withdrawal Agreement — the CJEU would be able to rule on legal interpretations of EU law.Read More – Source [contf]
ADDIS ABABA, Ethiopia — For the past four years, Welibuw Buzenehe watched as China built a new national sports stadium in the heart of the Ethiopian capital.
Located deep in Addis Ababas commercial center, the soon-to-be-finished structure towers some 40 meters above the ground, and will have a capacity of 62,000 people.
“China is building this city from the ground up,” said Welibuw, a local food seller in the area around the stadium. “Without China, not much would happen around here.”
The roughly $160 million construction project is one of many highly visible, Beijing-backed mega-projects — from hydropower dams to skyscrapers — that have helped make China Ethiopias largest trading partner.
“Western governments, led by the U.S., appear to like what Prime Minister Abiy is trying to achieve and they want to help him move forward with his reforms” — Zemedeneh Negatu, investor
But recently, efforts by Ethiopias firebrand prime minister, Abiy Ahmed, to modernize the economy, privatize state-owned companies and reduce the countrys debt burden are shifting the power dynamics in the country.
Abiy, analysts say, is positioning the country to leverage competition between the West and China to attract even greater investment — and reduce the countrys dependence on Beijing.
In December, Ethiopia received a $9 billion injection of financial aid from Western donors, the International Monetary Fund and the World Bank. The influx of cash could upend 15 years of Chinese dominance and spark unprecedented interest from Europe and America, investors, economists and political analysts say.
“The granting of this money sees the West countering China in a very tangible way, in one of the more politically and economically important and consequential countries in Africa,” said Zemedeneh Negatu, an Ethiopian-American investor and global chairman of the Fairfax Africa Fund.
Ethiopian Prime Minister Abiy Ahmed has attempted to modernize his countrys economy | Lysberg Solum/NTB scanpix/AFP via Getty Images
“Western governments, led by the U.S., appear to like what Prime Minister Abiy is trying to achieve and they want to help him move forward with his reforms.”
For Europe and America, Ethiopia — one of Africas fastest growing economies and the continents second most populous country after Nigeria — has become too big of a prize to ignore.
The IMFs disbursement was the first time in over a decade the Fund lent money to Ethiopia. The amount — $2.9 billion — also represents one of the highest levels of financial assistance that can be provided under the organizations lending rules.
Observers chalk up the bodys decision to approve the cash to the leadership of Ethiopias prime minister, who — despite criticism that he has not done enough to quell deadly fighting between Ethiopias ethnic groups — is seeking to embark the country on a new path.
A core part of Abiys agenda is an effort to overhaul the countrys economic model of heavy state investment, which economists widely agree has run out of steam.
As part of that push, the prime minister has surrounded himself with a tightly knit group of young, liberal-minded technocrats with international experience to raise private capital and privatize key sectors such as the telecommunications market.
“There are some that say we are adding more debt to the countrys already high debt. But borrowing from the IMF and the World Bank is like borrowing from ones mother” — Abiy Ahmed, Ethiopian prime minister
“A key objective of the governments economic reform agenda is to sustain Ethiopias growth by tackling emerging fiscal and current account deficits,” said Mamo Mihretu, Ethiopias chief trade negotiator and a senior adviser to the prime minister.
Abiys efforts havent gone unnoticed. In October, he won the Nobel Peace Prize for his efforts to end Ethiopias long-running war with Eritrea and to bring greater political and economic freedoms to a country that had suffered for decades under oppressive regimes.
The award appears to have gone a long way toward lionizing his image on the world stage. Despite hundreds dying in ethnic clashes and anti-government protests demanding more autonomy from the state since he came to power in April 2018, Abiy has become the poster child of a modern Africa full of economic potential.
The reforms are creating “opportunities for Western businesses to invest in Ethiopia,” even as they are altering Ethiopias relationship with China, said Abdulmena Mohammed Hamza, an economist specializing in banking at the Edinburgh Business School.
A changing relationship
Over the course of the last decade, Ethiopia has become increasingly dependent on Chinese investment.
The Export-Import Bank of China put up $2.9 billion of the $3.4 billion railway project connecting Ethiopia to Djibouti, providing the landlocked country access to ports. Chinese funds were also instrumental in the construction of Ethiopias first six-lane highway — an $800 million project — the metro system, and several skyscrapers dotting Addis Ababas skyline.
Beijing also accounts for nearly half of Ethiopias external debt and has lent at least $13.7 billion to Ethiopia between 2000 and 2018, data compiled by John Hopkins University School of Advanced International Studies shows.
But finance ministry figures show that Beijing has begun to taper the amount it lends to Ethiopia in recent years — from $1.47 billion in the 12 months from July 2014 to $630 million in 2017.
