A week which was long on hyperbole and short on progress.
News broke on 22 April that the USA would put a trade deal with the EU27 ahead of a UK trade agreement. This was no surprise to many commentators – one commenting ‘in other news the sky is blue and the sea is salty’. The Times first broke the news, but if you don’t have access through its paywall the Huffington Post provided a good summary as well. The numbers tell the story although they were curiously absent from many of the reports:
- Value of US exports in goods to EU, 2016: $270 Bn
- Value of US imports in goods from EU, 2016: $417 Bn
- So US/EU trade deficit $146 Bn
- Value of US exports in goods to UK, 2016: $55.4 Bn
- Value of US imports in goods from UK, 2016: $54.3 Bn
- So US/UK trade surplus is $1.1 Bn
Apparently it was only after Angela Merkel had told President Trump 10 times that he couldn’t do a trade deal with Germany, only with the EU, that he ‘got it’. The USA exported $49.4 Bn of goods to Germany in 2016 and imported $114.3 Bn of goods, a deficit of $64.9 Bn (all trade data sourced from US Census Bureau).
The week ended with the EU27 endorsing Donald Tusker’s proposed guidelines for negotiations. It took them about one minute to do so, demanding an early resolution of the rights of EU citizens in the UK. There are fundamental differences between the UK and EU approaches to the negotiations. Most notably, the UK wishes to pursue future trade arrangements in parallel with withdrawal terms. The EU27 on the other hand insist that the ‘divorce’ must be finalised before future trade talks can start. Some estimates of the divorce bill reach €60 Bn
Meanwhile Theresa May and EU President Jean-Claude Juncker dined together in Downing Street on Wednesday night. According to the UK government note of the encounter, it was a constructive meeting with PM May repeating the UK’s commitment to a ‘deep and special partnership with the EU‘. Other reports differ markedly, in particular the extensive report carried by the German newspaper Frankfurter Allgemeine Sonntagszeitung (this summary from The Guardian is a helpful review). Jeremy Cliffe, Berlin Bureau Chief for the Economist summarised the issues in a thread on twitter (@jeremycliffe). Speaking at the weekend, Juncker is reported to have said: “I have the impression sometimes that our British friends, not all of them, do underestimate the technical difficulties we have to face”. PM May’s mantra for the EU negotiations is emerging as, “Be patient and ambitious” – makes a change from “strong and stable”.
In France the presidential election was whittled down to two candidates: Emmanuel Macron and Marine Le Pen. Both are currently talking tough on the future of the EU ahead of the election on 7 May although Macron believes in a strong EU while Le Pen seeks stronger borders and more control over immigration. Le Pen has promised a ‘Frexit’ referendum if she wins; Macron calls for fundamental reform. In the light of this and the German elections later in the year it would be wrong not to recognise that the EU27 may fundamentally change during the course of Brexit negotiations. At this stage the direction of this change is far from clear. Angela Merkel’s personal influence is clearly a force to be reckoned with. Witness her influence on Donald Trump mentioned above and her speech this week in which she emphasised the importance of sorting out at least the formula for the divorce bill, and stressed that the UK could expect no special favours in its future relationship with the EU.
The odds that May and Juncker will be walking hand in hand towards the sunset in March 2019? Pretty slim, but despite the rhetoric there is everything to play for – money and trade will talk. ‘Forming, storming, norming, performing, mourning’ are said to be five key stages in any mutual endeavour – perhaps this is just the storming stage.
The key message for anybody running a rural business with any degree of reliance on the EU must continue to concentrate on getting and keeping as economically fit as possible, and ensuring you engage with and understand your key customers and suppliers.
Tuesday (28th March) sees Theresa May in Scotland the day before she services the Article 50 Notice which will begin the two year countdown to Brexit.
Wednesday: Article 50 Notice is due to be served on the EU Commission.
