Nearly 100 firms have moved to the Netherlands over Brexit fears, say Dutch

Close to 100 companies have moved from the U.K. to the Netherlands because of Brexit and more than 300 others are considering doing the same, according to a Dutch government agency.

“The ongoing growing uncertainty in the United Kingdom, and the increasingly clearer possibility of a no deal, is causing major economic unrest for these companies,” said Jeroen Nijland of the Netherlands Foreign Investment Agency in a statement. “That is why more and more companies are orienting themselves in the Netherlands as a potential new base in the European market.”

The agency said in addition to the almost 100 companies that have already made the switch, 325 are considering a move over concerns about losing access to the EU’s single market. The companies involved are in the finance, information technology, media, advertising, life sciences and health sectors, the Dutch agency said.

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Boris Johnson loses Brexit bite in Biarritz

BIARRITZ, France — Boris Johnson made plenty of noise in Biarritz, but at critical moments, his bark proved worse than his bite.

The U.K. prime minister headed into one of his key meetings of his first major outing on the world stage — a 20-minute head-to-head with Donald Tusk during the G7 summit — on Sunday against a backdrop of newspaper reports claiming he would tell the European Council president the EU would lose out on up to £30 billion worth of U.K. financial obligations in the event of a no-deal Brexit.

But when it came to it, the issue didn’t even come up during their talk on the sidelines of the summit in the coastal French town, according to EU officials.

Indeed, for a prime minister who let it be known during his leadership campaign that he would retain the U.K.’s full £39 billion divorce bill, Downing Street’s acceptance that some money must be paid even in the event of no deal represents a climb-down of sorts.

The Sunday Times reported that U.K. government lawyers put the financial obligation in the event of no deal at between £7 billion and £10 billion, but following the Tusk meeting, Downing Street declined to put a figure on it.

There was also a sense of anti-climax about Johnson’s challenge to Donald Trump on trade.

The £39 billion was a figure “attached to the Withdrawal Agreement,” agreed by Theresa May, a U.K. government official said. “If we leave without a deal, then obviously the Withdrawal Agreement no longer stands.”

“If we are to leave without a deal, there will be substantial sums that we can spend domestically,” the official added, but didn’t say how much. Johnson “didn’t discuss figures,” the official said.

There was also a sense of anti-climax about Johnson’s challenge to Donald Trump on trade. The prime minister had positioned himself before the summit as a defender of the principles of free trade and open economies. But in comments to the press ahead of his one-hour meeting with the U.S. president, amid bellicose rhetoric from Trump on China, Johnson mustered only what he admitted was a “faint, sheep-like note of our view on the trade war.”

“We’re in favor of trade peace on the whole, and dialing it down if we can,” he said. Trump barely seemed to notice.

Britain’s Prime Minister Boris Johnson (right) meets European Union Council President Donald Tusk (left) at the G7 summit on August 25, 2019 in Biarritz, France | Pool photo by Neil Hall/Getty Images

Finding a way through

Johnson began his second summit day with a 7 a.m. swim in the Atlantic, a dip which he later used as part of an analogy for his Brexit strategy. Monitored by a French security team on paddleboards and boats and accompanied by the U.K.’s ambassador to France Ed Llewellyn, he said he had swum all the way round a rocky outcrop just off the beach.

“Let me give you a metaphor. I swam round that rock this morning. From here you cannot tell there is a gigantic hole in that rock. There is a way through,” Johnson said during a TV interview later in the day. “My point to the EU is that there is a way through, but you can’t find the way through if you just sit on the beach.”

Actual detail on the way forward was in short supply, however.

Both sides said the Tusk-Johnson meeting took place in a positive atmosphere (Saturday’s trading of “Mr. No Deal” barbs did not get a mention either). But there were few signs of progress. The EU is waiting for the U.K. to put forward what Tusk calls “credible alternatives” to the Northern Ireland backstop plan — a pillar of the Withdrawal Agreement — before they countenance a formal negotiation.

Reflecting the circular dispute in which the two sides find themselves, the U.K. official countered: “We’ve always been ready to talk … if you’re talking about a formal negotiation, the EU have to be willing to reopen the Withdrawal Agreement because the Withdrawal Agreement simply cannot pass through parliament.”

The question of parliament, and what it will try to do to prevent Johnson from delivering on his pledge to take the U.K. out of the EU — deal or no deal — on October 31, continued to dog the prime minister during the summit.

In a reminder of the battle waiting for him at home, former Chancellor Philip Hammond sent a strongly-worded letter on Sunday demanding Downing Street withdraw anonymous briefings which last week suggested a former minister was responsible for leaking documents that painted a bleak picture of the potential impact of a no-deal Brexit. Hammond had fallen under suspicion for the leak, something his team has denied.

Johnson himself told the BBC in Biarritz that the probability of a deal was now “touch and go.”

“I am writing on behalf of all former ministers in the last administration to ask you to withdraw these allegations which question our integrity, acknowledge that no former minister could have leaked this document, and apologize for the misleading briefing from No. 10,” Hammond wrote.

He and other anti-no deal Conservative MPs have indicated a willingness to back Johnson if he makes a genuine push for a deal with the EU. But their patience will run out quickly if there are no substantive talks soon, and a parliamentary move to block Johnson heading for no deal could happen as soon as MPs return to Westminster in early September.

Johnson himself told the BBC in Biarritz that the probability of a deal was now “touch and go” — a significant downgrade on his previous prediction that no deal was a “million to one” scenario.

So far, his Biarritz outing has given little cause to believe the trend will reverse any time soon.

This article is from POLITICO Pro: POLITICO’s premium policy service. To discover why thousands of professionals rely on Pro every day, email pro@politico.eu for a complimentary trial.

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Johnson and Trump eye US-UK trade deal ‘within a year’

BIARRITZ, France — U.S. President Donald Trump wants a trade deal with the U.K. by the summer of 2020, U.K. Prime Minister Boris Johnson said following their meeting at the G7 summit.

Acknowledging that a 12-month timetable for a post-Brexit pact with Washington was “very fast,” Johnson nevertheless said he’d “love to” to deliver an agreement that quickly.

“There’s an opportunity to do a great free trade deal with the United States,” Johnson told ITV News. “The president is very gung-ho about that and so am I.”

Johnson made a point of criticizing some elements of U.S. protectionism in his meeting with Trump, acknowledging “tough talks ahead” and highlighting barriers to U.K. food produce entering the American market.

“I don’t think people realise quite how protectionist sometimes the U.S. market can be,” he told ITV. “but what I’m saying to Donald … is, you know, this is a big opportunity for both of us but … we need to see movement from the U.S. side.”

“They want to do it within a year, I’d love to do it within a year, but that’s a very fast timetable”

Johnson also told the BBC that a year-long timetable “is going to be tight” but that suggestions a negotiation could last “years and years” were an “exaggeration.”

A trade deal could face domestic resistance on each side of the Atlantic. While the U.K. government has said it will not change animal welfare standards to allow U.S. products into the U.K., American negotiators will push hard for a deal that benefits their farmers. Senior Democrats in Congress have also warned that they would block any trade deal if the U.K.’s exit from the EU were to destabilize the peace process in Northern Ireland.

The U.K. cannot begin substantive negotiations on trade, or strike new deals, until it has left the EU, which it is currently scheduled to do on October 31.

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Trump admits ‘second thoughts’ on China, but predicts trade win

BIARRITZ, France — Donald Trump today predicted that Beijing would blink first in its trade dispute with the U.S. but also made a rare confession that he had entertained doubts about whether the escalating tit-for-tat tariff duel was the right course.

Speaking ahead of a meeting with U.K. Prime Minister Boris Johnson, the U.S. president insisted that the Chinese “want to make a deal much more than I do,” but added that he had “second thoughts about everything.”

In a lively exchange with reporters ahead of their meeting at the G7 summit in Biarritz, Trump and Johnson heaped praise on one another but could not hide significant divisions over Trump’s approach to trade and to Russia.

Taking on the increasingly widespread accusation that the U.S.-China trade war is tipping the world into a downturn, with U.S. stocks lurching into a tailspin on Friday, Trump suggested that the media wanted a recession because “maybe that’s the way to get Trump out.”

“Our country is doing really well, we have horrible trade deals but I am straightening them out,” he said. “The biggest one by far is China.”

“We are in favor of trade peace on the whole. The U.K. has profited massively in the last 200 years from free trade” — Boris Johnson, U.K. prime minister

Johnson, meeting Trump for the first time as prime minister, gently demurred, venturing what he called “a faint, sheeplike note of our view on the trade war.”

“We are in favor of trade peace on the whole,” he said. “The U.K. has profited massively in the last 200 years from free trade.”

As if to prove Johnson’s point about the faintness of the U.K.’s voice, Trump seemed to have no sense that other countries were pressing him to back down.

“Nobody’s told me that,” Trump shot back after a reporter asked if allies were pressuring him to “give up” his tariff-led efforts to force a trade agreement with China.

Trump and U.K. Prime Minister Boris Johnson heaped praise on one another ahead of their meeting | Pool photo by Stefan Rousseau/Getty Images

“Nobody would tell me that,” he added. “I think they respect the trade war. I can’t say what they’ve been doing to the U.K. and to other places, but from the standpoint of the United States, what [China] has done is outrageous.”

The U.K. finds itself in an awkward position at the G7, seeking to lobby Trump over a post-Brexit trade deal, while also remaining consistent with its long-term foreign policy stance in favor of free trade and other issues. On key dividing lines between the U.S. and European allies, including policy on Iran and Russia, the U.K. is far closer to France and Germany than the U.S.

Asked about the possibility that Trump could invite Russian President Vladimir Putin to the G7 next year — a proposition that has little support beyond the White House — the U.S. and U.K. leaders said Russia had been the subject of a “lively” discussion at the summit dinner on Saturday evening.

“We had a very good discussion on Russia and President Putin, a lively discussion, but really a good one,” Trump said.

“It was lively,” Johnson agreed.

On Brexit and the prospect of a U.K.-U.S. trade deal, Trump said he had been “stymied” from moving quickly on negotiations by the previous Downing Street administration of Theresa May but that Johnson was “a different person.”

The U.K. and the U.S. cannot enter substantive negotiations on trade or strike a deal until the U.K. has left the EU. Trump suggested EU membership had been an “anchor around their ankle” for the U.K.

Asked what advice he would give Johnson on Brexit, Trump said: “He needs no advice, he’s the right man for the job. I’ve been saying that for a long time. It didn’t make your predecessor [May] very happy.”

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Air Boris blasts into Biarritz

BIARRITZ, France — Boris Johnson was quite clear about what he wanted discuss with the president of the United Sates.

“Cauliflowers!” the U.K. prime minister bellowed over the sound of jet engines as he briefed reporters on his Royal Air Force Voyager plane bound for the G7 summit in Biarritz.

Not just cauliflowers: “U.K. bell peppers,” “wallpaper, pillows and other fabrics,” “British-made shower trays,” and — crucially — “Melton Mowbray pork pies.” All face restrictions to entry to the U.S. market, he said, and he had made the point to Donald Trump and would make it again on Sunday when the two leaders have their first face-to-face meeting of Johnson’s premiership.

Reporters had gathered near the front of the plane for a mid-flight huddle. Johnson, suited and with an uncharacteristically neat collar, clutched a few pages of notes — some typed, some scribbled by hand. He went on for several minutes, while increasingly bemused journalists waited to ask questions about some of the more pressing matters on the G7 agenda: Brexit, the Amazon rainforest fires, the threat of a global economic downturn.

Anyone used to Johnson from his days as foreign secretary and mayor of London would have recognized the schtick: distract and divert with humor, and hope to avoid scrutiny. Even Johnson knows his routine has been rumbled. The Q&A would now begin, he said at last, “having cunningly exhausted as much time as I can with this lengthy but very, very important recitation of the problems British exporters face in the U.S.”

“President Trump has pioneered a quite remarkable way of communicating directly with the electorate” — Boris Johnson, British prime minister

In fairness to Johnson, he then fielded questions happily for 10 minutes, his ease in front of the press in stark contrast to his predecessor Theresa May, whose own briefings on ‘May Force One’ were curt, uncomfortable and sometimes difficult to hear over the sound of the engines. Then again, he is a former journalist who has spent a good part of his life talking to fellow hacks and clearly enjoys their company.

Only the imminent landing of the plane stopped him from talking for longer. “We’ll get thrown off the plane if I don’t get you sat down,” said one Downing Street aide to reporters, as the RAF crew politely but firmly requested everyone return to seats for landing.

“Are you getting used to being prime minister?” one reporter asked before heading back to their seat. “Yes!” Johnson replied. “At last. It took a while.”

New captain, same course

Fellow G7 leaders seeking to get a handle on what kind of British prime minister they are dealing with could still leave the summit perplexed.

Johnson with French President Emmanuel Macron at the G7 meeting | Pool photo by Andrew Parsons/Getty Images

Johnson seems to face both ways. His enthusiasm for Brexit, and his free-wheeling diplomatic style appear to place him firmly in the Trump camp. But on other areas of substance, his decisions to maintain continuity with British foreign policy on questions like climate change and Iran put him alongside Angela Merkel and Emmanuel Macron.