Beijing lent at least $13.7 billion to Ethiopia between 2000 and 2018 | AFP via Getty Images
Diplomats and observers of Ethiopias economy say that Beijing has grown frustrated after major investments such as the Djibouti railway line failed to generate sufficient revenues.
Chinas partial retreat has thrown into relief Ethiopias indebtedness to Beijing. Observers say upending that equation is perhaps the greatest motivation for Ethiopias opening up to the West.
Speaking at a conference in Addis Ababa in December, Abiy went as far as to say the terms of Chinese loans had damaged the Ethiopian economy.
The European Union is willing to negotiate a highly ambitious trade deal with the U.K., but “this exceptional offer is conditional,” according to the EUs Brexit chief negotiator Michel Barnier.
Barnier Monday laid out the draft negotiating directives for the future relationship negotiations with the U.K. for journalists. The European Union is willing to negotiate an agreement that includes “zero tariffs and zero quota on all goods entering the single market,” he said. Brussels also wants an ambitious agreement in services “with wide sectoral coverage” that includes “digital trade, intellectual property and access to our respective procurement markets.”
But certain conditions must be met by London, Barnier warned. “We are ready to offer all this even though we know that there will be strong competition between the U.K., our immediate neighbor, and the EU. Competition is normal. But because of our geographical proximity and economic interdependence, our draft mandate also makes clear that this exceptional offer is conditional on at least two things.”
The first is a level playing field over the long term.Read More – Source [contf]
European Commission President Ursula von der Leyen is stepping onto very thin ice if she presses ahead with a mini trade deal that she has targeted with the U.S. in the next few weeks.
There are obvious attractions to a quick pact, which the German EU chief says should cover “trade, technology and energy.” Such an agreement could secure a truce in the trade war with U.S. President Donald Trump, which has already hit key EU products such as aircraft, wine and steel. Most importantly for Berlin, an armistice would grant a vital respite to the talismanic German car sector, which Trump is threatening with high duties.
But such an accord will be a hugely risky gamble for von der Leyen so early in her tenure. Leading EU member countries including France do not want her trading away key agricultural concessions, and there is danger of a wider public backlash against Brussels if the EU makes a deal that gives any ground to Washington in the politically explosive territory of food standards and genetically modified food.
Until now, her deal looked impossible — stuck over the issue of agriculture. EU countries, led by France, Austria and the Netherlands, explicitly prohibited the Commission from negotiating with the Americans on agriculture in the negotiating mandate, while Trump insists there will be no deal without farm goods on the table. There was no sign that either side was willing to budge.
“Were not going to get there with apples and pears and shellfish” — Sonny Perdue, U.S. agriculture minister
She and her trade chief, Phil Hogan, think they have found a way to square the circle. Legally, they will not include a chapter on agriculture inside a trade agreement — but they will strike separate commitments to lower EU barriers for certain U.S. farm goods.
“We are trying to look at ways where through regulatory cooperation we might be able to look at non-tariff barriers as a way of bringing agriculture issues on the table,” Hogan said.
That doesnt solve the original dilemma, however. Either the EU opens up its market in a significant way to U.S. farm goods, or it doesnt. Commission officials, EU diplomats and politicians in Paris, the Hague, Stockholm and Berlin contacted for this article all agreed on one thing: Getting a deal across the finish line in the next few weeks will take some major bluffing. What they did not agree on is who was being tricked: Trump, or European citizens.
Officially, the Commission is only offering extremely minor concessions on farm products. Hogan said the EU would like to talk about food import approvals for products such as “apples and pears” — products which EU farmers want to export to the U.S.
Phil Hogan, the European commissioner for trade, thinks he can get a deal made | Stephanie Lecocq/EPA
At a meeting of EU trade envoys on Friday, the Commissions trade chief Sabine Weyand said Brussels was also ready to recognize U.S. testing procedures for “bivalve molluscs” such as oysters and clams, according to three people in the room.
GMOs to sweeten the deal
However, the U.S. has made clear that a deal on clams and pears wont cut it, and several EU diplomats and Commission officials said they believed the EU would end up offering more.
“Were not going to get there with apples and pears and shellfish,” U.S. agriculture minister Sonny Perdue told reporters in Brussels on Monday, according to Reuters. “There are other things that have to happen.”
One other thing the EU is mulling is approving more genetically modified crops for sale in the bloc, three people following the file said. That would not require a change in EU laws, as Europe already has a procedure to certify GMOs for consumption. But the Commission has been notoriously slow in approving certain GM crops, especially those that compete with EU products, such as rice and wheat.
“The Commission may offer to approve more GMOs, which would be of real value to U.S. exporters,” one official said.
