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Europe has “given up” hope of concluding a mixed trade deal with Britain will instead concentrate on completing a rapid divorce with the UK during the forthcoming Brexit negotiations, the Telegraph has been told.
The sharp fall in expectations for the negotiations was confirmed by both senior EU and UK officials ahead of next week's European Council meeting in Brussels where Theresa May will attend for the first time as Prime Minister.
Senior EU diplomatic sources said Mrs May can expect a decidedly muted reception from EU counterparts after her speech at the Conservative Party Conference which was widely seen as slamming the door on the UK staying inside the EU single market.
“The speech was very clear. Mrs May excluded the UK from jurisdiction of the European Court of Justice (ECJ) which is necessary for any kind Free Trade Agreement,” said a senior EU diplomat with knowledge of Europe’s negotiating position.
“If this is Mrs May’s position, then we can only focus on doing this break quickly and cleanly. There will be a Brexit agreement and nothing else.”
What a bunch of petulant children.
Fortunately for them, it will be the EU Council (leaders of the 27 countries - Donald Tusk, President) that will be leading the negotiations, and not the EU Commission (Executive Branch - Jean-Claude Junker, President) or the EU Parliament (Martin Schulz, President). The presidents of these 27 individual countries are largely driven by the economic interests of their people and tend to be much more practical and mature, and much less ideologically or emotionally motivated than the people in these other two bodies.
This is a smart move on the part of the Europeans. Of course the British are well aware of how valuable their country is to the EU as a trading partner, as the UK is on its own the fifth largest economy in the world. Also on the list are
1. United States of America
2. China
3. Japan
4. Germany
5. United Kingdom
6. France
7. India
8. Italy
9. Brazil
10. Canada
Of course the EU would come in at #2 on that list, without the UK. Suffice it to say, they are both big players in their own right.
Also, like we have discussed several times before, the UK will have access to the EU under WTO trading rules, which include tariffs averaging just under 5%, but these vary depending on the types of goods being traded. The upshot for the UK is that the pound has already fallen more than 5% against the Euro, rendering any competitive disadvantage related to those tariffs moot for UK businesses, and much more expensive for EU businesses.
But I digress. This is a good strategy for the EU, to hold themselves out as being disinterested. If they were to recognize the symbiotic relationship they have with the UK at this point, including the costs to the EU of not negotiating a deal (especially in light of the rapidly falling pound, which makes EU exports to the UK much more expensive, and therefore much less competitive - which is bad for EU businesses and bad for EU jobs), that would just serve to empower the UK prematurely. Better to play coy.
So instead, they are going to act disinterested and play hard to get. What is being proposed here - completing a rapid divorce, with the EU and the UK being left to trade under WTO rules - could actually happen and it probably does make the most sense, especially to begin with.
Then the establishment and big business on both sides of the channel will turn up the lobbying heat and pressure both sides to arrange a deal to lower trade barriers and therefore costs. It may take some time, but it will eventually happen. Watch and see.
France and Germany are both big players in their own right..... Much bigger than the UK if they team up. I hope the UK knows what it is doing since the EU is its largest trading partner.
In terms of UK Balance of Trade with EU Countries we have a slight trade surplus with Croatia, Estonia, Bulgaria and Denmark whilst the tiny nations of Malta and Luxembourg do have at least a noticable trade surplus, although Ireland with a population of 4.5 million is the only country in the EU that the UK has a decent Trade Surplus with.
Really going to miss that export surplus with Malta and Luxembourg.
On the other side of the coin we are Germany's most profitable export market in the entire world, one in five or 20% of all German Cars are sold here as well as a lot of other German Manufactured Goods, the French sell us their wine and agricultural profits and most EU Countries enjoy healthy trade supluses with the UK.
The EU Countries are the ones with the vast surpluses with the UK and not the other way around.
In terms of UK Balance of Trade with EU Countries we have a slight trade surplus with Croatia, Estonia, Bulgaria and Denmark whilst the tiny nations of Malta and Luxembourg do have at least a noticable trade surplus, although Ireland with a population of 4.5 million is the only country in the EU that the UK has a decent Trade Surplus with.
Really going to miss that export surplus with Malta and Luxembourg.