The split personality was on display on RAF Voyager. He spoke of his horror at the Amazon fires and listed biodiversity, free trade and girls’ education as his three key summit priorities.

His shopping list of grievances against Trump and U.S. trade policy was in part an attempt to amuse, in part very deliberate positioning of the U.K. in favor of internationalist free trade over protectionism (although he was clear some things were “completely off limits” for the U.K. in any trade deal, including the National Health Service.)

Asked about the U.S.-China tariff stand-off, he delivered a sharp rebuke to Trump (and to China) warning that those imposing tariffs “risk … incurring the blame for the downturn in the global economy.”

But in the same breath he lavished praise on the U.S. president. Asked if he was flattered by comparisons to Trump, he noted that it was “the most important thing for any prime minister of the U.K. … to have a very close, friendly relationship with our most important ally.”

“President Trump has pioneered a quite remarkable way of communicating directly with the electorate. My impression is that is also popular with large numbers of people in our country,” he said. (That’s not what Britons are telling pollsters — according to YouGov, only 21 percent of British people have a positive opinion of Trump and 67 percent negative.)

Brexit battles

But while a meeting with Trump on Sunday is the centerpiece of this G7 for Johnson, the most pressing issue in his in-tray at home, Brexit, still overshadows everything.

He waded into a row with European Council President Donald Tusk, who warned Saturday that Johnson risked going down in history as “Mr No Deal.” Johnson suggested it was Tusk who might earn the label if the EU refuses to agree to the U.K.’s demand to re-open May’s Withdrawal Agreement and scrap the Northern Ireland backstop plan for avoiding a hard border.

Asked about his relations with Tusk, and the European Council president’s comment that those who promoted Brexit without a plan had a “special place in hell”, Johnson joked with reporters that he didn’t want to get into “post-Brexit eschatology with the president of the Council.”

‘Eschatology’ — referring to the field of theology concerned with death, judgment and the final destiny of humankind — is not a word that commonly featured in Theresa May’s clipped press briefings.

For Boris Johnson, Brexit still overshadows the entire agenda | Isabel Infantes/AFP via Getty Images

But while the former prime minister made an art of giving unrevealing answers, Johnson’s own bombastic style can also be a way of dodging difficult questions. Pressed on whether he would bring forward the “credible alternatives” to the backstop that the EU is demanding as the basis for further talks to avoid a no-deal Brexit, he fudged it. There were “a large range of alternative arrangements” which “will be discussed with our friends in the coming weeks,” he said.

Asked what he would do if the U.K. parliament legislated for a Brexit delay, Johnson swerved again. “It’s parliament’s job now to respect not just the will of the people but to remember what the overwhelming majority of them promised to do over and over and over again and that is to get Brexit done,” he said.

Two sides talking past each other on Brexit, and a parliamentary battle waiting at home. May Force One may have made way for Air Boris, the prime minister’s style of communication may be the polar opposite to his predecessor’s — but Britain still faces the same tricky course to avoid a crash landing.

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Julian Brazier: How Johnson should try to get the backstop dropped

Sir Julian Brazier is a former Defence Minister, and was MP for Canterbury from 1987-2017. He is Chairman of a security company.

Boris Johnson is right to ‘do or die’ for Brexit on October 31st. As the first crack starts to appear in the EU edifice, with Angela Merkel’s reference to 30 days, it is right that No Deal planning continues relentlessly, both to keep up the pressure and in case there is no agreement.

Many of the fears from the anti-No Deal camp will prove to be exaggerated or groundless; some must be – and are being – tackled as a priority. This article seeks to address the one really serious danger which could sour the whole process and make our departure a very different business from the government’s intent. We need to examine what happens to the Irish border under No Deal if the EU rejects our proposals for alternative arrangements.

I suspect I was not the only supporter of the Leave Campaign who campaigned hard to take back control, but harboured doubts on this one area. No sane politician of any ilk wants to see an upsurge in the paramilitary groups – a ghastly euphemism for terrorists and organised criminals.

Yet the mishandling of the withdrawal negotiations by the last Prime Minister has left us with a real danger that exactly this may happen. By agreeing to a Withdrawal Agreement entirely separate from a trade agreement supposed to follow it, she left the Irish border issue up in the air – allowing the EU free rein to wheel out the infamous backstop, an arrangement that no sovereign country should contemplate.

The problem for our government, as it bravely faces an intransigent EU, working hand in hand with some UK politicians, journalists, big business lobbies, academics and others, is that the Irish border issue cannot be brushed aside; terrorist movements, from Peru’s Shining Path to the Taliban, have thrived on racketeering and smuggling. If we were simply to move to WTO rules without enforcing the duties which we would be required by those rules to introduce, we would be making a present to the terrorist gangs. They continue to commit occasional murders in the province, and attempted another attack on the police last week. The new arrangement (or lack of arrangements) must not end up as the kind of boon which prohibition was to Chicago’s nascent gangs.

Resurgent terrorism should concern us greatly, but the problems would not stop there. Nancy Pelosi’s threats to block a trade deal with the US would crystallise fast were American TV screens filled once more with stories of terror in Ireland. Moderate opinion in Britain would shift, and the more extreme Remainers would have just what they need to launch a campaign to re-join.

So what should we do? It seems to me that this issue has to be approached at several levels, starting with dialogue with Ireland. The fact is that big players like Germany and France will not face the economic hammer blow which Ireland would suffer in the event of no deal, with so much of its trade either with the UK or via traffic across the UK.

Realisation of this is starting to dawn in the Republic, with growing concern among some journalists. Polls are showing increasingly divided views on Leo Varadkar’s policy, emphasised again in his recent much-publicised phone call with the Prime Minister. This shift should not give us the false hope, however, that Irish policy can be transformed by economic realities alone.

The Irish national narrative is rooted – with good reason – on past predations by the British, just as ours is still is framed by our lonely stand at the beginning of the Second World War. As Churchill put it “Cromwell in Ireland, disposing of overwhelming strength and using it with merciless wickedness, debased the standards of human conduct and sensibly darkened the journey of mankind”.

The horrors of the nineteenth century potato famines, the behaviour of absentee English landlords for centuries and the armed struggle for independence in the twentieth century are all still part of the Irish psyche. Without a game-changing approach from us, Varadkar can probably maintain his hard line by propagating the lie that our rejecting the so-called Irish Backstop is one more example of an over-mighty Britain bullying and marginalising Ireland.

Our new Prime Minister is a gifted communicator. He should speak to the Irish people over the heads of their Taoiseach and do so in terms which they can sympathise with. Either by means of a visit to Ireland or by getting Irish journalists into Downing Street, he should explain to the Irish exactly what the Northern Ireland backstop means for Britain. He should spell out the proposed indefinite subjection to diktat by Brussels with no say. To put it in language they would appreciate, he should ask the Irish people to consider whether those people who struggled for Irish independence in the nineteenth and twentieth centuries would have agreed to such terms.

This gambit could work – it certainly has a better chance than assuming that Varadkar will act in Ireland’s best economic interests. If it does, and public opinion forces Varadkar to change course, then it is a much shorter step to persuading EU leaders, especially Angela Merkel, to drop the Northern Ireland backstop and deal with the border in the planned trade agreement.

If it doesn’t work, the solution will have to be more complicated. To start with, we should remember that WTO rules are just that. As we would become dependent on WTO rules for most of our trade, we would rightly want to be seen to support the institution. Nevertheless, while Britain has a long history of standing by its treaty obligations as a firm supporter of a rules-based world order, WTO rules do not apply directly in UK law. Furthermore, there is a long backlog of cases awaiting decision by the WTO Appellate Body.

So in the event of No Deal – and hence no agreed alternative arrangements – we should announce that we were putting on hold the implementation of certain WTO tariffs for Irish trade on those items most likely to offer opportunities to organised crime in Northern Ireland. Agricultural livestock and products would figure large in this plan and – unlike in mainland Britain – generous subsidy to protect farmers will not do the trick if large price differences across the border offer enhanced opportunities for smuggling.

Next, we need to introduce best practice from existing well-managed borders, like Switzerland. The key must be to use existing technology, based on satellites, cameras and perhaps drones, but networking it in an innovative fashion, bringing live feed together with tax databases and a range of other sources of information. I introduced one company with impressive experience in this field (not commercially linked to my own operation) to the informal but rigorous and well-grounded commission headed by Nicky Morgan and Greg Hands. I understand they found its input useful. It is likely that Ireland would co-operate with this approach once Brexit had occurred, but a great deal could be done on a unilateral basis.

Once workable systems were in place, we could tidy up the gaps in our WTO compliance and introduce whatever tariffs are required. If someone took us to the WTO tribunal in the meantime, our lawyers should be able to find small print around national security – or some other way of adding to the delays in that lengthy process – to give us time to get the new systems implemented and working.

Of course, No Deal would be followed by negotiations between Britain and the EU, and Irish arrangements would help to shape those negotiations, including exerting pressure on the EU to go light on tariffs affecting British-Irish trade. (That was, of course, the original reason why the EU insisted on dealing with the border before the trade agreement).

A great deal depends on Boris delivering Brexit on October 31st, including our national credibility, public support for our institutions and the very survival of the Conservative Party. But we have to get the Irish border issue right, whether we have negotiated a deal without the backstop or left with No Deal.

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Boris Johnson’s double Donald dilemma

LONDON — For Boris Johnson, G7 will be a tale of two Donalds.

The new U.K. prime minister flies into Biarritz Saturday lunchtime determined to show the world Britain has its mojo back. The centerpiece of his weekend is a meeting first thing Sunday with Donald Trump. Hours later, Johnson will come face-to-face with Donald Tusk.

“My message to G7 leaders this week is this: The Britain I lead will be an international, outward-looking, self-confident nation,” Johnson said in his pre-summit statement. Those who think Brexit — even the no-deal Brexit he is prepared to enact in just 10 weeks’ time — means the U.K. retreating from the world are “gravely mistaken,” he added.

If the Trump meeting is likely to be hailed by Johnson as an exemplar of the U.K.’s new place in the world, the Tusk one will be a reminder of the fractious Brexit process he needs to navigate before he can pursue that agenda with gusto.

In truth, neither head-to-head will be easy. While in style Johnson might appear to share the straight-talking rambunctiousness of his North American ally, in substance many of the prime minister’s policy positions remain closely aligned with those of his Continental counterparts. Play too nicely with one and he risks antagonizing the other — or worse still being stranded, lonely in the middle.

European Council President Donald Tusk | Frederick Florin/AFP via Getty Images

Trump might talk up his good relations with Johnson, choose the prime minister as his first bilateral of the summit and discuss the agenda with him by phone beforehand, and Johnson may enjoy sharing the limelight with a U.S. president, but the two countries are far apart on key foreign policy questions, particularly on Iran and climate change. Regarding a new U.S.-U.K. trade deal, despite public confidence, officials in London are under no illusions about the serious hurdles that need to be overcome.

As for Tusk-Johnson, the European Council president said in February said there was a “special place in hell” for those who championed Brexit without a plan to carry it out. Most thought he was referring to Johnson, the champion of the 2016 Vote Leave campaign, who was then a backbench MP opposing Theresa May’s Brexit deal.

As fellow leaders, their diplomatic relations haven’t been much more cordial. This week Tusk responded to a letter from Johnson requesting that a key pillar of May’s deal — the Northern Ireland backstop — be removed by effectively accusing the U.K. prime minister of wanting to reimpose a hard border on the island of Ireland.

And despite some warm words and mixed messages from Emmanuel Macron and Angela Merkel this week, a new deal before October 31 that could avert an economically disruptive, crash-out Brexit still looks unlikely, and Johnson knows it.

“I want to caution everybody, OK? Because this is not going to be a cinch, this is not going to be easy. We will have to work very hard to get this thing done,” he told broadcasters on Friday. No wonder then that the other message Johnson intends to convey to Tusk on Sunday, according to officials, is that the U.K. really means it (this time) when it says it will leave with no deal.

Looking both ways

The paradox of Boris Johnson’s G7 agenda is that while the Trump meeting is at its heart, his other key messages could hardly sound more different to those of the U.S. president.

A convinced advocate of global action to combat climate change and protect the environment, the U.K. prime minister joined Emmanuel Macron in advance of the summit in highlighting the seriousness of the “heartbreaking” Amazon rainforest fire.

On Russia, he opposes Trump’s wish to invite Vladimir Putin back into the G7 fold, and on perhaps the most pressing foreign policy issue on the summit agenda — Iran — he stands with France and Germany.

U.K. officials indicated in advance of the summit that there was no change in the U.K.’s support for the nuclear deal, and that London, despite the change of leadership, was still not supportive of the U.S. “maximum pressure” on Iran strategy.

New Foreign Secretary Dominic Raab is, one official said, more inclined to a hardline stance on Iran than his predecessor, Jeremy Hunt (Johnson’s vanquished leadership rival), but the overall direction of U.K. foreign policy — on this and much else — has not radically changed.

This much was clear from Johnson’s pre-summit statement.