An EU diplomat said, “The Americans have been waiting for the approval of sensitive GMO crops literally for decades.”
“I am sure that the Commission can find legal tricks to put agricultural questions back on the table” — Anonymous EU official
But countries such as France, Austria and Germany are worried about a public backlash, if the deal creates the impression that Europe is “lowering” its food standards or letting in dangerous foods to appease Trump.
Indeed, Perdue also called on Brussels to soften limits on pesticide residues — which are sometimes stricter in the EU than recommended by international organizations.
Fear of a backlash
In the Netherlands, the government is already fighting a backlash from parliament. Trade minister Sigrid Kaag was this week questioned by MPs worried that the Commission was about to sell out EU farmers.
“The EU and the Commission can only work with a mandate that has been given and thats about conformity recognition, regulation and the industrial aspects. There is nothing else,” Kaag said. “Commissioner Hogan has said that in the future perhaps [there would be talks on agriculture]. Those are his words, the words of Commissioner Hogan.”
“I understand the intention, because it signals goodwill towards the U.S. government that the EU isnt stubborn. They are taking the cold out of the air, but the mandate is the mandate,” she added.
Sigrid Kaag, Dutch trade minister | Jeroen Jumelet/EPA
Paris also warned the Commission that it was playing with fire by allowing the U.S. to put any agricultural issues on the table, as it created an opening for demands on sensitive products like GMOs and chemically rinsed chicken.
The Commission would be “wrong to strike out without Read More – Source [contf]
British Prime Minister Boris Johnson is expected to set a hard-line tone toward the EU in a speech Monday as the two sides prepare to enter the next phase of trade talks.
Setting out his demands for negotiations in a speech in London, Johnson will say the U.K. wont accept alignment with EU legislation or accept judicial oversight from the EUs top court, The Times reported Sunday.
After Britain left the EU on Friday with Johnson pledging a “new era of friendly cooperation,” the U.K. government over the weekend took a combative tone.
Arguing the EU cannot expect the U.K. to meet its regulatory standards, Foreign Secretary Dominic Raab said Sunday: “Were not going to be aligning with EU rules, thats not on the table … The legislative alignment, it just aint happening.”
But he accused Brussels of having unreasonable requests, for example by demanding that trade disputes be adjudicated by the Court of Justice of the European Union.
“Were not going to have a positive agreement with the EU, thats not going to happen, if they pull the rug and shift the goal post,” Raab said.
The U.K. governments tough talk appeared ill-received by Irish Prime Minister Leo Varadkar, who told the BBC that “setting out so boldly such hard red lines actually makes coming to an agreement more difficult … unless those red lines are turned pink in some way.”
Varadkar said legislative alignment — meaning the U.K.s commitment to EU social, environmental and other standards — is crucial to ensure aRead More – Source [contf]
Boris Johnson has long made clear that he wants to strike a post-Brexit deal similar to the one the EU has with Canada.
In a speech in London on Monday, the prime minister is expected to map out his demands for the upcoming negotiations with Brussels and confirm he is seeking to mirror the Canada free-trade agreement, according to the Times.
POLITICO guides you through the main questions surrounding such a deal.
Why didnt anyone think of this before?
They did. On the European side, EU Brexit chief negotiator Michel Barnier offered Canada as a scenario in the now-famous “Barnier slides” of 2017. When all the options that transgressed Britains red lines (e.g. free movement) were put aside, Canada was pretty much the only model left.
Johnson has stressed several times that hes looking for a “super Canada-plus” agreement with the EU rather than a closer economic partnership. “When they say Canada, they dont mean literally Canada. They mean an equivalent balance of access and obligation,” Sam Lowe, a senior research fellow at the Centre for European Reform, said.
What would this mean for trade in goods?
The access that comes with the EUs deal with Canada – which is in the same ballpark as its deals with Japan and South Korea – allows for almost tariff-free trade in goods. More precisely, CETA removes duties on 98 percent of products that the EU trades with Canada. Customs duties for almost all goods will be removed within seven years. But although it slashes tariffs, the export of food is still restricted by quotas and phytosanitary controls. Also, this kind of free-trade deal would create a whole new set of costs, paperwork and border checks for companies wishing to trade under such an agreement. This is not “frictionless” trade.
Both the EU and the U.K. sides have already said that they want a future trade deal with “zero tariffs, zero quota.” However, the EU has added “zero dumping” to this line, stressing that it wants a level playing field. If Britain wants a sweeping deal, the EU wants some kind of regulatory convergence.
What would this mean for trade in services?
In services, CETA is one of the most far-reaching agreements the EU has concluded and takes into account sectors ranging from telecoms to tourism. It also has a special chapter on financial services that creates a financial services committee to supervise and regulate the sector.