On the other side of the coin we are Germany's most profitable export market in the entire world, one in five or 20% of all German Cars are sold here as well as a lot of other German Manufactured Goods, the French sell us their wine and agricultural profits and most EU Countries enjoy healthy trade supluses with the UK.
Yep.
Moreover, the EU faces painful budget choices as a result of losing the UK, which is its second largest net contributor. This will require the EU to either cut spending, raise taxes on member states, or find another source of revenue, writes Strafor, a leading global intelligence organization.
Summary: The initial story told by Europe’s elites was that Britain would suffer for daring to leave the EU. Suffer severely and soon. Four months have passed since the June 23 vote and Britain has felt no ill effects. Britain might have the last laugh, since the EU has to redo its budget following the loss of its second largest contributor. The EU is already under stress. Cutting the budget and raising taxes will make it worse.
A Bitter Budget Battle Looms in the EU
Stratfor, 13 October 2016.
Forecast
Because of the Brexit, the European Union will lose a net contributor to its budget, forcing the remaining members to rethink the bloc’s spending limits and priorities.
EU members will have three options for dealing with the loss of the United Kingdom’s income: increase national contributions, trim the budget or look for new revenue sources. Each choice carries political risks.
Budget-related issues will create new sources of friction in the European Union as national interests shape the negotiations.
Analysis
When Britain leaves the European Union, it will take with it the sizable financial contributions it makes to the bloc’s budget. That will leave remaining member states with some difficult choices to make about how big future budgets should be, what they should pay for and how much members should pony up for them. In all likelihood, key policies — from agricultural subsidies to development funds — will have to be redesigned. And as members decide how to proceed, new sources of conflict will arise that will do little to help reverse the bloc’s political fragmentation.
{more at the link}
Meanwhile, the hard-line by some EU leaders is that they want to 'punish' the UK for leaving by refusing to cooperate in negotiations on a possible trade agreement, which would lower tariffs and trade barriers below what is established under WTO rules. What these EU leaders and much of the media fail to mentio is that lack of cooperation actually punishes the EU at least as much as it does the UK, as the EU sells more to the UK than vice versa. So the lack of a trade agreement would adversely effect EU companies and jobs more than those of the UK.
Considering the increased economic burden that the UK's exit from the EU will already be putting on the EU budget and the citizens that ultimately fund it, does this sound like a very responsible approach to these discussions? Of course time will tell if cooler heads prevail. While there will be a lot of pressure from EU and UK businesses to work out a free trade agreement, it may be difficult to get agreement from the EU Parliament, regardless of how self-destructive the failure to negotiate such an agreement would be for the EU.
Make no mistake about it, the ideological insolence of the UK is deeply offensive to the leaders of the EU and the collectivist establishment globalism movement that they represent. However, in practical terms, the withdrawal of the UK's financial contributions, both in the short and longer terms, are much more of a critical and substantial issue for the future of the European Union.
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^^^^^
I totally agree, we pay a substantial price for the privilege of having a massive trade deficit. The UK would be much better just trading globally, and if the EU want to negotiate a trade deal then so be it, otherwise it's WTO Rules.
Last edited by Brave New World; 10-16-2016 at 12:07 PM..
The UK government is working with China and India to start laying the foundations for trade deals with these countries. Of course no such deals can be finalized until the UK formally leaves the EU, which is currently in charge of all such negotiations on behalf of its members. But there is so much work to do preparing for negotiations, determining what the scope and objectives of any such discussions will be, that it makes good sense to start establishing working groups to start pulling information together.
CHINA is opening its doors to free trade with Britain in the wake of Brexit with Philip Hammond set to negotiate a deal with the world's second largest economy within weeks. The chancellor will meet with one of the country's vice premiers at an event in London next month forging stronger trade ties with the economic powerhouse.
China's ambassador to the UK said last week that "mutual" agreements would benefit both countries. Liu Xiaoming said: “High-level mutual visits and dialogues will further promote our co-operation in the fields of business and finance.” Mr Xiaoming added that China would "seize the opportunities when they come along” in the wake of June's momentous Brexit vote.
The Prime Minister will also visit India next week on a trade mission as she seeks to firm up Britain's international relationships, with formal deals being agreed once Article 50 negotiations have concluded and Britain has officially left the EU.
