Hardening UK language leaves EU perplexed

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During her visit to the UK last week, France’s Europe minister Amélie de Montchalin made a point of seeing the CBI to take the temperature of the UK’s biggest business lobby group as talks between Britain and Brussels get under way.

She may have got a shock.

For some weeks Michael Gove, the cabinet office minister overseeing the Brexit trade negotiations, has been telling business groups that while the UK wants a Canada-style free trade agreement, they should nevertheless prepare for a “no-deal” when the transition period ends on December 31.

Boris Johnson reinforced that message last week when he said he was prepared to walk away from talks in June if there is insufficient progress.

Until now Ms de Montchalin and other senior European politicians may have felt this was all part of the “drama” that has accompanied the build-up to the negotiations.

She insisted in an interview with the BBC’s Andrew Marr on Sunday that the two sides were entering a new phase, led by real people rather than politicians.

“We have known a lot of drama, a lot of passion, a lot of emotion because politicians were speaking to politicians . . . now we are entering the real people negotiating . . . the ones for business, for farmers, for fishermen . . . the real issues that concern people on both sides of the channel.

“This is a moment where we need economic rationality”.

That rationality shapes the Brussels approach to these talks; in return for an “ambitious” trade deal with the EU — ie no tariffs, no quotas and minimum border friction — the UK will eventually accept its demands on state aid, fair competition and regulatory oversight, seen in Brussels as essential measures to protect the single market.

And faced with the prospect of a deal on World Trade Organization terms that would mean a sharp rise in tariffs and border disruption, the EU hopes Mr Johnson and Mr Gove will eventually blink.

But this runs entirely counter to the hardening of the language from Mr Johnson’s government, which has placed sovereignty above the interests of business.

It is a position that has left Ms de Montchalin bewildered, questioning how the Conservative party, with its historically deep ties to business and entrepreneurs, could contemplate taking such a risk with the economy and people’s jobs.

In the end, she and other EU leaders might be right and Mr Johnson might back down when faced with the economic damage a no-deal might cause next year.

However, Ms de Montchalin will have returned to Paris in no doubt that big business groups in the UK are, for now at least, taking Mr Johnson at his word.

The UK’s threat to walk out of EU trade talks is real
“Maybe we should start looking at second-best options: a no-deal outcome followed by a trade agreement a year or two later. This would clearly not be economically efficient. Both sides would incur the costs of no-deal first, the UK more than the EU. But at least we would find ourselves in a scenario where both sides stand to regain trade flows that had been lost in the rupture. The problem today is that the losses are hypothetical. In two years, they will have materialised. That could make it easier for the UK and the EU to calculate gains from a zero-tariff, zero-quota agreement.” (Wolfgang Münchau, FT)

There is a landing zone for a UK-EU trade deal
“Theodore Roosevelt summed up his foreign policy with the motto: “Speak softly and carry a big stick.” The British approach to negotiations on a post-Brexit trade deal with the EU, published last week, reverses that: the substance of the document is much more conciliatory than the often aggressive rhetoric that framed it.” (FT View)

Business group calls for more customs agents funding (Daniel Thomas, FT)

EU vows to help nationals ‘outside the mainstream’ stay in UK (Daniel Boffey, The Guardian)

Deals, deals, deals: who needs them? (Iain Begg, The UK in a Changing Europe)

UK’s Galileo rival delayed amid wrangling and rising costs (Peggy Hollinger and Jim Pickard, FT)