British Chancellor of the Exchequer Rachel Reeves joked to journalists after Monday’s EU-UK reset that trade deals were coming along “like buses,” given the agreements with India and the US that had also been sealed in the past fortnight alone.
The chancellor described the EU deal as the best that had been secured by any non-member country, but she was also keen to talk about the three successful negotiations as a package.
That is because the British government accepts the EU deal would not be transformational for the UK’s growth prospects in itself — boosting GDP by ￡9 billion (US$12.07 billion), or 0.3 percent, over 15 years, according to officials — but hopes it would persuade investors to take a fresh look at the UK.
“It shows Britain now is the place to put investment and business, because we’ve got preferential deals with the biggest economies around the world, and so I’m confident that these deals will lead to investment coming to Britain,” Reeves said.
Labour hopes that would help to underpin the growth it sorely needs to fulfil its promises to voters.
Three aspects of the EU agreement have been particularly welcomed by business, and form the core of the economic package — although many details remain to be negotiated.
The first is the long-hoped-for agreement to create a common sanitary and phytosanitary (SPS) area, under which cumbersome checks on food and agricultural products would be lifted in return for the UK aligning with EU standards in these areas.
Former British prime minister Boris Johnson, presenting his trade and cooperation agreement with the EU on Christmas Eve in 2020, wrongly claimed there would be “no non-tariff barriers to trade.”
In practice, these barriers — including veterinary checks — have been hugely damaging, and a SPS deal is aimed at dismantling some of them, for this key sector.
The British Chambers of Commerce, which has long drawn attention to the frustrations of UK exporters, called the prospect of an SPS agreement “a huge boost” that would “cut costs, reduce waste and increase sales.”
Reeves, when asked whether the UK could take a similar approach to other sectors — aligning on rules in exchange for more frictionless market access — said: “potentially,” pointing to the fact that the two sides had now agreed to meet annually.
The second aspect of the deal that carries economic weight is an agreement to cooperate more closely on energy policy, including aligning the EU and UK emissions trading schemes.
That should, “create the conditions for goods originating in our jurisdictions to benefit from mutual exemptions from the respective EU and UK carbon border adjustment mechanisms (CBAM),” the British government said.
In practice, the British government claims that would mean the steel industry escapes ￡5 million a year in levies that the EU would otherwise have imposed, via the CBAM — a policy aimed at ensuring heavily polluting products cannot enter the EU and undercut domestically produced equivalents that have paid to offset their emissions.
British government modeling suggests membership of the emissions trading scheme accounts for 0.1 percent of the 0.3 percent boost to GDP from the reset, with SPS contributing the other 0.2 percent.
Third, the UK hopes the agreement to negotiate over the possibility of defense industry cooperation would mean British firms being able to bid for projects procured via the planned EU Security Action For Europe (SAFE) fund, which would allow member states to borrow to pay for weapons.
The language on this in the EU-UK agreement is scant: The two sides agree to cooperate on “security and defence initiatives, including on defence industry,” and they commit to “swiftly explore any possibilities for mutually beneficial enhanced cooperation created by the SAFE instrument.”
However, ministers clearly believe this could open the way for British defense companies such as BAE Systems, to profit, as defense spending ramps up on both sides of the English Channel.
The fury about fishing rights, which held up the final agreement, has little to do with economics and everything to do with the political symbolism of the sector.
Research by the Resolution Foundation found that fisheries had been one of the industries worst affected by Johnson’s Brexit deal, with output perhaps 30 percent lower than it might otherwise have been.
Given how rapidly fish needs to get to market, Labour argues that eliminating cumbersome food checks under the SPS deal would benefit the sector more than allowing EU boats access to UK waters for another 12 years. It might also have the positive political side-effect of preventing regular rows about fish from spilling out into the headlines.
Economists say the limited size of the direct GDP boost from the deal results from the British government’s clear determination not to rejoin the single market or customs union, to avoid having to sign up to the free movement of people.
John Springford of the Centre for European Reform, whose analysis suggests the British economy is about 5 percent smaller than it would otherwise have been as a result of Brexit, suggests that the government’s 0.3 percent estimate still looks relatively generous.
He forecast that an SPS agreement would add less than 0.1 percent against the 0.2 percent upside modeled by the British government.
However, as Reeves made clear, Labour hopes the economy would gain something more nebulous, which it is harder to plug into a model: a growing acknowledgement from the business sector that the UK is an appealing investment proposition.
Before coming to power, Reeves and British Prime Minister Keir Starmer hoped the credibility of a steadier hand on the tiller than the Conservatives would win over investors, whose confidence they see as key to the UK’s recovery.
Instead, Labour swept into power on a wave of dire warnings about the state of the economy, blindsided businesses with tax rises and saw GDP continue to flatline.
Now, they hope the triumvirate of the India-UK trade deal, the US tariff agreement with US President Donald Trump and the EU reset would burnish their reputation as calm and competent stewards of the economy, helping to generate a glimmer of optimism, in a highly uncertain world.
As strategic tensions escalate across the vast Indo-Pacific region, Taiwan has emerged as more than a potential flashpoint. It is the fulcrum upon which the credibility of the evolving American-led strategy of integrated deterrence now rests. How the US and regional powers like Japan respond to Taiwan’s defense, and how credible the deterrent against Chinese aggression proves to be, will profoundly shape the Indo-Pacific security architecture for years to come. A successful defense of Taiwan through strengthened deterrence in the Indo-Pacific would enhance the credibility of the US-led alliance system and underpin America’s global preeminence, while a failure of integrated deterrence would
It is being said every second day: The ongoing recall campaign in Taiwan — where citizens are trying to collect enough signatures to trigger re-elections for a number of Chinese Nationalist Party (KMT) legislators — is orchestrated by the Democratic Progressive Party (DPP), or even President William Lai (賴清德) himself. The KMT makes the claim, and foreign media and analysts repeat it. However, they never show any proof — because there is not any. It is alarming how easily academics, journalists and experts toss around claims that amount to accusing a democratic government of conspiracy — without a shred of evidence. These
Taiwan is confronting escalating threats from its behemoth neighbor. Last month, the Chinese People’s Liberation Army conducted live-fire drills in the East China Sea, practicing blockades and precision strikes on simulated targets, while its escalating cyberattacks targeting government, financial and telecommunication systems threaten to disrupt Taiwan’s digital infrastructure. The mounting geopolitical pressure underscores Taiwan’s need to strengthen its defense capabilities to deter possible aggression and improve civilian preparedness. The consequences of inadequate preparation have been made all too clear by the tragic situation in Ukraine. Taiwan can build on its successful COVID-19 response, marked by effective planning and execution, to enhance
Since taking office, US President Donald Trump has upheld the core goals of “making America safer, stronger, and more prosperous,” fully implementing an “America first” policy. Countries have responded cautiously to the fresh style and rapid pace of the new Trump administration. The US has prioritized reindustrialization, building a stronger US role in the Indo-Pacific, and countering China’s malicious influence. This has created a high degree of alignment between the interests of Taiwan and the US in security, economics, technology and other spheres. Taiwan must properly understand the Trump administration’s intentions and coordinate, connect and correspond with US strategic goals.
RSS