Earlier today Priti Patel, the governments Secretary for for International Development, stated that Britain's trade with the rest of the world will be strengthened by Brexit. Speaking on The Andrew Marr show, she said: "We are looking at the new opportunities that leaving the EU will bring; new trade opportunities and taking back control of immigration."
These sorts of deals tend to take years under normal circumstances. Considering the long and complex history between the UK and both China and India, that is certainly likely to be the case in these instances. So it clearly makes sense to get the preliminaries started as soon as possible. Theresa May and the UK government clearly appear to agree.
The auditors of the EU government's books have refused to provide a clean audit opinion for the 21st year in a row, as a result of being "material affected by error".
According to Vítor Manuel da Silva Caldeira, President of the European Court of Auditors, “As in previous years, we conclude that the 2015 EU accounts are reliable but spending continues to be affected by a material level of irregularity”. President da Silva Caldeira observes candidly that “Our estimate of the overall level of error in 2015 is 3.8 %, which is an improvement on recent years but still significantly above our materiality threshold of 2 %”. This simply means that EU misspending is almost double the acceptable error margin of 2%. In 2014, misspent money was 4.4% of the total.
In its Press release an interesting passage says: “As the ECA points out itself, the “level or error” is not a measure of fraud, inefficiency or waste”. The truth is that, legally the ECA cannot tell if the error means fraud, inefficiency of waste. This is the exclusive duty of the Commission to find out, and only in certain cases is done adequately.
What the ECA has to say about that is the following: “Typical errors in this area include: *ineligible costs included in cost claims, *ineligible projects, activities and beneficiaries and *serious infringements of public procurement rules”. Every first year student of law knows that all these simple ‘errors’ may conceal serious crimes. Despite that the Commission wants us to believe that the term ‘error’ is quite innocent and doesn’t mean fraud, inefficiency or waste, this may very well be the case.
In conclusion, the European Court of Auditors has performed its duty by identifying the payments which may conceal serious financial crimes. It’s the Commission’s duty to dig into that. As the ECA plainly states, “The Commission bears the ultimate responsibility for the legality and regularity of the transactions underlying the accounts of the European Union (Article 317 of the Treaty on the Functioning of the European Union – TFEU)”.
Klaus-Heiner Lehne, president of the European Court of Auditors, says the people of Europe have lost trust in EU institutions and the EU Parliament in particular. He offered these comments publicly as he presented the audit findings to the EU Parliament’s Budgetary Control Committee.
The EU’s top auditor said Thursday that the bloc’s institutions have lost citizens’ trust and regaining it would be “a major challenge” in the years to come.
Klaus-Heiner Lehne, president of the European Court of Auditors, made the comments as he was presenting the EU auditors’ 2015 annual report to the Parliament’s Budgetary Control Committee. While the court signed off on the bloc’s 2015 budget, it noted there was still room for improvement in eliminating errors in EU spending.
Lehne said it was important for the institutions to restore faith in the EU by keeping “a good account” of how money is spent.
“People cannot even begin to trust the EU institutions if they do not believe we are looking after their money properly,” Lehne said.
Now it should be clarified that the amount of money identified as being "mispent" by the EU government was about €5.51bn. To people here in the USA who have been numbed to the levels of corruption and incompetence that occur routinely here, this will sound like a laughably small amount. Of course it is in fact more money than most people can truly imagine or conceive of.
However, here in the USA, that amount would have to be increased by adding at least two zeros, and practically speaking, probably three zeros before it gathered any meaningful attention here in this country, such that anyone would make any serious effort to try to do anything about it.
While many of the citizens there are surely as intellectually lazy and tribally oriented in their thinking as most people in this country appear to be, this still will not help them to develop unity around a central EU government or to agree on further efforts at political union or financial integration.
German Defence Minister Ursula von der Leyen has called for Germany to substantially expand its military role, in order to "engage" and to take on more military responsibility within Europe. This is coming at a time of saber-rattling between Russia and the USA with regards to the conflict in Syria.
German Defence Minister Ursula von der Leyen said yesterday (17 October) that Berlin was ready to play a larger military role than in the past in the service of closer European defence cooperation.