Thursday: Publication of the Great Repeal Bill is due. This will be the major piece of legislation which, despite its title, will repeal very little if anything but will attempt to incorporate existing EU law into UK law ready for Brexit. The House of Lords Select Committee Report (see also the Read All About It page) describes the task in this way:
Both the Government and Parliament face a unique challenge in converting the current body of EU law into UK law—not least in determining the exact scope of that task. The body of EU law is found in a number of different places, and in a number of different forms. Some is embodied in existing UK primary legislation; some in secondary legislation. Other elements of EU law are directly effective in the UK (by virtue of the European Communities Act 1972), but are not actually written anywhere in the UK’s statute book. Yet further elements of the body of EU law are non-legislative in nature, consisting, for example, of judgments made by the Court of Justice of the European Union, regulatory rulings by EU agencies, or in the interpretation of our own courts. The Government will need to take the lead in setting out for Parliament exactly what will be required to preserve the effect of EU law following Brexit.
The task of adapting this body of law to fit the UK’s circumstances following Brexit is complicated not only by the scale and complexity of the task, but also by the fact that in many areas the final shape of that law will depend on the outcome of the UK’s negotiations with the EU. Yet preparations for the amendment of EU law will need to be made before it comes into effect as UK law, in order that those changes will take effect on the day of Brexit. These amendments will sometimes be minor, for example removing references to EU institutions, and sometimes substantial, such as where an EU regulatory regime needs to be replaced with a UK regime.
The degree of uncertainty as to what exactly the process of converting EU law into UK law will involve—and, in particular, the need to take account of the UK’s ongoing Article 50 negotiations with the EU—will almost certainly necessitate granting the Government relatively wide delegated powers under the ‘Great Repeal Bill’, both to amend existing EU law in preparation for the day of Brexit and to legislate for new arrangements following Brexit where necessary.
A Great Fear arising from the Great Repeal Bill is the extent to which government ministers will need to use delegated powers. Will we fall out of one constitutional shackle into another one as we move to Brexit without full Parliamentary scrutiny of new laws?
The three big things wanted from Brexit by UK business are:
- Free movement of goods and services
- Free movement of workers
- Clarity regarding Brexit and future trade negotiations
More than four out of five larger businesses are therefore lobbying government and others on these points.
This information comes from a survey published by Eversheds Sutherland, the legal firm, this week. Their survey received 175 replies from UK businesses. 96% of respondents are worried about Brexit, but 80% aren’t doing anything yet. Two-thirds of respondents expect Brexit to have a negative impact on their business in the next two years.
Worries tend to focus in the following areas:
- economic fears including the prospects for property prices and the effect on consumer confidence.
- Staffing concerns. As well as the EU as a source of labour, over 50% of the respondents have UK staff working in the rest of the EU.
- Regulations, trade, contracts and currency fluctuation make up the remaining areas of principal concern.
The survey does not identify farming as a particular business category, but companies related to food and real estate make up 25% of respondents to the survey. Of all the respondents 44% had not considered the potential impact of Brexit before the referendum at all.
The report authors urge that all companies should consider their ‘Brexit Risk Profile’.
Respondents were hard put to identify any potential Brexit benefits, but the authors consider that the following sectors could benefit:
- Infrastructure and Construction spending
- Procurement and State Aid rules might be simplified
- Currency opportunities might help investment in UK business from overseas
- Private banking services may find themselves in demand for high net worth individuals.
Get Fit and Engage. This was my message to a conference organised by the NFU in Worcester on 3 February.
The difference between the high performers and the ‘average’ farmer in profitability is very wide. In the case of many lowland enterprises, the difference in favour of the high performer is higher than the amount of Single Farm Payment. In other words, the high performer would still be better off without single payment than his average counterpart is with it! Not all factors that affect this will be within the control of the individual, but in each and every case it must be worth examining the figures. Farming is one of the few national industries to benefit from figures collated and published by the government for this purpose via the Farm Business Survey, yet anecdotally these data seem to be woefully under-used.
We have all heard of Open Farm Sunday and many farmers can proudly recite how many trees, hedges and so on they have planted and maintained. But how many farmers can tell you how many people they feed with the produce from their farms? Anecdotally again, very few indeed. Yet if farming is to convey any sense of the value which is derived from farm support payments this is surely a crucial case to consider and make.
My slides for the conference expand on both of these points, and you can see them below:
This link will show you the NFU Press Release about the conference, and this link will show you a similar report on Dan Dalton’s MEP website. Dan, who is MEP for the West Midlands, was the instigator of the conference on behalf of Andrea Leadsom, Defra Secretary.
Today we launch our new page of Brexit links – our key resource for anybody with an interest in Brexit and the rural economy. Click the tab above to see the new page.