EU-UK Trade Negotiations: let the dance begin


The Financial Times today comments on the difficult beginning, or re-start, of the negotiations between the UK and the European Union in anticipation of the Brexit, in this article.

My comments:

  1. The European Union leaders must wait, hold off and reflect on its past mistakes
    The EU has a merchandise trade surplus of 94 billion pounds, be careful to close the door to the UK for the sake for revenge
  2. But, UK has a trade surplus in services of 28 billion pounds, therefore a negotiating weapon in EU’s favor that we often forget
  3. In negotiations, both good and services must be discussed together so that both parties can focus on what interests them, otherwise it will be difficult to get out
  4. Include a “Rule of Origin” that allows the United Kingdom to make all the free trade agreements it deems appropriate, for example with the USA, without this having an impact on the agreement with EU
  5. As for Italy, the ICE promotional plan should be reformulated, in terms of value and type of activities to mitigate potential frictions in trade, even if my optimism and rationality lead me to imagine a scenario with minimum duties and customs controls not dramatically different from today

In no uncertain terms, the author, Wolfang Munchau, accuses the European leadership of not having been able to negotiate with May and, even more seriously, having ‘rooted’ against Brexit, taking sides, essentially with a party that was, and will be , to the opposition for the next 5 years. Johnson, on the other hand, will be Prime Minister even when all the current EU Commissioners are already at home.

 “If EU leaders had any strategic sense, they would now pause for a minute to decide exactly what they want from a new bilateral relationship with the UK.”

The most significant phrase is reported here: an invitation to EU leaders to pause for a moment to reflect and decide well what to do. Stopping and reflecting has not the attitude of the EU leaders, even less when dealing with the Brexit dossier, where instead the tones of many were almost vindictive towards the United Kingdom, guilty of having asked its citizens who, rightly or wrongly, decided about their future. But, as it was in the case of Greece, in Brussels democracy seems welcome only when it gives the results they want. I also recall during our government crisis in Italy, an invitation was made to Italian voters to learn to vote better next time. Ah, the liberals!

The commercial framework between the EU and the UK is quite complex but offers a symmetrical image when looking at the surplus goods and services taken together.

For historical reasons, and due to analytical laziness, we have often and always only talked about surplus / deficit in the goods sector. Here, the European Union must be very careful because it has a surplus of 94 billion pounds against the United Kingdom. Italy is the fourth country to enjoy a high surplus of 9 billion pounds, behind Germany, and the obvious Netherlands and Belgium, but ahead of France. Without going into the merits of the true value or presumed so to run a surplus rather than a deficit, these are important numbers that must be preserved.

However, if we also look at the services sector, the situation is reversed, with a surplus in favor of the United Kingdom of 24 billion pounds, of which 9 with Germany, 10 with Holland, 7 with Spain and a little less 4 billion with Italy. In practice, the UK compensates for the goods deficit with the export of services.


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