“Change is necessary. Isolation and self-blockades will not solve the problems we face in the world, in Europe, or here in our country,” von der Leyen told a biennial gathering of 200 top military officials, citing Russia’s more aggressive actions, the ravages of the Syrian war and brewing challenges in Africa. “Germany is ready to engage … to take more responsibility,” she said. “This is the right path, but it will require an enormous commitment of time and money.”
Von der Leyen said the Finance Ministry had agreed to boost defence spending by a total of €10 billion up until 2020 to help procure equipment and increase personnel. The hike still needs the approval of parliament, and is only a step toward von der Leyen’s goal of spending €130 billion on investment programmes by 2030.
Germany, Europe’s largest economy, and France are pushing to strengthen European defence cooperation after Britain’s June vote to leave the European Union. They insist the effort is not aimed at building a European army. Spain and Italy have backed the proposal, but Britain is resistant, worried that greater EU security cooperation could weaken the NATO alliance.
This follows Angela Merkel's call for a huge unilateral increase in German Defense spending earlier this week.
German Chancellor Angela Merkel said on Saturday that Europe's largest economy would significantly boost defense spending in the coming years to move towards the NATO target for member states to spend 2 percent of their economic output on defense.
But Merkel, addressing a conference of the youth wing of her conservatives, did not specify by how much defense spending would rise. Merkel said U.S. President Barack Obama had told her it could no longer be the case that the U.S. spends 3.4 percent of its gross domestic product (GDP) on security while Germany - its close NATO ally - only spends 1.2 percent of GDP on that.
"To get from 1.2 percent to 2 percent, we need to increase it by a huge amount," Merkel said. In 2016 Germany's budget for defense spending stands at 34.3 billion euros so it would need to be increased by more than 20 billion euros to reach the 2 percent target.
An increase of 20 billion is a bit of an understatement. German GDP is forecast to be about $3.467 Trillion for 2016, which is €3.152 Trillion in Euros. Two percent of that number is €63.01 Billion, less the current €34.3 Billion in defense spending, leaves €28.74, which would be an 84% increase, year over year.
German Chancelor Angela Merkel is proposing this.
Make no mistake about it, this is being driven to a large degree by the UK's withdrawal from the EU, for several different reasons.
The first is that the UK has far and away the biggest military of any nation in Europe. When the UK leaves, the EU will still have the UK's backing in NATO, but the mandate of NATO is limited and any actions would need to have the support of both the US and the UK. So the rest of the EU needs to start taking their own self defense seriously.
However, in this instance, the Germans are attributing it to the need to fend off their old enemies, the Russians. That is probably a politically smarter and more palatable strategy, as the most of the other reasons, including the need to control migration, appears to have a primary inter-EU focus for this proposed military structure, which gives people the willies, especially when it is being proposed by the Germans, apparently to be led by the Germans. Unless they are going to invade the Middle East, that is.
A third reason is the desire of many in the EU to form a United States of Europe. Of course a USE would need its own military and this could be the start of that. It would also have the effect of binding the nations of the EU even tighter together, at a time when many forces appear to be working towards pulling the EU apart, including the fiscal weakness of the Mediterranean countries, the refusal of Eastern EU nations to cooperate with the EU's immigration policies, the unwillingness of the richer nations to open their pocketbooks any further, and of course the recent vote by the UK to actually leave the EU. Efforts to force tighter integration with measures like this appears to be just what are needed by those who are concerned about further disintegration of the EU, and who dream of a United States of Europe.
However, if some people are concerned about the foundations of a Fourth Reich being laid here, given the history in that region, that is at least somewhat understandable. Nevertheless, the Europeans do need to spend more and take more responsibility for their own defense. This increase in spending by the Germans will be a nice start, if it happens. But at the same time, other members of the EU would do well to be exceedingly cautious about how all of this is handled.
Prime Minister's Questions with Theresa May. This was interesting for a couple of reasons.
First is the inadvertent sexual innuendo that Theresa May opened with to start the session. The entire Parliament was in stitches. The Speaker of Parliament was sufficiently amused that Prime Minister May actually admonished him to "calm down" right there on the floor of Parliament.