“We face unprecedented global challenges at the very time when public trust in the institutions designed to address them risks being undermined,” he said. “International tensions and new trade barriers are threatening global growth. Violence and conflict are trapping countries in poverty, depriving children, and particularly girls, of the universal right to education. Climate change is accelerating the devastating and unprecedented loss of habitats and species.”

It’s not a pitch tailor-made to appeal to Donald Trump.

Nor will the two leaders necessarily find an easy path to a new trade deal between their countries. In private, U.K. officials recognize the difficulties involved in securing a post-Brexit trade deal with the U.S. — namely ensuring protection for U.K. farmers and the NHS, while persuading Washington to open up the U.S. market to the U.K.’s services firms.

Boris Johnson (L) and U.S. President Donald Trump greet before a meeting on United Nations Reform at UN headquarters in New York on September 18, 2017. | Brendan Smialowski/AFP via Getty Images

Talk of a series of mini-deals, promoted by Trump’s national security adviser John Bolton on a recent visit to London, is not considered viable in London, and Downing Street is downplaying any suggestion of a timetable for negotiations emerging from the Trump-Johnson meeting.

“The prime minister and president have both repeatedly expressed their commitment to delivering an ambitious U.K.-U.S. free-trade agreement and to starting negotiations as soon as possible,” a Downing Street spokesperson said.  “Of course we want to move quickly, but we want to get the right deal that works for both sides.”

Johnson’s real fight back home

And then, of course, there’s Brexit.

Angela Merkel’s suggestion on Wednesday of a 30-day timetable to find a solution briefly raised hopes in the U.K. that the EU might climb down from its refusal to countenance a re-opening of the legally binding Withdrawal Agreement struck with May.

However, EU officials have been clear that there has been no change of position and that it is still up to the U.K. to come up with what Tusk on Monday called “realistic alternatives” to the Northern Ireland backstop plan.

While Macron hinted on Thursday at more talks led by the EU chief negotiator Michel Barnier, the EU has not dropped its insistence that the backstop stays in the Withdrawal Agreement.

British Prime Minister Boris Johnson | Dan Kitwood/Getty Images

As Merkel in particular emphasized, the non-legally binding Political Declaration on the future relationship between the U.K. and the EU — the second element of the Brexit deal — can be changed, and Barnier is authorized to start talking about that. But without changes to the Withdrawal Agreement the U.K. won’t be at the table — so deadlock looks likely to persist.

EU leaders also have half an eye on Johnson’s home front. MPs return to parliament in little over a week’s time, and opposition parties and Conservative rebels are expected to fight tooth and nail to block Johnson from taking the U.K. out of the EU on October 31 without a deal. While it is not yet a public position, many government officials are convinced Johnson will seek an election to prevent the House of Commons — where he has a majority of one — standing in his way.

For now, that is where Johnson’s real fight lies, and until he wins it, his fellow G7 leaders will be justified in wondering how long his tenure as a member of their exclusive club will be.

David Herszenhorn and Gaby Orr contributed reporting for this article.

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Commission dismisses internal document outlining policy plans

The European Commission on Friday said an internal document outlining EU policy ideas — obtained by POLITICO — should be given “zero credence” and was not “mature enough” to make it to President-elect Ursula von der Leyen’s desk.

A 173-page wish list dating from July contains proposals from across the Commission’s directorates-general for policies ranging from creating a €100 billion wealth fund to bolster “European champions” against American and Chinese business rivals, to putting beehives on public buildings and placing greater restrictions on social media.

“Let me clarify that no such project or plans exist that are mentioned in several articles,” Mina Andreeva, the Commission’s chief spokesperson, told reporters. “Draft internal brainstorming documents from the services should never be confused with policies. The document from the services that you refer to has not even been seen by the political hierarchy of the Commission, nor by the president-elect or her transition team, let alone endorsed in any way,” she said, adding that “this leaked document should therefore be given zero credence.”

Asked why the Commission’s leadership had not looked at a document that involved all directorates-general and took EU resources to produce, the spokesperson said that “we have tens of thousands of Commission officials who have certainly bright and good ideas, but nothing is put forward by the Commission without political backing. We are in the run-up to forming a new Commission, and the president-elect has made her priorities clear in the political guidelines which will serve as the guidance for what will follow and what will be put forward to the deliberation of the new College.”

“It’s clearly not a document that was mature enough, since it did not make it, or did not reach neither the Commission nor the president-elect or her transition team,” Andreeva said.

The ideas in the document — including a European Future Fund that would invest more than $100 billion in equity stakes in high-potential European companies, as well as an aggressive new framework to slap tariffs unilaterally on the United States — would put the bloc on a Fortress Europe path against other global powers.

Responding to the plans on Thursday, a spokesperson for von der Leyen said that “nobody in the [president-elect’s] transition team has heard of that mysterious European Future Fund.”

The document suggests other expenditures for the next Commission, outlining plans to consider an EU-wide unemployment insurance program within the first 100 days of the new administration. That scheme, floated by von der Leyen in her maiden speech, could see the EU directly pay benefits to unemployed people.

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UK government to scale back use of Brexit gagging orders

LONDON — Businesses and trade bodies working with the U.K. government on no-deal preparations will no longer be routinely required to sign non-disclosure agreements, known as NDAs.

The legally binding contracts have been used by the U.K. government in discussions with industry about the implications of a no-deal Brexit, but some trade bodies complained the NDAs hindered their ability to explain the impact of crashing out of the EU to their members.

The decision to scale back the use of NDAs was made by ministers at a daily operations meeting, codenamed XO, this week. The U.K. government said NDAs would still be used when strictly necessary, including to protect the interests of third parties.

“As we continue our preparations for Brexit on October 31, it makes no sense to engage processes which hinder constructive debate, transparency and exchange of information,” a U.K. government spokesperson said.

Sky News reported in April that hundreds of the orders had been made as part of the government’s no-deal planning.

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Macron’s masterplan for Trump, the universe and everything

PARIS — Another G7 summit blown apart by Donald Trump? Not on Emmanuel Macron’s watch.

Last year’s gathering of G7 leaders ended in chaos after Trump abruptly announced via Twitter that he would not support the just-agreed summit communiqué, apparently out of anger over comments made by the host, Canadian Prime Minister Justin Trudeau.

The French president is determined not to let his American counterpart steal the show this year in the beach town of Biarritz in southwest  France so he has come up with a cunning plan: There will be no communiqué.

But that doesn’t mean Macron lacks ambition when it comes to the summit, which will run from Saturday to Monday.

As Macron expounded in a two-and-a-half-hour briefing for reporters on Wednesday night, he views the gathering as a key moment in his drive to save what he sees as an endangered multilateral liberal world order.

He will have his work cut out, and not just when it comes to trying to keep Trump and the other leaders even vaguely on the same page. The summit takes place at a time of multiple crises around the world.

Trump is engaged in feuds on multiple fronts — from a trade war with China to a bizarre battle with Denmark over the idea of buying Greenland. New U.K. Prime Minister Boris Johnson is immersed in battles at home and abroad over Brexit. Italian Prime Minister Giuseppe Conte will likely attend the summit after his government collapsed. Angela Merkel is facing a weakening German economy.

And that’s without even getting into the deep international disagreements over issues as diverse as Iran and climate change.

In his marathon briefing, Macron declared that France has a “particular responsibility” in a pivotal reshaping of the global liberal order. Otherwise, “Europe is at risk of fading … and losing its sovereignty,” or worse — “becoming vassals.”

Here are some of the key points in Macron’s strategy for handling the G7.

Trump containment

Though Macron conceded he and the U.S. president “don’t think the same thing about the global order, we don’t have the same objectives,” (which are pretty fundamental disagreements), he highlighted that “President Trump hasn’t been to any country as often as he has been to France. The G7 will be his fourth visit since the beginning of my term, [this] is useful to coordinate things because otherwise, divergences grow.”

And while Macron is aware that “with President Trump, when it’s a campaign promise, you can’t convince him otherwise,” as was the case with the U.S. withdrawal from the Paris climate agreement, the Iran nuclear deal, and waging a trade war with China, all of which have had destabilizing effects on Europe, he chose to focus on when they’ve “been able to achieve real things together.” As examples he cited convincing Trump not to pull all U.S. troops out of Syria and the U.S. president’s decision to carry out joint airstrikes in Syria in 2018 with the U.K. and France in response to a reported chemical weapons attack by the Syrian government.

No backing down on Brexit

Macron, who is having a working lunch with Johnson in Paris on Thursday, didn’t mince his words on the possibility of a no-deal Brexit.

“A hard Brexit … will be the responsibility of the British government,” he said.

“It was the British people who decided on Brexit, and the British government has the possibility up to the last second to revoke Article 50,” Macron continued.

He said a renegotiation of the Brexit deal to remove the Irish border backstop provision, as suggested this week by Johnson, “is not an option … because what Johnson suggests in the letter he sent … is to choose between the integrity of the European market and the respect of the Good Friday Agreement. We wouldn’t choose between these two.”

And as for the much-vaunted trade deal the U.K. would make with the U.S., Macron argued it will not compensate for the cost of Brexit, and would come at “the cost of a historic vassalization.”

“I don’t think it’s the will of the British people … to become the junior partner of the U.S.”

Russia rebuff

A day after the White House claimed Macron suggested that Trump invite Russia to the G7 next year, Macron rebuffed that claim.

He said major progress in the conflict in Ukraine would have to be found before Moscow could be welcomed back into the fold.

“It’s pertinent that, eventually, Russia be able to return to the G8 but … the indispensable preliminary condition … is that a solution be found, in connection with Ukraine, on the basis of the Minsk Agreement to resolve the issue,” he said.

He went further, in what could have been a dig at Trump, who has expressed support for reinstating Russia to the G8, apparently without conditions.

“I think saying that Russia can return to the table without any conditions is enacting the weakness of the G7,” he said. “It would be a strategic mistake and a profound injustice.”

Nevertheless, Macron said he is cautiously optimistic that conditions can be met to hold a summit in the coming weeks in Paris between Ukraine, Russia, France and Germany to negotiate the end to the conflict in Ukraine.

“We can go forward on an exchange of prisoners, I had a long conversation with [Vladimir Putin] on this and he is ready, we can move forward on the Donbass [region], on demilitarization,” he said. “The [Russian and Ukrainian] presidents seem ready to go forward.”

Doubling down on tech tax

Macron said it was a “crazy” system that allows giant companies like Google or Facebook to avoid paying taxes in countries where they operate, giving them access to a “constant tax haven.”

But he stressed that the 3 percent digital tax he spearheaded —  adopted by nine other European countries after failing to get it adopted on the EU level — did not exclusively target American companies, but rather companies with a certain level of revenue.

The tax drew Trump’s ire, and prompted him to threaten to impose a 100 percent tax on French wine. But Macron pointed out that Trump’s treasury secretary had, along with other G7 finance ministers, signed on last month to the principle of tech companies being taxed in the countries where they make money.

Macron is standing firm on the issue, even if Trump says his European allies blame the French leader when they get criticized for the measure.

“That’s what President Trump told me last night — ‘they all say it’s you,'” Macron recalled. “OK, well I own it.”

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Boris Johnson’s not-so-grand tour

LONDON — Boris Johnson is heading to Europe, but his officials are heading out.

The U.K. prime minister will touch down in Berlin on Wednesday for talks with German Chancellor Angela Merkel as part of his pledge to work with “energy and determination” to reach an agreement with the European Union before the Brexit date of October 31. He heads on to Paris to meet French President Emmanuel Macron on Thursday.

But Johnson has hardly prepared the ground for smooth talks with his EU counterparts.

His call for the EU to drop the Irish border backstop from the Brexit deal agreed with his predecessor Theresa May was sharply rejected by European Council President Donald Tusk.

And on the eve of Johnson’s visit, Britain announced most U.K. officials will stop attending most EU meetings on the future of the Union from September 1. While the government insisted the move “is not intended in any way to frustrate the functioning of the EU,” the message to Brussels is clear: We have more important things to do.

“It is time to remove that backstop, get rid of it, have a total backstop-ectomy and I think then we can make progress” — Boris Johnson, British prime minister

“From now on we will only go to the meetings that really matter, reducing attendance by over half and saving hundreds of hours,” Brexit Secretary Steve Barclay declared. “This will free up time for Ministers and their officials to get on with preparing for our departure on October 31 and seizing the opportunities that lie ahead.”

Against that backdrop, the chances of the two sides bridging their differences look slim as Johnson prepares for a diplomatic blitz in Berlin and Paris, and at a summit of G7 countries in Biarritz at the weekend.

But the prime minister said he would not be put off by the EU’s stance.

“I saw what Donald Tusk had to say and it wasn’t redolent of a sense of optimism. But I think actually we will get there,” he said on Tuesday.

Johnson will meet with German Chancellor Angela Merkel on Wednesday | Halldor Kolbeins/AFP via Getty Images

“There is a real sense now that something needs to be done with this backstop. We can’t get it through Parliament as it is. So, I am going to go at it with a lot of oomph as you’d expect, and I hope we will be making some progress in the course of the next few weeks,” he told broadcasters.

“It is time to remove that backstop, get rid of it, have a total backstop-ectomy and I think then we can make progress,” he said in another interview, with Britain’s ITV.

