DI­VORCE TO RE­DE­FINE U.K.-EU TRADE TIES

Prime Min­is­ter aims to win back con­trol of labour flows and law­mak­ing, lands new free trade pact by March 29 2019

New Straits Times - - Business -

BRUS­SELS

PRIME Min­is­ter Theresa May set the United King­dom on course for leav­ing the Euro­pean Union (EU) in two years time, a di­vorce that will re­de­fine the coun­try’s re­la­tion­ship with its largest trad­ing part­ner and end decades of deep­en­ing po­lit­i­cal in­te­gra­tion on the con­ti­nent.

“Af­ter nine months the UK has de­liv­ered,” said EU President Don­ald Tusk in a Twit­ter post af­ter re­ceiv­ing a signed let­ter by May, which in­voked Ar­ti­cle 50 of the Lis­bon Treaty.

The ties that have bound the UK to the EU since 1973 started to un­ravel at around 1.20pm here yes­ter­day when Bri­tain’s am­bas­sador gave Tusk the let­ter.

“I want us to be a truly global Bri­tain,” May told law­mak­ers in Lon­don.

Nine months since Bri­tons un­ex­pect­edly voted to leave, the phony war of what Brexit might look like will turn into a real bat­tle over the com­plex terms of a set­tle­ment with 27 other gov­ern­ments. Enough lines over money, trade and im­mi­gra­tion have been drawn to sug­gest a tough process with costs to both sides.

“We’re mov­ing from a UK mono­logue to a hard ne­go­ti­a­tion,” said Gre­gor Ir­win, chief econ­o­mist at Global Coun­sel, a con­sul­tancy, and a for­mer of­fi­cial in the UK For­eign Of­fice. “There are go­ing to be many up­sets along the way.”

The pound yes­ter­day weak­ened against all of its Group-of10 peers and fell to a one-week low against the dol­lar. It has fallen 17 per cent since the ref­er­en­dum al­though it sta­bilised re­cently as in­vestors awaited signs of how the talks would progress.

May is aim­ing by March 29 2019 to have won back con­trol of labour flows and law­mak­ing, while also land­ing a new free trade pact with the bloc. The EU is de­mand­ing the UK first pay a £50 bil­lion (RM274.5 bil­lion) fee and there is the threat of sweep­ing tar­iffs be­ing im­posed if a deal isn’t struck in time.

In the back­ground is Lon­don’s fu­ture as an in­ter­na­tional fi­nan­cial hub and threats by banks to up sticks. There’s also Bri­tain’s com­mer­cial re­la­tions with the rest of the world and even the po­ten­tial breakup of the UK as Scot­tish na­tion­al­ists use Brexit in their push for au­ton­omy. The leg­is­la­ture in Ed­in­burgh voted on Tues­day to pur­sue an­other in­de­pen­dence ref­er­en­dum.

The talks will test the ne­go­ti­at­ing met­tle of a premier in power for just eight months and her abil­ity to play to a do­mes­tic au­di­ence, es­pe­cially the anti-EU wing of her Con­ser­va­tive Party that re­mem­bers she voted to stay in the bloc. Bri­tain is di­vided over a “hard Brexit”, where May could walk away with no deal, and “soft Brexit” with con­tin­ued tar­iff-free trade, which Scot­land and other pro-EU fac­tions want.

May in­ter­preted June’s ref­er­en­dum re­sult as a protest against some of the key tenets of glob­al­i­sa­tion, a trend that also swept Don­ald Trump to power in the United States and put Na­tional Front leader Marine Le Pen ahead in some polls be­fore French pres­i­den­tial elec­tions next month.

For Europe, it’s a ques­tion of co­he­sion. Any deal struck be­tween the UK and the EU po­ten­tially could de­cide whether Bri­tain proves to be a trail­blazer for other coun­tries to leave, or re­main the scep­ti­cal out­lier it has al­ways been.

To ward against en­cour­ag­ing oth­ers to eye the exit door, EU of­fi­cials said Bri­tain would not be al­lowed to en­joy bet­ter terms out­side the bloc than in­side it.

May wants to leave the EU’s sin­gle mar­ket to re­duce the num­ber of peo­ple al­lowed into Bri­tain to work. She also wants to es­cape the over­sight of the Euro­pean Court of Jus­tice and cease send­ing what she calls “vast” sums of money to Brus­sels.

As for trade, she is re­quest­ing the “best pos­si­ble deal”, while at the same time win­ning the free­dom to line up trade ac­cords with coun­tries such as the US and China. Bloomberg

Theresa May

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