Next, the issue of Brexit did not come up until 27:20 into the session. This is remarkable, as this question has dominated PMQ's in every session since June 23, the day of the Brexit referendum, until now. Even then, both questions asked on Brexit were presented by the conservatives, and neither included any whinging or screeching about the actual decision, but where more technical in nature. So it appears that for the first time since the vote on June 23, a corner may have been turned and the British Parliament across the spectrum may have actually reached the point that it has accepted the fact that the UK is actually going to leave the EU.
Instead of Brexit, the leading topic was the National Health Service and the severe fiscal and operating issues it is experiencing, as the governing conservatives and their opponents traded accusations and shifted responsibility for this situation. However, no solutions were offered. This is a core driving issue in the UK and across Europe for the fiscal difficulties that most of these countries are experiencing.
Of course we also have our own issues with this sort of an experiment here with Obamacare. But what we see here is that doubling down on more government does not dependably result in a health system that is financially sustainable for the people. There has to be a better way.
Theresa May is attending her first EU summit since the Brexit vote and there is friction in the air.
The leaders of the other 27 countries apparently insisted that the UK would not be granted "access" to the "Single Market" without allowing for "freedom of movement" for people between the UK and the EU. Of course this is obviously just not true.
That would imply that if the UK controls immigration into and out of its boundaries, then the EU would establish a trade embargo with the UK, very much like what the USA has had with Cuba over the last 50 years. That is just not going to happen.
Theresa May was rounded on by EU leaders last night, who demanded that Britain continue to accept hundreds of thousands of migrants if it is to have any hope of accessing the single market. The Prime Minister faced a series of threats from her counterparts as she arrived at her first European Council meeting in Brussels.
European People's Party leader Manfred Weber expressed anger that the UK was blocking some long-term EU defence measures. He told the BBC Radio 4 Today programme: "When somebody wants to leave a club, it's not really normal that such a member who wants to leave a club wants to decide about the future of this club. That is really creating a lot of anger, the behaviour of the British Government.
On arrival, Mrs May said: "The UK is leaving the EU, but we will continue to play a full role until we leave and we will be a strong and dependable partner after we have left. It's in the interests of both the UK and the EU that we continue to work closely together, including at this summit."
Today she will hold talks with Jean-Claude Juncker, the president of the European Commission, who is expected to criticise her over signals that the Government is pushing for a clean break from Brussels rather than a compromise solution.
She also insisted that the UK be included in all summits and negotiations for as long as the UK remains a member of the EU.
British Prime Minister Theresa May told other European leaders Thursday that they should not hold any more summits without the U.K., saying “otherwise it will be hard for me to accept things you agreed among yourselves,” according to a senior EU diplomat.
During her first EU summit in Brussels, May interrupted a discussion on migration to demand that there be no more such meetings that exclude the U.K., the diplomat said. The other 27 EU leaders have held two informal meetings since the British referendum to leave the bloc: one a week after the vote and another last month in Bratislava. They plan to have another informal meeting without Britain in Malta in January.
“I accept that 27 needs to meet, but I want the U.K. to play an active part,” May said, according to the diplomat. Thus, we should meet as 28, otherwise it will be hard for me to accept things you agreed among yourselves. I expect to be fully involved in all discussions related to the EU 28.”
The leaders of the other countries apparently did not like this either. However, they have insisted that the UK obeys all the rules of the EU until it leaves, makes payments until it leaves, etc. They have been entirely inflexible with the UK regarding preliminary talks with the UK and also allowing the UK to begin preparations for trade talks with other countries in advance of the UK's formal independence day.
So, what is good for the goose is good for the gander. Of course the UK needs to be kept involved in any decisions it will be expected to help pay for or to comply with. At the same time, the EU will have private discussions about their approach to the Brexit negotiations.
Theresa May clearly said this in part because the UK does expect to be included in substantive issues other than Brexit talks among the 27, but she also said it as a negotiating lever to force the EU leaders to realize that if they want to impose a zero tolerance policy on any deviations from the rules during this transitional period, that works both ways. There are going to have to be reasonable accommodations and a reasonable amount of flexibility permitted by the EU as well as the UK for this to work.
Last edited by Spartacus713; 10-21-2016 at 07:05 AM..
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