He also risked riling the EU and members of the previous British government by declaring that ministers under his predecessor had been reconciled to remaining “within the empire of EU legislation.”

Demand for detail

His diplomatic statement of intent came after EU officials spent the day criticizing the lack of detail in a letter from Johnson to Tusk calling for the backstop to be dropped from the Withdrawal Agreement negotiated between the EU and the government of Theresa May.

Officials said there is no clear plan about what would happen if the so-called alternative arrangements to manage customs and regulatory differences as a result of Brexit on the Irish border are not in place at the end of a transition period.

“Replacing the backstop with something that isn’t defined gets rid of the guarantee the backstop was meant to provide. No checks, it’s a joke, it means that the U.K. would accept that products that don’t respect its rules enter its market without control? How long will that hold?” one French diplomatic official said.

European Council President Donald Tusk | Sergei Supinsky/AFP via Getty Images

Tusk took to Twitter to slam a lack of “realistic alternatives” on the backstop. And in a note to EU governments, seen by POLITICO, the European Commission’s task force dealing with Brexit described parts of Johnson’s letter as “inaccurate” and “misleading.”

Ahead of her dinner with Johnson on Wednesday, Merkel struck a constructive note but made clear the EU is not ready to reopen the Withdrawal Agreement.

While the EU would consider “practical” solutions for the Irish border after Brexit, that does not mean reopening the agreement, Merkel told a press conference on Tuesday.

One U.K. government official said that if EU leaders don’t change their position on the backstop, discussions in Berlin, France and Biarritz this week would focus on issues other than Brexit.

No watershed

A second U.K. official insisted the Tusk letter was never going to be a “watershed moment” and had simply set down the U.K. position in writing.

The official said that more specific proposals would first have to be aired in private talks with both EU leaders and the Commission. “The detail will come after those conversations,” the official suggested.

Some British government officials hope that the EU will shift its position if it becomes clear that the U.K. parliament can’t unite around a common position to prevent a no-deal Brexit.

“If I was the EU I would want to know if there is a real coalition to stop a no-deal Brexit,” a third U.K. government official said. “You need to get a majority of parliamentarians on the same page for something, and they aren’t yet.”

“The problem is that nothing has changed. What has it changed? A new government? That’s surely not enough, the approach is the same” — EU diplomat

The problem for Johnson’s government is that EU officials don’t believe he is strong enough politically to force through a no-deal outcome.

Johnson’s threats are not being taken seriously because of his thin majority, and the strength of opposition to no deal in the House of Commons, an EU diplomat said.

Another diplomat added that the EU has little reason to shift position when there was no evidence that any fundamental political realities in the U.K. had changed.

“The problem is that nothing has changed. What has it changed? A new government? That’s surely not enough, the approach is the same,” the diplomat said.

German unity

While EU governments are concerned about the impact of a no-deal Brexit, particularly after the German economy contracted in the second quarter, there is little pressure from industry or opposition politicians in European capitals to reopen the withdrawal text.

The Federation of German Industries, Germany’s leading business lobby group, said in a statement on Tuesday that threats from London of a disorderly exit were “irresponsible.” It was “reasonable” for the German federal government and the European Commission to “continue to stand by the negotiated deal,” the group added.

“It is also in the interest of the German economy that internal market rules are permanently observed at the Irish border. This will only succeed with the backstop,” the trade body said.

The noises from Germany were not supportive of Boris Johnson’s bid to strike a new Brexit deal | Sean Gallup/Getty Images

Franziska Brantner, the European affairs spokesperson for the opposition Green party in Germany, said new negotiations would be “completely unacceptable.”

“Irish peace and European principles prevail over the selfish interests of Boris Johnson and his chaotic Tory troupe,” she told POLITICO.

For Johnson, there is also little domestic incentive to compromise.

Brexit Party leader Nigel Farage, whose party crushed the Conservatives to emerge as the clear winner in the U.K.’s European election in May, criticized Johnson’s focus on the Irish backstop in his letter to Tusk.

“Even without the backstop, this is still the worst ‘deal’ in history,” he tweeted.

Letter reading

On the wing of the U.K. Conservative Party fighting against a no-deal Brexit, opinion was divided about Johnson’s letter to Tusk.

“It’s not a serious or credible negotiating position,” one Tory MP actively working to block no deal told POLITICO.

Former Foreign Office Minister Alistair Burt, another opponent of no deal, warned that if the letter had been “designed largely to reinforce domestic understanding of the government’s current position,” it would not be helpful.

But Burt said it would be encouraging if, along with Johnson’s phone call to Irish Prime Minister Leo Varadkar on Monday night, it indicated there was “a willingness in setting out the PM’s lines, to engage and understand the position of others.”

Tory MP Alistair Burt, a staunch opponent of no-deal Brexit | Helene Wiesenhaan/Getty Images for IMCP

“After nearly a month of little direct communication it is an advance on that. I hope it prompts further efforts to reduce red lines, not reinforce them,” he added.

Another former Tory minister also hoped the letter was simply an “opening shot.”

If not, MPs fear things could turn nasty as Number 10 Downing Street looks to put the blame on the EU and Johnson’s domestic opponents.

“I fear hostile and combative discussions with aggressive language from No. 10 so opponents of no deal can be vilified,” the former minister said.

This article is part of POLITICO’s premium Brexit service for professionals: Brexit Pro. To test our our expert policy coverage of the implications and next steps per industry, email pro@politico.eu for a complimentary trial.

Lili Bayer, Jacopo Barigazzi, Rym Momtaz, Judith Mischke, Emma Anderson contributed reporting.

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UK officials to withdraw from EU meetings from September 1

LONDON — U.K. officials will only attend EU meetings with a “significant national interest,” Brexit Secretary Steve Barclay announced Tuesday.

Attendance will be reduced by more than half, freeing up officials to work on Brexit preparations and post-Brexit trade opportunities, he said.

Officials will start to withdraw from meetings from September 1, unless the U.K. has an interest in the outcome of discussions, such as security, sovereignty, Brexit, international relations and finance.

“An incredible amount of time and effort goes into EU meetings with attendance just the tip of the iceberg,” Barclay said in a statement issued by the Department for Exiting the EU on Tuesday. “From now on we will only go to the meetings that really matter, reducing attendance by over half and saving hundreds of hours. This will free up time for Ministers and their officials to get on with preparing for our departure on October 31 and seizing the opportunities that lie ahead.”

The move comes after Prime Minister Boris Johnson promised to “unshackle” officials from EU meetings in the House of Commons in July. He will attend the October European Council meeting.

The Brexit department said the U.K.’s vote would be delegated in a way that “does not obstruct the ongoing business of the remaining 27 EU members, and a decision about which meetings to attend would be made on a “case by case” basis.

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Boris Johnson insists free movement ’will end’ October 31

LONDON — Boris Johnson’s post-Brexit immigration plan is still “being developed” but he insisted today that freedom of movement “will end” on October 31.

At a regular briefing for journalists, a spokeswoman for the prime minister said “tougher criminality rules” for people entering the U.K. would be immediately introduced, as one example of how the U.K.’s immigration policy would shift from day one after Brexit.

Johnson’s predecessor Theresa May had been planning a “transition” period until the end of 2020 during which the U.K. would continue to have the same obligations as an EU country, under the Withdrawal Agreement negotiated with the EU27. That deal was voted down by parliament and Johnson has called for it to be reopened.

The new prime minister’s tough stance has big implications for a host of industries reliant on workers from abroad such as the farming sector and the National Health Service, and would require immediate changes to immigration checks at airports and ports.

The spokeswoman said the government’s settled status scheme, which May’s government set up to guarantee that EU nationals living in the U.K. before the end of 2020 are able to remain in the U.K. indefinitely, would continue as it had previously been announced.

The Home Office said today that, while EU citizens will have until December 2020 to apply for settled status, it will only be EU citizens living in the U.K. before 11 p.m. on October 31 that will be eligible.

“Freedom of movement as it currently stands will end on October 31 when the U.K. leaves the EU. For example we will introduce immediately much tougher criminality rules for people entering the U.K. Details of other changes immediately on October 31 for a new immigration system are currently being developed and we will set out further plans on that front shortly,” the spokeswoman said.

“The prime minister has obviously been clear he wants to introduce an Australian-style points base immigration system,” the spokeswoman added. Australian visas are allocated in line with criteria including age, qualifications and English language ability.

Home Secretary Priti Patel has sent officials to Singapore to “understand how a well-functioning immigration IT system is developed. Specifically, ensuring we can count people in and out the country,” the Daily Telegraph reported Sunday.

However, concerns have been raised it would be impossible to implement immediate changes because the government has not yet solved the question of how to distinguish between those who were already in the U.K. before Brexit and those who will enter the country post October 31, and because government will not have finished registering all EU citizens already in the U.K. by then.

A Downing Street official privately admitted that in a no-deal scenario there would not be a lot of time available to make a “significant change” to the U.K.’s immigration system and to get a new system ready.

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UK freight industry says it’s ‘shooting in the dark’ on no-deal Brexit

The leak of Operation Yellowhammer, the British government’s no-deal planning dossier, indicates a hard Brexit would be “far, far more potentially disruptive” than industry has been told to prepare for, according to the Freight Transport Association.

The U.K. government must urgently clarify what it predicts the impact of no deal will be for moving goods into and around Britain, James Hookham, deputy chief executive of the Freight Transport Association (FTA), told POLITICO’s London Playbook.

The FTA was particularly blindsided by the suggestion in the leaked document that the government’s own no-deal zero-tariff policy could hit the U.K.’s domestic fuel industry, leading to the closure of two refineries, strikes and disruption to fuel availability, Hookham said.

While he said the FTA had not seen the original Yellowhammer document, Hookham added: “That really frightened me, because that’s clearly got the potential to disrupt all U.K. goods distribution activity and commercial activity, if the domestic fuel supplies are under threat. That’s certainly never been raised with us before.”

He continued: “We’re calling for some kind of independent review of the evidence and the scenarios that the government’s using, just to get it all out on the table. What we’re feeling now is that we’re just shooting in the dark, we’re being asked to prepare for something that we don’t fully understand and that the government’s not prepared to share with us … All of a sudden this isn’t just queues at Dover … this could have a knock-on effect to all domestic goods distribution and that is orders of magnitude more than we were led to believe might happen.”

Any threat to fuel supplies would be a “game-changer,” Hookham said, and urged the government to be open about its expectations to help industry prepare. “What we want now is just some honesty and some clarity. How can we help to mitigate this if we don’t know what we’re trying to solve?”

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Cutting Air Passenger Duty can give us the flying start to our post Brexit future

If there is one tax cut that would show in totemic fashion that post Brexit Britain is truly ‘Open for Business’, it would be to cut Air Passenger Duty (APD). Since its introduction in 1994 by then Chancellor Ken Clarke, APD has increased by 680% for long haul flights and 160% for short haul at the same time that flight costs overall have fallen by 30% as a result of increased competition
amongst airlines. This has left the UK with the highest aviation taxes in Europe and the developed world, more than double Germany, the next highest in Europe.
 
We are competing in a global market for businesses and investors.  As Brexit approaches the new Chancellor must look with urgency at the impact that APD has on creating a truly global Britain. Put simply, APD is not working. It places an unnecessary cost on passengers and prevents a large number of routes from being economically viable, particularly in our regional economies. 
 
Aviation is crucial to our Brexit future beyond the EU. It is perverse that we are taxing planes and routes ‘out of the sky’ that we need to connect us to future trade opportunities.  Research conducted for Airlines UK last year showed that APD prevented a significant number of routes from being financially viable. APD is causing the UK to miss out on new routes like Bristol to Dubai;
Edinburgh to Delhi; and Birmingham to Tel Aviv. 
 
When my colleagues and I press ministers on this, they will often respond that passenger numbers have increased over the last few years so ‘what’s the problem’. Whilst this is true, it masks the real problem. In trade, ‘connectivity is king’. We lag behind our European neighbours in connectivity terms, with Germany having considerably more direct connectivity to China, Japan, South Korea and Brazil than the UK. This connectivity problem is also exacerbated by our regional airports losing routes, with Edinburgh Airport losing its valuable routes to the USA when Norwegian Airlines pulled the routes citing sky high APD as a key factor.
 
Over the last year, I have met with, and had representations from, airlines from across the world. The clear message from them is that APD is holding back our ability to connect our airports across the UK to the nations that we will need to be connected to for our global trading future.  One international airline made clear to me that they want to add more connections into the UK but are
prevented from doing so by the additional cost of APD to their cost base.
 
The Government’s approach to Air Passenger Duty is motivated by one factor – cash.  Air Passenger Duty brings in over £3 billion each year to the Treasury.  But this approach is simplistic and self-defeating, with research showing that more tax revenue would be raised from other taxes than would be lost from its abolition. It is estimated that there would be a net £570 million in extra tax
receipts in the first fiscal year following abolition, and positive benefits through to 2022 that could add up to as much as £2 billion in additional tax receipts.
 
Aviation is a key driver of economic growth. Take for example the Emirates route from Newcastle to Dubai, which has helped grow trade between North East England and Australasia from £150 million in 2007 to over £360 million for 2015.  Our post Brexit future needs more of these routes and APD is acting as block on airlines adding the routes that we desperately need.
 