“Largely what this financial chapter does in the agreements with Canada or Japan is set up a framework through which regulators can have dialogue so as to avoid creating unnecessary new barriers in the future,” said Lowe. “So just to keep them talking. You can imagine something like that being in there, but it doesnt do much at all when it comes to market access. Were not talking about creating market access or keeping the source of access we have now.”
For example, the EU-Canada deal stops way short of allowing the so-called passporting that U.K. financial firms are keen to retain to enable them to operate throughout the single market having only registered in one EU member country.
U.K. Prime Minister Boris Johnson is expected to set out his demands on Monday | Paul Ellis/Getty Images
“A free-trade agreement, such as the EU-Canada deal, is going to push up a lot of challenges for the U.K.” said David Henig, a former British government trade official and director of the European Centre for International Political Economy. “It doesnt do a lot for services compared with the rules of the World Trade Organization.”
Given how economically important and politically sensitive the financial services sector in London is, that might change in a deal with the U.K.
When asked about the Canada model, a spokesperson for TheCityUK, a financial services lobby group, said this negotiation is a different one. “What is unique about the future relationship discussion between the U.K. and the EU is that it starts with a shared rule book already in place. EU regulations in financial services have been written with the U.K. around the table and often holding the pen, since it is the largest financial center in Europe,” he said.
The U.K. government wants to strike a comprehensive agreement on services too, however, given that they are a major part of the British economy. “Weve been clear that we are looking for services to be included and I believe the Political Declaration also includes that,” Johnsons spokesman said on Friday. EU trade chief Phil Hogan already suggested that financial services access might be one of the trade-offs at the end of the negotiations, for example for fishing rights.
Is such a deal possible in less than a year?
Johnson said he does not want an extension of negotiations beyond December 2020. That raises eyebrows with trade experts.
“Its very difficult to negotiate even a Canada-style agreement in less than 10 months,” Henig said. “It took several years to complete the trade deal with Canada. And the start of these negotiations isnt going very well. The EU and the U.K. are not speaking the same language, which makes it extra difficult.”
On the other hand, there is political will. While the EU has stressed the risks of the brutal timeframe, both sides want to avoid a catastrophic cliff edge of tariffs and trade barriers from January 2021. A lot will depend on the degree of regulatory alignment the U.K. is ready to accept as a price for its accessRead More – Source [contf]
Donald Trump will push in trade talks for the U.K. to pay high prices for drugs and for U.S. food producers to have more market access, Britains former ambassador to Washington told the Guardian.
Laying out the tough trade-offs that Boris Johnsons government will have to consider in trade negotiations with the U.S. after Brexit, Kim Darroch said Trump would strongly defend the interests of farmers and corporate America.
“I know what the U.S. will be pitching for when they negotiate a free-trade deal with us. They will pitch for massively greater access for agricultural products. People talk about chlorinated chicken — it is a lot more than that. Farmers in America vote for Trump, pretty much all of them vote for Trump,” said Darroch in his first interview since he resigned last year after diplomatic cables in which he criticized the U.S. president were leaked.
“They also want us to pay the same for American pharmaceuticals as they pay in their own market. Do they want us to pay more for their pharmaceuticals? Do the pharmaceutical companies want to use this leverage? Of course they do.”
Darroch said that U.K. negotiators would push for more access to the U.S. financial services market, as well as for concessions on aviation, arms sales and public procRead More – Source [contf]
France and Germany will struggle to drive the EU without the British “energy” that helped Paris and Berlin work together, EU competition and digital chief Margrethe Vestager said today.
“One of the things we will be missing is of course the energy. Because we have a French-German axis – but part of the energy to make that axis work comes from, came from, the U.K.,” Vestager said when asked what she would miss about Britain.
Vestager said that other member countries, “maybe changing coalitions of member states,” would have to step into that void.
“I think we will see a new dynamic in the union, but it will take some time before we fully recover,” she said. Vestager attended the Brexit vote in the parliament on Wednesday, which she said was “really touching because you see it is real.”
Vestager also said she would miss the sense of humor of the Brits, which she said was similar to the Danish.
LONDON — U.S. Secretary of State Mike Pompeo stressed today the United States intends to “put the U.K. at the front of the line” for negotiations on a trade deal and wants to “lower every barrier” between the two countries.
“An important part of this relationship is reducing the friction between these kinds of things, whether it is the friction of the ease of travel, its the ease of exchange or confidence in information systems, of our students going to each others schools and the cross-generation of knowledge that will flow from that, whether it is tariff barriers,” Pompeo at an event in London organized by the Policy Exchange think tank.
Those areas, along with security “are the things that, if we do this well together, will be Read More – Source [contf]