APD is an out dated, exorbitant and perverse tax that is preventing us from having the connectivity that we need in a truly global Britain.  The Chancellor has the opportunity to end this and give us the flying start to our post Brexit future by cutting APD by at least 50 per cent, I urge him to do so.

The post Cutting Air Passenger Duty can give us the flying start to our post Brexit future appeared first on BrexitCentral.

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UK government no-deal Brexit fears revealed in full

A leaked U.K. government report paints a grim picture of the fallout from a no-deal Brexit, from medicines shortages, multimonth slowdowns at ports and threats to clean drinking water.

Dubbed “Operation Yellowhammer,” the report prepared by the Cabinet Office and published by The Times imagines a “base scenario” on the Brexit crash-out date of October 31, marked by unprepared business, hostile EU member countries and impending cold weather that could exacerbate food and medical supply problems.

Further, the report notes the risk that “increasing EU Exit fatigue” could hamper contingency planning after the original March 29 Brexit date was postponed.

A person quoted in The Times as a “senior Whitehall source” said, “This is not Project Fear — this is the most realistic assessment of what the public face with no deal. These are likely, basic, reasonable scenarios — not the worst case.”

The government said while it did not expect such outcomes, they were being looked at as part of no-deal preparations, according to the BBC.

The release comes as U.K. Prime Minister Boris Johnson stands by his position that Britain will leave the EU on October 31 with or without a Brexit deal, ahead of meetings with German Chancellor Angela Merkel and French President Emmanuel Macron expected Wednesday and Thursday.

As MPs opposed to a no-deal Brexit mull ways to stop the U.K. crashing out of the bloc, Johnson reportedly told conservative MPs such efforts risked undermining the U.K.’s negotiating strategy. “It is as plain as a pikestaff that Brussels — or the EU 27 — will simply not compromise as long as they believe there is the faintest possibility that Parliament can block Brexit on 31 October,” Johnson wrote in a letter, according to the Mail on Sunday.

The government’s no-deal plans, printed in full by The Times today, anticipate a chaotic situation emerging at the Irish border. While the U.K. will initially stick to its March promise to avoid most new checks, that’s “likely to prove unsustainable because of economic, legal and biosecurity risks.”

Job losses and disruption to some industries “are likely to result in protests and direct action with road blockades” around the Irish border.

On the first day of a no-deal Brexit, the flow of goods through French ports could be reduced by 40-60 percent of current levels, the plans warn, estimating that 50-85 percent of high-volume truck operators aren’t prepared for French customs checks. Even after three months, flow rates may only increase to 70 percent, “although disruption could continue much longer,” the plans state.

While the availability of drinking water is “likely to remain largely unaffected,” it remains a risk that disruptions in the availability of chemicals could affect the supply of clean water for “hundreds of thousands of people” on a localized basis.

Parts of the food supply chain — including the availability of fresh foods as well as ingredients and packaging — could also be impacted, leading to reduced choice and price rises, according to the no-deal plans.

More than 100 cross-party MPs wrote to Johnson on Saturday asking him to recall parliament from its summer break, arguing the country faces a “national emergency.”

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Nancy Pelosi says no UK-US trade deal if Brexit risks Irish peace

LONDON — Nancy Pelosi, the speaker of the U.S. House of Representatives, warned Boris Johnson and Donald Trump that Congress will block any trade deal between the U.K. and U.S. that threatens peace in Northern Ireland.

According to a statement from her office, Pelosi said Brexit “cannot be allowed to imperil” the Good Friday Agreement that ended decades of conflict.

British Prime Minister Johnson has demanded the EU scrap the backstop plan to keep the Northern Irish border open, which was negotiated by his predecessor Theresa May. But Brussels has refused to budge, increasing the possibility of a no-deal Brexit and border checks.

Pelosi, a Democrat, issued her warning after U.S. National Security Adviser John Bolton said during a visit to the U.K. on Tuesday that Britain would be at the “front of the trade queue” with Washington after Brexit.

She said in a statement: “Whatever form it takes, Brexit cannot be allowed to imperil the Good Friday Agreement, including the seamless border between the Irish Republic and Northern Ireland, especially now, as the first generation born into the hope of Good Friday 21 years ago comes into adulthood. We cannot go back.”

She added: “If Brexit undermines the Good Friday accord, there will be no chance of a U.S.-U.K. trade agreement passing the Congress.

“The peace of the Good Friday Agreement is treasured by the American people and will be fiercely defended on a bicameral and bipartisan basis in the United States Congress.”

It comes after senior members of Congress vowed to block any trade deal between the U.K. and U.S. that jeopardizes the 1998 pact.

Bolton also said during his U.K. visit that the Trump administration would “enthusiastically” support a no-deal Brexit.

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Former UK chancellor: There’s no mandate for no-deal Brexit

Pulling the U.K. out of the EU without a trade deal would be as much of a betrayal of British voters as not delivering Brexit at all, according to former U.K. Chancellor Philip Hammond.

“There is no mandate for leaving with no deal,” given the British public was told a divorce agreement with the EU “would be the easiest deal ever done,” Hammond told the BBC’s Today program.

“Leaving the EU without a deal would be just as much a betrayal of the referendum result as not leaving at all,” Hammond said. “It’s absurd to suggest the 52 percent who voted to leave the EU all voted to leave with no deal.”

The former chancellor, who resigned from the British government in protest at Boris Johnson’s stance on Brexit last month, said the PM had both privately and publicly said he could get a Brexit deal, “but I fear there are other people around him whose agenda is different.” The comments echoed an op-ed Hammond wrote for Wednesday’s Times, in which he lashed out at the “unelected people who pull the strings of this government.”

In the Today interview, Hammond took aim at the Johnson government’s decision to say the Irish backstop had to be cut from the Brexit deal.

“Pivoting to say that the backstop has to go in its entirety — a huge chunk of the Withdrawal Agreement, just scrapped — is effectively a wrecking tactic,” he said. “The people behind this know this means there will be no deal.”

Hammond reaffirmed his commitment to preventing no deal from being pushed through against the will of the parliament and warned against any move to suspend the House of Commons.

“Any idea of trying to bypass parliament by dissolving it for example and holing an election over the exit date would provoke a constitutional crisis,” Hammond said. Johnson has vowed to lead Britain out of the EU by October 31st, “do or die,” and refused to rule out suspending parliament in order to ram through a no-deal Brexit against the will of MPs.

Hammond also said the government’s no-deal preparation wouldn’t provide long-term solutions.

“Preparing doesn’t solve the longer term problems,” he said. Michael Gove, the minister in charge of no-deal preparations, “is talking about an intervention fund to buy lamb and dispose of it … now that’s probably a perfectly sensible thing to do in the first few months … but you can’t do it five years later, 10 years later.”

Gove is reportedly planning to buy up surplus lambs from farmers in the event of a no-deal Brexit.

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James Arnell: The conventional wisdom about a trade deal with America is wrong. Trump will want a fair one. Here’s why.

James Arnell is a partner at Charterhouse. He writes in a personal capacity.

I disagree with most commentators who believe that the UK will get a raw deal in any US-UK trade negotiations after Brexit.

I do not underestimate the fickleness of Trump, nor the Irish-American lobby in Congress. I recognise the overwhelming weight of the US relative to the UK.  I know that the US looks after its interests and does no one any favours.

But I don’t think any of that will stop us agreeing a decent trade deal. I believe that the US has major strategic interests in a trade deal with the UK, and that it will decide not to use all the undeniable leverage it has to strike the toughest possible terms.  It will want to strike a fair deal.

The US is in “America First” mode.  Contrary to what most people seem to believe, I believe that means Trump, and the American people, wish to see a global trading system which it sees as fair from its perspective.  There are many senior American business people who believe that the renegotiation of NAFTA was long overdue, and who are throughly fed up with the uneven playing field between the US and China.

Yes, they worry about the effects of the US-China trade war on the US economy, but many of them believe that some fights just have to be had.  There is more patriotism in American business and much more business support for Trump’s China line than the media presents.

The opportunity to strike a trade deal with a long-term ally like the UK is timely.  Agreeing an even-handed trade deal sends a strong message: this is about fairness, not American economic bullying.  I am optimistic that the US, across the political spectrum, will support a fair deal with the UK, because I think that it has a very strong interest in sending that message.

And that is not all.

 

A thriving UK, in a comprehensive free trade relationship with the US, right on the periphery of the EU, will put massive pressure on it.  Other EU countries, fed up with the federal agenda of the EU, will look at the UK and wonder whether they too might be better free and able to strike their own trade relationships.  This threat to the EU will be eyed by the US as great leverage to force the EU into what the US would see as a fair trade deal.  They will want the UK to succeed in its deal with the US.  They won’t want to screw us – because that would make it far too easy for the EU to keep its trade barriers up.

The US’ leverage is greater if any UK-US trade deal is designed to be as close as possible to something the EU could, should and, ultimately, would accept.  There is no leverage in agreeing a deal which does not work for the UK and which certainly would not work for the EU, and the smart money in the US will know it.

Aside from its desire to show an openness to trade with partners who do not play the US for fools, and its desire to pressurise the EU, the US will also welcome a committed ally in the global struggle for a new trade order, binding the three big blocs (US, China, Europe) into a more open, more level world trade regime or, at least, binding the rest of the world into a trading system around an unreformed China.  That is the best chance of America remaining “First”.

At present, we are in the phase of pulling down the old system, which the US sees as rotten and against its own interests.  We should not confuse that with isolationism.  My firm belief is that the US will relish the opportunity to show the world what its new order should look like, by agreeing a sensible deal with the UK.

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Boris Johnson: UK-US trade deal will be a ‘tough old haggle’

Brokering a transatlantic trade deal won’t be easy but can be done, U.K. Prime Minister Boris Johnson said Tuesday.

“It will be a tough old haggle, but we’ll get there,” Johnson told Sky News.

“In my experience, the Americans are very tough negotiators indeed,” he said, adding that the U.S. market “is growing very fast for the U.K., but they still ban haggis, for heaven’s sake.”

Johnson also said reaching a post-Brexit deal with the EU will be most important.

“The single biggest deal that we need to do is a free trade agreement with our friends and partners over the Channel.”

Johnson’s comments come a day after John Bolton, U.S. President Donald Trump’s national security adviser, said during a visit to the U.K. that the two countries could broker sector-by-sector deals to reach bilateral agreements “very quickly, very straightforwardly.”

Bolton’s comments have been dismissed by trade experts, who say piecemeal deals based on tariff reductions in one sector would not comply with World Trade Organization rules.

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A UK-US trade deal. Never mind the economics (at least for a moment). Feel the politics.

“While trade deals have taken on an important political and symbolic value in the context of Brexit,” Dominic Walsh of Open Europe wrote recently on this site, “their economic benefits are typically smaller and slower to materialise than many realise.” This is the place to start when considering a possible UK-US agreement on trade.  Boris Johnson’s enthusiasm for one is as much political as economic: a successful deal would show Britain, as it moves a bit further from the EU, also moving a bit closer to America.

Such a rebalancing is a strategic consequence of Brexit, at least in the eyes of many backers of leaving the EU.  Future trade deals were a Vote Leave EU referendum priority – though it may be significant that the United States was not one of the headline countries named.  Perhaps the reason was a wariness of anti-American sentiment among a section of the voting public.  None the less, the prospect of a trade agreement with the United States was mooted during the 2016 campaign: hence Barack Obama’s line, written for him by Team Cameron, of Britain being “at the back of the queue” for such a deal.

The obstacles to one are formidable.  For while the Prime Minister is bound to view it through the lens of politics, Donald Trump is more likely to do through that of economics – though the one admittedly tends to blur into the other.  America’s approach to such matters as food safety and animal welfare, environmental protection and intellectual property rights is different from ours in any event.  Never mind the red herring of chlorinated chickens – so to speak – or autopilot claims from Corbynistas about NHS selloffs. The real action is elsewhere.  The United States has long had a protectionist streak, and is resistant to opening up its financial services markets, for example.

The conventional view is that Trump is the biggest America Firster of all; that he would drive a hard bargain, that he has the muscle to do so – and that he wouldn’t be in control of an agreement anyway.  Congress could block one if it wished, and might well do so in the event of No Deal, since the Irish-American lobby is as well-entrenched as ever.  It has been a headache for British governments over Ireland-linked matters before: remember the McBride principles.  A different take is that politics may win out in the end, because both Trump and Congress will want a UK trade deal in order to put economic and political pressure on the EU: we will publish more about that later this week.

John Bolton, Trump’s National Security Adviser, is visiting Britain.  He said yesterday that the UK will be “first in line” for a trade agreement post-Brexit – a deliberate counter to Obama’s line.  Bolton will be dangling the prospect as an inducement.  He will want Johnson to take a more resistant line to Huawei than Theresa May did, and for the UK to move closer to America’s position on Iran.  But the possibility of early sector deals – or at least the exclusion of Britain from new pro-protection moves – seems to be real enough.  As with the NHS, policing, immigration and stop and search, so with trade.  Johnson wants progress towards a quick win as a possible election looms.

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Trump envoy: US would ‘enthusiastically’ back no-deal Brexit

America would “enthusiastically” support a no-deal Brexit, U.S. National Security Adviser John Bolton said on Monday during a visit to London.

“If that’s the decision of the British government, we will support it enthusiastically, and that’s what I’m trying to convey,” Bolton told reporters on the first day of his two-day visit to the British capital, according to the Guardian. “We’re with you, we’re with you.”

He said the U.S. would consider striking sector-specific deals ahead of a full-scale trade pact.

“The ultimate end result is a comprehensive trade agreement covering all trading goods and services,” Bolton said. “But to get to that you could do it sector by sector, and you can do it in a modular fashion. In other words, you can carve out some areas where it might be possible to reach a bilateral agreement very quickly, very straightforwardly.”

Bolton also took aim at Brussels, saying: “The fashion in the European Union is when the people vote the wrong way from the way the elites want to go, is to make the peasants vote again and again until they get it right. There was a vote — everyone knew what the issues were. It is hard to imagine that anyone in this country did not know what was at stake. The result is the way it was. That’s democracy.”

He added: “Britain’s success in successfully exiting the European Union will be a statement about democratic rule and constitutional government. That’s important for Britain. But it’s important for the United States, too. So we see a successful exit as being very much in our interest, and there’s no quid pro quo on any of these issues.”

Bolton also said he couldn’t see a threat to the Good Friday Agreement as a result of Brexit, the Guardian wrote.

Bolton was expected to urge Britain to align more closely with America’s stance on Iran and on Huawei’s involvement in 5G telecoms networks, but he told reporters that Washington understood Brexit was the priority, given Britain’s Prime Minister Boris Johnson had promised to exit the EU by October 31.

“The U.S. government fully understands that in the next 80 days the U.K. government has a singular focus on the Brexit issue, so that we’re not pushing for anything on these broad and complex questions,” he told reporters.

The comments came after Johnson joined a meeting with Bolton and senior officials on Monday.

Bolton said Johnson’s relationship with U.S. President Donald Trump had “got off to a roaring start,” with the two having shared multiple phone calls since he assumed the British prime ministership. Their most recent conversation was on Monday, when Trump “expressed his appreciation for the United Kingdom’s steadfast partnership in addressing global challenges,” according to the White House readout of the call, and said he “looks forward” to meeting Johnson “personally in the near future.” Trump and Johnson are both expected to attend the G7 summit in Biarritz, France at the end of the month.

This article is from POLITICO Pro: POLITICO’s premium policy service. To discover why thousands of professionals rely on Pro every day, email pro@politico.eu for a complimentary trial.

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Mike Pompeo: US will be ready with ‘pen in hand’ to sign post-Brexit trade deal

WASHINGTON — The United States will be on Britain’s “doorstep, pen in hand” to sign a trade deal as soon as possible after the U.K. leaves the European Union, Secretary of State Mike Pompeo said Wednesday.

The chief U.S. diplomat made the comment alongside Britain’s new foreign secretary, Dominic Raab, who was in Washington as part of a North American trip aimed at strengthening ties with non-European countries ahead of Brexit.

The pair appeared buoyant about the U.S.-British relationship, despite the strains caused by differences over how to deal with Iran, climate change and other issues.

U.K. officials hope new British Prime Minister Boris Johnson’s relationship with U.S. President Donald Trump will eventually lead to a bilateral trade deal.

Pompeo seemed to give those hopes a boost, although he’s not a major player in the Trump administration when it comes to striking trade deals.

“We support the United Kingdom’s sovereign choice, however Brexit ultimately shakes out, and we’ll be on the doorstep, pen in hand, ready to sign a new free trade agreement at the earliest possible time,” he said.

Raab said the U.K. is “absolutely resolved” to be out of the EU by the end of October. Once Britain is out, it expects to be free to strike bilateral trade deals with other countries. Raab also reiterated the new U.K. government’s insistence that Brussels must be willing to reopen the Brexit deal struck with Theresa May.

“If the EU’s position is that there can be no change to the Withdrawal Agreement, then that will be a choice that they’ve made,” Raab said.

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Inside the mind of Boris Johnson’s right-hand man

LONDON — Want to know which direction the U.K. under Boris Johnson is headed? Then read the blog posts of the most powerful official on his team.

Dominic Cummings’ writings are a window into the world of the special adviser now shaping Johnson’s premiership, Brexit and the U.K.’s future.

They shed light on Cummings’ motivations for backing Brexit, his obsessions (Otto von Bismarck, the science of probability, chess), and his grudges (against David Cameron, George Osborne, most political pundits). They also point to a revolution in store for the civil service and a political system that, in Cummings’ view, has for too long let process and tradition stand in the way of clear goals, big and small — from fixing the office lifts (or elevators, if you will) to leaving the EU.

Fixing the lifts? Yes. “The [Department for Education’s] lifts were knackered from the start and still are,” Cummings wrote in 2014, reflecting on his first stint in government, from 2010 to 2014, as the right-hand man to then-Education Secretary Michael Gove.

“There were dozens of attempts to have them fixed. All failed. At one point the permanent secretary himself took on the task of fixing the lifts, so infuriated had he become. He retired licking his wounds.”

“I found him very impressive. But also slightly scary. He’s quite intimidating” — Government official on Dominic Cummings

The tale is one of many to be found on the blog. And it wasn’t really about the lifts.

“The insuperable problem of the lifts … gives a clue to what is really happening in Whitehall,” Cummings wrote. “Most of everybody’s day is spent just battling entropy — it is not pursuing priorities and building valuable things.”

Impressive and scary

As campaign director of Vote Leave, Cummings was the back-office mastermind to Johnson’s front-of-house showman during the EU referendum campaign.

Together they were instrumental in delivering the vote in favor of Brexit. Appointed as a senior adviser on Johnson’s first day at 10 Downing Street, the two men have now tasked Whitehall with delivering Brexit — by October 31, deal or no deal, “do or die.”

Together, Cummings and Boris Johnson were instrumental in delivering the vote in favor of Brexit | Pool photo by Ben Stansall/Getty Images

After three years away from frontline politics, during which the blog was his primary means of broadcasting to the world, Cummings has suddenly found himself with more power than ever.

He has taken the office next door to the prime minister’s, and officials say that despite the presence of Johnson’s former London City Hall chief of staff Eddie Lister in No. 10, Cummings is “the most powerful man in Downing Street” and “the one who gives the direction.”

“I found him very impressive. But also slightly scary. He’s quite intimidating,” said one government official.

Cummings himself claims on the blog — not all that convincingly — that his fearsome reputation is over-hyped.

“Contrary to the media story, I dislike confrontation and rows like most people but I am very strongly motivated by doing things in a certain way and am not motivated by people in [Westminster’s London postcode] SW1 liking me,” he wrote in 2017.

He has already won over some inside Downing Street. “I have had no issues with him whatsoever and it’s good to have that focus and determination at the top,” said a government figure who has seen Cummings at work.

His first days in government bear out some of the recurring themes of his copious online writings. He is a believer in the military principle of Auftragstaktik — the idea that leadership means giving subordinates a crystal-clear strategic goal. And the obsessive focus on the October 31 exit date has all the hallmarks of a Cummings campaign. He’s even had a countdown to Brexit clock installed in Downing Street.

Why Cummings wants Brexit

The blog gives some clues about Cummings’ animus toward the EU.

He is not a Brexit ideologue. In a May 2018 post, he said it is “unknowable to anybody” whether the U.K. could “make the most” of Brexit over a “10/20/30 year timescale.”

He describes himself as “not a Tory, libertarian, ‘populist’ or anything else” and in a January 2017 essay outlined his reasoning for joining the Brexit campaign. “I thought very strongly that 1) a return to 1930s protectionism would be disastrous, 2) the fastest route to this is continuing with no democratic control over immigration or human rights policies for terrorists and other serious criminals, therefore 3) the best practical policy is to reduce (for a while) unskilled immigration and increase high skills immigration … 4) this requires getting out of the EU, 5) hopefully it will prod the rest of Europe to limit immigration and therefore limit the extremist forces that otherwise will try to rip down free trade.”

On the day Johnson received the keys to Downing Street, Cummings was photographed inside the most important building in the country, wearing a T-shirt advertising the Elon Musk firm Open AI.

The quote suggests that far from the “dangerous” radical some of his critics see, Cummings sees himself as a counterextremist, seeking to restore public trust in the political system.

War and the historical errors that lead to it haunt his writings (“few realize how lucky we were to avoid nuclear war during the Cuban Missile Crisis”). Another preoccupation is the idea of “branching histories” — the many possible paths that events can take at any given moment. If Bismarck had been assassinated in 1866, would World War I have happened, and therefore would Lenin have come to power, or Hitler?

The principle of branching histories, he wrote, “ought to, but does not, make us apply extreme intelligent focus to those areas that can go catastrophically wrong, like accidental nuclear war, to try to narrow the range of possible histories.”

Instead, “most people in politics spend almost all their time on trivia.”

The science of government

After freeing the U.K. from the EU at the end of October — easier said than done — the blog posts suggest that Cummings’ next target will be the Whitehall machine.

On the day Johnson received the keys to Downing Street, Cummings was photographed inside the most important building in the country, wearing a T-shirt advertising the Elon Musk firm Open AI. It may not have been a throwaway choice of garment.

On the blog, he never misses an opportunity to apply the lessons of science to political decision-making.

In a December 2014 post titled “The Hollow Men ii,” he complained that government institutions “operate to exclude from power scientists, mathematicians, and people from the start-up world — the Creators, in [American physicist Steve] Hsu’s term.”

If he and his boss can navigate the choppy Brexit waters ahead, Cummings now has the chance to make that all-or-nothing gamble | Niklas Halle’n/AFP via Getty Images

In the thousands and thousands of words he devotes to the ills of the Whitehall machine, he laments its inability to respond quickly to errors; the “slow, confused” and usually nonexistent feedback; the “priority movers” system that sees incompetent staff members (“dead souls”) moved into jobs elsewhere in the civil service rather than sacked; and the “flexi-time” working regimes that end up with key personnel missing in action when big announcements need to be planned.

All in all, Cummings decries that Whitehall views failure as “normal, not something to strive to avoid.”

And he suggests having parts of Whitehall “amputated” as one necessary measure, including “firing thousands of unnecessary people.”

To Cummings, quitting the EU will sweep away another roadblock on the path to his vision of the U.K.

While working with Gove, “we cut the department’s headcount by more than a third and halved running costs,” he wrote. “We more than halved the press office, and cut 95 percent of the communication budget. Performance improved rapidly. It would improve further if the [department] were halved again.

In a 2014 blog post, he laments that Margaret Thatcher did not go “for all-out civil service reform with a proper PM’s department,” adding: “If she had been much more revolutionary — then much more could have been done (though such a move would obviously be an all-or-nothing gamble for any prime minister who really tried it and one can see why she shied away).”

If he and his boss can navigate the choppy Brexit waters ahead, Cummings now has the chance to make that all-or-nothing gamble.

Cummings arrives at No. 10 carrying a Vote Leave tote bag | Chris J. Ratcliffe/Getty Images

He’s floated the idea of bringing in Cabinet ministers from outside parliament. He’s also suggested setting up government agencies in the mold of DARPA, the U.S. Department of Defense’s tech development arm, originally founded in response to the Soviet launching of Sputnik; working on a new international lunar base to help world diplomacy; and revamping the Cabinet room and emergency COBRA committee room to look more like the NASA control center.

“Some old colleagues have said ‘don’t put this stuff on the internet, we don’t want the second referendum mob looking at it,’” he wrote in June. “Don’t worry! Ideas like this have to be forced down people’s throats practically at gunpoint.”

But one government figure said: “He knows he cannot do anything like that this side of a general election. Big Whitehall reforms require a strong majority and you cannot get one until you have delivered on Brexit.”

A new UK

Some of the viewpoints aired in the blog posts give clues as to the immediate direction of Johnson’s government. Anyone wondering whether the PM will enter into a pact with the Brexit Party and Nigel Farage will be asking themselves if Cummings still thinks Farage “put off millions of (middle class in particular) voters” during the referendum.

And those trying to guess whether Downing Street is war-gaming for a no-deal Brexit in October, a general election, or both, might look at the lessons Cummings takes from computer chess, and from his hero Bismarck.

“The very best computers seem to make moves [in chess] that preserve the widest possible choices in the future, just as the most effective person in politics for whom we have good sources, Bismarck, operated always on the principle of ‘keep two irons in the fire.’”

But the blog posts are also a blueprint for a wider outlook.

Cummings was not complimentary of Brexit Party chief Nigel Farage’s role in the referendum campaign | Frederick Florin/AFP via Getty Images

In Cummings’ grand vision, the U.K. would take on “a central role in tackling humanity’s biggest problems and shaping the new institutions, displacing the EU and UN, that will emerge as the world makes painful transitions in coming decades.”

But first he must solve Brexit; a Gordian knot that has led to the demise of two prime ministers and may yet claim another, along with his right-hand man.

To Cummings, quitting the EU will sweep away another roadblock on the path to his vision of the U.K.

Whitehall’s failure to achieve it — just like fixing the “bloody lifts” in the Department for Education — highlights the inefficiencies he wants to remove, seemingly by any means necessary.

This article is part of POLITICO’s premium Brexit service for professionals: Brexit Pro. To test our our expert policy coverage of the implications and next steps per industry, email pro@politico.eu for a complimentary trial.

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Post-Brexit UK ‘desperate’ for Trump trade deal, former US treasury secretary says

The U.K. government’s commitment to leaving the European Union in less than three months with or without a deal has crippled its trade negotiating power, former U.S. Treasury Secretary Larry Summers said.

“Britain has no leverage. Britain is desperate. Britain has nothing else,” Summers told the BBC’s “Today” program this morning.

“It needs an agreement [on trade with the U.S.] very soon. When you have a desperate partner that’s when you strike the hardest bargain.”

However, Summers, who served as Treasury chief in President Bill Clinton’s administration, warned that American domestic politics, the ongoing trade war with China, and the plummeting pound made a post-Brexit trade deal between the U.K. and the U.S. unlikely.

Summers added that even if London and Washington could come to an agreement, the U.K. would be in a weak negotiating position.

“Britain has much less to give than Europe as a whole did, therefore less reason for the United States to make concessions,” he said.

“You make more concessions dealing with a wealthy man than you do dealing with a poor man.”

British Foreign Secretary Dominic Raab is traveling to Canada, the United States and Mexico this week to seek to boost ties with non-European countries ahead of Brexit, his office said.

His trip comes after 45 American senators sent a letter to U.K. Prime Minister Boris Johnson on August 3, promising to back a trade deal between the two nations even in the case of a no-deal Brexit, according to the Sunday Times.

Republican Senator Tom Cotton, who coordinated the letter, told BBC radio he is optimistic about a deal that would benefit both countries.

“It obviously wouldn’t be a matter of days or weeks … but I suspect it would be months, not years,” he said.

“Many of my colleagues in the Congress would say that Great Britain should be in the front of the queue given everything our nations have gone through together.”

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BMW to accelerate through Brexit crunch at electric Mini plant

BERLIN — German automaker BMW will move ahead with plans to produce an electric version of its iconic Mini at a factory in Oxford from November, despite potential post-Brexit chaos in importing key components from the Continent.

While the e-Mini will be put together at the Cowley site, which employs around 4,500 people and already builds the conventionally fuelled Mini, the drivetrain — a crucial part transferring power to the car’s wheels — will still be imported from southern Germany.

That means any problems with shipping parts from the Continent after a possible no-deal Brexit on October 31 could impact BMW’s ability to deliver the vehicle in large numbers. Company officials have previously hinted at plans to move some production of the conventional Mini to the Netherlands depending on the terms of Brexit, but for now executives are sticking with the e-Mini Oxford plan.

“The November start of production date [has] been in the plan for years and from long before the Brexit deadline reset, so this is no more than a coincidence,” Graham Biggs, a U.K.-based BMW director, told POLITICO, adding that BMW would “have to work around” any potential disruption caused by a disorderly Brexit on October 31.

The e-Mini is a key component of BMW’s broader electric shift, which was recently ramped up to include at least 25 new models by 2023. Around 45,000 customers have registered interest in buying the car, according to Germany’s Frankfurter Allgemeine Zeitung, almost half of whom are in the U.K.

At present, BMW imports about €2 billion worth of car parts into the U.K. from the EU every year to feed its production. In advance of the previously expected Brexit date of March 29, BMW scheduled an annual maintenance shutdown to mitigate any expected disruption at major import terminals around April 1, a feat it doesn’t plan to repeat this time.

BMW Customs Manager Stephan Freismuth said earlier this year that stockpiling beyond just a few days would not be feasible either. “We are producing ‘just in time,’ and just in sequence,” Freismuth said.

BMW’s outgoing CEO Harald Krüger has called for a meeting with U.K. Prime Minister Boris Johnson to discuss Brexit and to mitigate any risk, while his incoming replacement, Oliver Zipse, is a former plant manager in Oxford.

Matthias Schmidt, a Berlin-based automotive analyst, reckons BMW might benefit from any loss of value of the pound and if things get really bad, it may choose to start “clandestinely shifting more production to the EU” and maintain just a modest output in the U.K. to serve the local market.

“The problem for BMW is that [the Mini’s] heritage and DNA belongs well and truly to the U.K.,” said Schmidt. “So the option to up sticks and shift the facility to mainland Europe doesn’t necessarily come into question.”

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Long read: Post-Brexit trade policy must serve British society, not just free trade

Brexit provides an opportunity to agree new Economic Partnership Agreements with the world’s largest economies such as the US, China, and India. These cannot make up for the trade it will lose through leaving the Single Market, according to Swati Dhingra (CEP & LSE) and Josh De Lyon (CEP). Nevertheless, the UK has an opportunity to forge a new generation of trade deals that could help spread the benefits of free trade and address widespread unhappiness with recent waves of globalisation.

The UK is one of the most open economies in the world – and international trade and investment are the biggest areas of economic policy that the UK will need to decide on as it prepares to exit the EU. Greater integration with the EU can limit the economic costs of Brexit, and does not need to prevent the UK from pursuing beneficial Economic Partnership Agreements (EPAs) in the future.

port of dover

The Port of Dover. Photo: frattaglia via a CC-BY-NC-SA 2.0 licence

All trade agreements begin with a sense of realism on which trade partners to prioritise for negotiations, which can be lengthy and demanding of resources. The EU is the UK’s most important trading partner, making up around half of the UK’s international trade and investments. The UK economy is highly integrated with the EU and separation would be very costly. It is estimated that a ‘No Deal’ scenario would cause a 40% reduction in trade with the EU over the next 10 years, translating to an average cost of £1,890 per household every year. These costs would be halved if the UK agrees a comprehensive ‘Norway-style’ deal with the EU. The evidence suggests that potential gains from greater integration with the US, India, and China cannot offset the losses of leaving the EU, at least in the near future.

The UK government has shown some level of appreciation for this: the so-called ‘Chequers’ statement set out proposals for a single market for goods between the UK and EU, and a customs arrangement that seeks to accomplish smooth trading relations with the EU while maintaining the ability of decide UK’s tariffs outside the EU. However, the proposal remains vague on practicalities. Most importantly, it provides few details on services, which make up 80% of the UK economy and where single market membership provides greater market access than even the most ambitious of EPAs.

Until the 1990s, trade agreements focused on reducing tariffs. Today, tariffs in most industries are low and the services sector – which has no tariffs – dominates economic activity in many countries including the UK. The bulk of modern trade agreements is about reducing the costs of doing business across borders by, for example, streamlining customs procedures or avoiding regulatory duplication between countries. These are so-called ‘non-tariff barriers’ (NTBs). The aim is to create an integrated international market where domestic and foreign businesses play by the same rulebook.

These modern trade deals can stimulate economic activity. But there is an inevitable trade-off between integration and national sovereignty as countries must agree to similar rules and standards. For countries with similar preferences over these standards, the costs of alignment are relatively small. For instance, the UK gives up some sovereignty when it applies the EU’s Toy Safety directive on its businesses but UK consumers are unlikely to object to safer toys.

EPAs aim to balance market access for businesses with the need to maintain high standards in products, services, environmental, labour and consumer rights. But they have not always been successful in striking this balance. The rules-based trading system is facing the pressures of the increasing dominance of multinational corporations, the centrality of global supply chains, and the growing importance of services trade. They have generally not been able to uphold the spirit of equitable rights across stakeholders. Dani Rodrik argues that the regulatory standards in EPAs tend to empower politically well-connected businesses, including international banks, pharmaceutical companies, and multinational firms.

The UK has an opportunity to help shape a model trade policy that recognizes the new realities of the rise in global value chains, services and multinationals and that takes on board the concerns of those who have been left behind by the growth of the last few decades. The UK could gain an advantage by leading the way on a new generation of EPAs that promote inclusive growth.

There is a concern that the UK could be pressured into a race to the bottom on domestic standards, especially when it is negotiating with large countries with very different standards. The UK can alleviate these concerns by drafting a modern EPA, which ensures that the same rules and rights apply to all stakeholders – domestic businesses, multinational firms, workers, consumers or investors.

Non-discrimination across stakeholders has always been the fundamental principle underlying EPAs, but it has been eroded by the fragmentation of production across borders. The key to the success of a post-Brexit policy will be the extent to which it reinstates the principles of National Treatment for all businesses and Non-Discrimination across all stakeholders.

Reinstating National Treatment for all firms

National treatment is a fundamental principle of most EPAs, which ensures that countries do not discriminate against foreign companies so that all businesses compete on a level playing field. The UK could take a leadership role in advocating national treatment by applying the same rules on the opposite side – multinational enterprises (MNEs) should be accorded the same treatment as smaller businesses and domestic firms.

MNEs directly account for half of global exports, a third of world GDP and a quarter of all employment. They have the ability to source inputs and credit from different countries and to shift profits across different tax jurisdictions. This amounts to MNEs facing different business conditions than firms that might be smaller or purely domestically oriented. Tax shifting is the most striking example of this. About 40% of multinational profits are shifted to tax havens globally, and non-tax haven EU countries, like the UK, are estimated to suffer the greatest revenue losses as a result.

It is feasible to plug the loopholes that enable MNEs to shop around for tax benefits and other cost reductions and the UK has been involved in previously negotiated tax treaties and data sharing. One approach for reinstating national treatment is through multilateral bodies to enable coordinated action, but many would argue that their multilateral provisions are weak because they are non-binding guidelines and do not prevent a race to the bottom whereby countries offer attractive tax breaks to attract MNEs.

The UK could support multinational efforts by implementing unilateral actions such as taxing all MNEs that sell in the country and enforcing equal treatment of all domestic firms and MNEs in terms of profits. Any planned action would need to involve carefully weighing the potentially conflicting commitments in previous tax or investment treaties with the objective of maintaining real competition. A post-Brexit reset in trade policy is an opportune political moment to have this overdue discussion.

Reinstating non-discrimination for all stakeholders

Non-discrimination has been eroded because many EPAs give greater rights to investors over other stakeholders. Since 1975, the UK has negotiated over ninety bilateral investment treaties, almost all of which include provisions to enforce investors’ rights. Until now, the bulk of these treaties have been with countries that are net recipients of investments from the UK, so the investment agreements were largely designed to protect UK investors from expropriation of assets in developing countries with politically unstable conditions.

With the fragmentation of supply chains, most EPAs today contain provisions regarding settlement of disputes brought by investors against host governments. These are often referred to as Investor State Dispute Settlement (ISDS) clauses. They give foreign firms the right to bring claims against the host country if they have not been given fair and equitable treatment. ISDS clauses are increasingly being used by investors to challenge governments in developed countries.

The main contention with ISDS clauses is that the language of what constitutes a violation of investor rights is too vague. This constrains governments from changing laws and can lead to a regulatory chill due to the fear of expensive litigation from foreign investors. Furthermore, the settlement procedure is typically opaque and costly. There is also a growing recognition that ISDS confers rights to foreign companies that are not available to domestic companies.

There still isn’t a standard solution to balancing the rights of foreign investors for fair compensation and the right to regulate for host governments. New solutions for balancing investor rights with regulatory discretion are being proposed, and the UK can join these efforts to develop workable proposals such as enabling countries in EPAs to opt out of ISDS as well as reviewing foreign investments in sensitive areas and providing safeguards in these sectors.

The UK could go further in ensuring that its public services and domestic standards are not compromised through ISDS procedures. One way that many EPAs do this is by including chapters on social clauses – environment, health and labour rights – and ensuring that stakeholders, like workers and consumers, have similar rights and dispute settlement procedures as those that are given to investors.

Instituting a new social compact

Wages have decoupled from productivity and many working families in the UK have never really shared in the prosperity that globalisation has brought to many global firms and their workers in the last few decades.

The UK economy has suffered as a result of the Brexit vote. Immediately following the referendum, sterling suffered its biggest one-day loss since the introduction of free-floating exchange rates in the 1970s. The sterling depreciation from the Brexit vote was expected to benefit UK exporters and improve the earning potential of domestic workers. But new research from the Centre for Economic Performance shows that wages and training of workers have fallen since the referendum. The rise in the costs of imported inputs have led to lower wages and fewer training opportunities for workers in the UK, which could reinforce the trends of anaemic wage and productivity growth.

As a starting point, what’s needed is an adjustment assistance fund that compensates people who are displaced by economic changes. A post-Brexit UK would be more inclusive of ordinary working families if they had access to an enforceable mechanism to compensate them for job losses induced by broad economic changes.

But compensation alone will not solve the problems of the constant churn to which workers are exposed. To undo the years of economic stagnation faced by many, a post-Brexit economic policy would need to commit to investing in skills so that people face lower risks of being left behind in the future. Ultimately, wage and productivity growth require re-training and upskilling of the workforce. The UK can ensure these policies are supported along with market access provisions in EPAs by linking clauses on labour rights, compensation and rehabilitation policies.

Multinational tax revenues raised through instituting national treatment could provide the funds necessary to support these upskilling activities. This is a practical proposal by Philippe Martin from the French Council of Economic Analysis to ensure globalisation and technological progress are politically and socially sustainable.
Anticipating exactly who will be hurt from a particular policy is always difficult – it can take years before the link between job displacements and economic policies becomes apparent. Whether the UK operates its post-Brexit trade policy independently or via a customs union with the EU, it should be pushing for EPAs that deliver market access without compromising the UK’s high standards on labour, products, services and safety.

It will be exceedingly hard to replace any loss of access to the EU market and to find trade partners that share the high quality standards that the UK has always maintained. Any new EPAs with China, India or the US need to respect these high quality standards. If it ends up outside of the EU customs union the UK’s best strategy would be to pioneer a new generation of trade deals that balances the rights of different stakeholders and addresses the new economic reality of global value chains and multinationals. The three rebalancing provisions – national treatment, non-discrimination and a new social compact – would be the first steps towards an inclusive economic model. In the current era of strong anti-globalisation sentiments, a post-Brexit trade policy must be re-geared to truly serve British society, not just free trade.

This post represents the views of the author and not those of the Brexit blog, nor LSE. It is an edited extract from Brexit and the Future of Trade by Swati Dhingra. 

Reference

S. Dhingra, ‘Brexit and the Future of Trade‘, in G Kelly and N Pearce (eds.), Britain Beyond Brexit, The Political Quarterly, Vol 90, Issue S2, 2019, pp. 21-31.

Josh De Lyon is a Research Assistant at the Centre for Economic Performance at LSE and a DPhil Economics candidate at Oxford University.

Swati Dhingra is Associate Professor of Economics and Research Fellow at the Centre for Economic Performance at LSE.

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Australia’s UK envoy sees hope of trade deal by end of 2020

Assuming Britain leaves the EU October 31, Australia is optimistic it can strike a trade pact with London “before the end of 2020” or even sooner, according to its U.K. envoy George Brandis.

“The reason I take that date is that it only took 15 months for Australia to complete our very, very ambitious FTA [free trade agreement] that is with the U.S. some 15 years ago,” the Australian high commissioner told POLITICO’s London Playbook. “The political will to do it is there.”

Whether the U.K. managed to strike a deal with the EU before leaving the bloc likely wouldn’t change things, Brandis said.

“I think myself that the shape of an FTA between the U.K. and Australia will be pretty much the same whether it is a no-deal Brexit or a Brexit with a deal, assuming that, as I think we may, that that deal doesn’t include a customs union or other trade restrictions on dealing with third-party nations,” he said.

Brandis urged the U.K. to take a positive view of its trade future after leaving the EU, telling pessimists to “look at the Australian experience.” Australia conducts 70 percent of its trade with countries with which it has trade agreements. “My advice to the U.K. government is to be bold and not be afraid of free trade agreements,” Brandis said.

Brandis pointed out that commodity trading between Australia and the U.K. is still “relatively modest” — though the biggest trade is wine. His favorite? “You can’t go wrong [with] a Penfolds — at whatever price point.” But what about British wine? “Some of it is very nice,” he conceded, but “I think the United Kingdom wine industry would have a way to go to match an Australian shiraz.”

Brandis, a former Australian Liberal Party senator who served in the conservative Howard, Abbott and Turnbull administrations, said he was a fan of the new British prime minister.

“What excites me about Boris Johnson is if anyone can rekindle that spirit of optimism in the British people, which I think has taken a bit of a hammering in recent years, it is him,” Brandis said. “If ever there was a nation which needed a good dose of optimism and encouragement not to be fearful of the future, but to embrace to restore that Carpe Diem spirit, it is the new prime minister.”

Brandis also defended the way British MPs have handled Brexit, saying that his own “shouty” parliament would not have coped as well.

“What has impressed me … is at a time when these profound and even existential issues are so acute, that the debate has been conducted with civility and maturity, and intelligence which bespeaks a very mature and sophisticated political system and a very mature political community,” Brandis said.

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Bank of England holds rates as no-deal pressure grows

The Bank of England maintained its interest rate at 0.75 percent and stood by its assumption of a “smooth” Brexit, despite growing pressure from market participants factoring in a high probability of no deal.

While continuing to say it expects a Brexit deal — in line with government policy — the Bank of England acknowledged the differing view of investors, as implied by falling asset prices, such as the value of sterling against other currencies. Market movements are an important part of the bank’s economic projections.

The British economy is growing slower than expected, the bank said, with an expectation that output was zero in the second quarter, compared with previous projections of a 0.2 percent expansion. Brexit uncertainty in business coupled with global trade tensions are to blame, the institution said.

Surveys carried out by the central bank show businesses expect Brexit uncertainty to persist until 2021 — longer than shown in its May report.

At the same time, a majority of the 240,000 U.K. businesses that trade exclusively with EU clients are unprepared for border checks that would ensue in a no-deal Brexit, the bank found. They have not yet obtained the necessary registration number or taken other steps required to continue exporting, the BoE said.

The odds of a recession in the medium term have increased to one in three, from one in four in May, according to the monetary policy report.

A Brexit deal would propel the economy into “robust” growth, the BoE said, and also drive up the value of sterling, which fell to multiyear lows in recent days due to no-deal fears.

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From ‘Blade Runner’ to Brexit in England’s industrial north

MIDDLESBROUGH, England — Boris Johnson has a plan to turn the U.K.’s old industrial port towns into freewheeling outposts of “global Britain.”

The plan means setting up so-called free economic zones offering lower import taxes and looser regulation to lure investment in up to 10 ports. It chimes with the swashbuckling Brexiteer vision of an outward-facing British economy restored to its glory days, and also spins a positive view of the country’s future outside the EU.

“Let us begin work now to create free ports that will drive growth and thousands of high-skilled jobs in left-behind areas,” Johnson pledged outside 10 Downing Street after becoming prime minister. In one of the candidate areas, Teesside, on Friday, International Trade Secretary Liz Truss will announce the appointment of a panel of ministers and experts to figure out the “world’s most advanced free port model” that will generate “thousands of jobs.”

But will it work?

Ben Houchen, the 32-year-old Conservative mayor of Tees Valley, a cluster of deprived cities in the northeast of England, wants to get the green light to start a pilot project around the mouth of the River Tees. He reckons free ports offer a “physical representation” of how Brexit can “deliver more control and say over international trade policy.”

The 20-minute train ride from Thornaby to cheery seaside town Redcar trundles past the skeletons of shuttered factories and steel plants.

“I get extremely frustrated as people talk about this very dismissively,” Houchen said in his office overlooking the river just days before Truss’ visit. “One of the reasons we came up with the concept 18 months ago is that there was such a negativity about Brexit.”

He’s pushing to make a free economic zone out of a 4,500-acre site around a shuttered steel works, six times the size of London’s City banking district. The goal is to transform the region by attracting new clean energy companies and manufacturing at the deepest port complex on England’s east coast, he said.

The plan may be novel for the Tees, but it isn’t new. A U.S. Congress report estimated there were more than 3,000 free economic zones worldwide in 2013. Britain closed its last free port in 2012, although there’s one on the Isle of Man, a U.K. crown dependency outside the EU. There are more than 80 across the EU offering various kinds of relief from taxes and tariffs to spur growth.

The top of Eston Nab in North Yorkshire, which looks down at the view over the industrial area of Teesside and Middlesbrough | Dan Kitwood/Getty Images

But the U.K. is dreaming bigger.

“What I’m talking about is not comparable to those in the EU,” said Houchen. “What they consider a free zone is basically a large warehouse.” Instead, outside the single market, customs union and the EU’s state aid restrictions, he’s aiming for zones similar to those that have helped supercharge growth in the United Arab Emirates and the United States.

The plan

Whatever Brexit brings, the Tees Valley, which in 2016 voted heavily in favor of the U.K. exiting the EU, will feel the impact. Once a heavy industry jewel in the British economy, its horizon of furnaces, chemical works and docks inspired the opening cityscape scene in the 1980s dystopian thriller “Blade Runner.”

But its days of industrial glory are long gone. The 20-minute train ride from Houchen’s office in a newbuild complex at Thornaby, through Middlesbrough’s dilapidated central station, to cheery seaside town Redcar trundles past the skeletons of shuttered factories and steel plants.

In 2015, a steelworks overlooking the beach was closed at Redcar, costing 3,000 jobs. That delivered a body blow to the local economy, although chemicals processing and oil rig-scrappage plants still dot the landscape.

If Johnson’s team gives the go-ahead for the free port project, Houchen thinks 37,000 jobs can be generated within 20 years and around £2 billion added to the local economy. He argues that at least half of that will come along anyway owing to a shift to wind energy and hydrogen production in the region, but will be “turbocharged” by a free port zone bringing new manufacturing to the area.

The tanker Louise Knutsen is moored alongside an oil facility on the banks of the River Tees | Ian Forsyth/Getty Images

“This site is chemicals, processing, clean energy and energy production, it’s manufacturing and it’s heavy industry,” said Houchen. “We’re not trying to store goods in the zone [but] the reintroduction of the kind of jobs we haven’t seen in this area for decades.”

To do that Houchen talks of abolishing corporation tax, employee national insurance contributions and business tax rates for companies moving in, in addition to offering direct subsidies for research projects that will help foster innovation. The Department for International Trade said in a statement that the zones can relieve businesses of “unnecessary checks and paperwork, and include customs and tax benefits” while noting that some of the most successful areas mandate “liberalized planning laws.”

Around the Tees, it’s all about investing in industries that fit the region, he said, rather than trying to attract tech firms.

“We know we’re not going to become the next Silicon Valley,” said Houchen. “So we’re quite happy to exclude consumer tech; the Amazons and the Googles of this world. Stop them relocating to this area just to get tax breaks.”

The catch

But not everyone is as starry-eyed about the prospects for a free zone on the Tees.

“I think there are so many flaws in it that it’s unlikely to get a lot of traction,” said Peter Holmes, an expert on trade at the University of Sussex. “None of this is going to develop high-skilled jobs. They would be jobs in warehouses and assembly plants. These are not the kind of things that transform a region.”

Despite recent improvements, unemployment sits at just over 6 percent across the region — 2 percentage points higher than the national average. In Hartlepool, the furthest north of the conurbations covered by the Tees Authority, it’s close to 10 percent. Locals complain that while the number of jobs may be up, they aren’t the high-paying ones lost in the steel plants.

Slashing environmental and labor rules offers one option, but that’s something the Tees authorities insist they won’t do.

Comparisons to U.S. special economic zones aren’t entirely valid either, as companies there take advantage of higher tax on components than on finished goods. For example, car assembly plants benefit from importing parts to a customs-free zone and only pay taxes on the finished vehicle, which is taxed at a lower rate than the individual parts.

“This has absolutely no relevance with the EU tariff system,” Holmes said.

That pours cold water on the insistence that the 250 zones employing 420,000 people in the U.S. offer a model for Britain. “If the U.K. model is implemented as successfully, it could have a significant economic impact,” the Department of International Trade said.

It will also be a struggle to persuade the U.K. Treasury that the plan won’t displace investment from elsewhere in the country, and just siphon tax revenues through Teeside that would otherwise head straight for the public purse. Houchen insists that’s not the case, and incentives offered would attract new investment.

In addition, the move comes just as Brussels takes a keen look at free ports and their potential for crime and deregulation. The European Commission this month labeled such sites an “emerging threat” that offer crooks a way to launder cash and shift counterfeit goods, but this isn’t the model Teesside is looking at.

Stanley, one of the cheapest places in the U.K. to buy a house. Much of the North East of the United Kingdom voted to leave the European Union | Dan Kitwood/Getty Images

Depending on how hard the U.K. crashes out of the EU, the plan wouldn’t be covered by watchdogs in Brussels anyway.

Regardless, Houchen counters he’s got legal advice that is clear there won’t be a problem. “The one thing free zones don’t do is turn a completely useless site into a brilliant site,” said Houchen. “You can’t turn a site in the Sahara into an amazing free port.”

The quick take on special economic zones is pretty alluring — look at the transformation of sleepy towns in China and the Middle East into forests of glass skyscrapers and factory complexes. But the reality is trickier, especially in developed countries. Shannon, a once vital Irish refueling stop for transatlantic aviation but otherwise a provincial backwater, was turned into a hub for big business thanks to its free zone. Despite that success, Shannon has created only 7,000 jobs, a fraction of what Houchen is proposing.

Slashing environmental and labor rules offers one option, but that’s something the Tees authorities insist they won’t do, ruling out making the port a haven for migrant labor.

A British Steel manufacturing site in Skinningrove in 2017 | Ian Forsyth/Getty Images

But that may hobble the dreams of creating an economic powerhouse, Holmes said. “You’re not going to make much difference to this region unless you give a substantial change in the cost [for business]. The cost saving from the free zone itself is going to be minimal.”

Keeping locals onside with the plan is key to satisfying one of the underlying causes of Brexit — a feeling of disenfranchisement outside the country’s rich southeast. While lawmakers argue over multibillion pound new infrastructure schemes around London such as a third runway at Heathrow and a rail scheme to Birmingham, the north has been relatively starved of public investment.

“The north is just all rusted up,” one local on Redcar’s high street said, declining to offer a name given the febrile political climate. “It’s a brilliant idea if it actually emerges.”

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