Archive for the ‘Trade’ Category

UK Brexit secretary denies claim he told Michel Barnier deal is ‘dead’

U.K. Brexit Secretary Stephen Barclay dismissed claims he told EU Brexit negotiator Michel Barnier the withdrawal deal is “dead” during an angry exchange in Brussels last week.

The Times reported the pair had a tense meeting over how the Brexit issue could be resolved by the next prime minister.

“He told Barnier that the Withdrawal Agreement was dead — not once but five times,” a senior EU diplomat told the paper. “If this is what is coming then we will be heading for no-deal very quickly.”

But appearing before MPs on the Brexit select committee this morning, Barclay said the reports about the spat were “misleading.”

He said: “In terms of the Withdrawal Agreement, what I said was that the House [of Commons] had rejected it three times, including the third time by a significant margin; that the European election results in my view had further hardened attitudes across the house and that the text, unchanged, I did not envisage going through the house.”

He added: “I don’t think that was a particularly controversial observation.”

Barclay said he asked Barnier to agree a side deal on citizens’ rights and data sharing, but said he did not ask about whether the two sides could agree continued trade arrangements under the so-called GATT 24 rules after a no-deal Brexit.

A spokesman for Barnier refused to comment on the meeting, but pointed to the tweet the EU chief sent out after the meeting, in which he said agreeing a Brexit deal “remains our priority.”

Elsewhere at the hearing, Barclay suggested the government could try to compensate sheep farmers if they have to slaughter flocks after a no-deal Brexit, saying there is a “huge amount of effort” going into the issue, including meetings with industry bodies this week.

He also suggested car manufacturers could be awarded compensation if they are hit with a 10 percent tariff following a no-deal departure.

He said British Prime Minister Theresa May is meeting with car manufacturers this week, adding: “We would also have to look at what support we can give to the industry and there are various computations of that.”

But anti-Brexit group Best for Britain said any compensation for car manufacturers following a no-deal departure would have to be worth more than £25 billion.

Barclay also suggested the U.K. would take a “continuity approach” to fishing waters after a no-deal, suggesting EU boats would continue to enjoy access to British seas. And he said the possibility of the U.K. leaving the bloc without a deal on October 31 is “underpriced.”

Tory leadership love-in creates more warmth than light

LONDON — Billed as the “final showdown” between the two men vying to become the U.K.’s next prime minister, the last Conservative leadership hustings turned out to be more sickly love-in than gladiatorial combat.

For Conservative Party members who will choose the next prime minister still wavering over whether to back Boris Johnson or Jeremy Hunt, in the final reckoning on Monday, there was little to divide the two privately educated senior Tories.

With their positions and debating lines now well rehearsed after nearly a month of clashes, the evening generated more warmth than light.

Both made it clear they would not accept a hypothetical five-year time limit to the Northern Irish backstop (even though the EU is offering no such change to the Brexit deal). Both agreed that the U.S. has taken the wrong approach to the Iran nuclear deal. And both condemned President Donald Trump over his attack on four congresswomen of color — although they refused to call it explicitly “racist.”

Voting in the Tory leadership contest begun 10 days ago, meaning many of the 160,000 Conservative members have already cast their ballots ahead of an announcement on July 23. Johnson is the strong favorite, according to several polls of party members, but for those who are yet to decide, it will likely come down more to character as opposed to any stark policy dividing line between the two candidates.

On course for no deal

With eyes on a largely pro-Brexit Tory electorate, both candidates at the event hosted by the Sun newspaper and TalkRADIO took a hard line on Britain’s departure from the European Union.

Johnson repeated his vow to leave on the Brexit deadline of October 31 come what may while Hunt stuck to his more flexible stance on that deadline. But as the race has gone on, the foreign secretary has hardened his rhetoric on other aspects of the U.K.’s departure from the EU.

One route mooted by some in the Tory party as a way to get MPs to back the backstop would be to give it an expiry date. But even if such a time limit could be negotiated with Brussels — a doubtful proposition — neither candidate said it would make the deal currently on the table more palatable.

Asked if he would accept a five-year time limit on the Northern Irish insurance policy, Johnson answered “no to the time limit, or unilateral escape hatches or all of these kind of elaborate devices, glosses codicils and so on you could apply to the backstop,” which he went on to describe as an “instrument of our own incarceration within the customs union and the single market.”

Hunt, who supported May’s deal with the backstop, declared the “backstop as it is is dead.”

“I agree with Boris, I don’t think tweaking it with a time limit will do the trick,” he added.

Message to Trump

The two men also agreed on their approach to Trump. Perhaps chastened by accusations that last week that he had not stood up to the U.S. president over his attack on British Ambassador to Washington Kim Darroch (Trump had called the diplomat a “pompous fool”), Johnson was more forthright over Trump’s latest Twitter blast.

The former foreign secretary condemned Trump’s attack on Democratic congresswomen of color at the weekend as “totally unacceptable,” adding that he could not understand why the U.S. president had made it.

Trump tweeted Sunday that the four women, who “originally came from countries whose governments are a complete and total catastrophe,” should “go back” and fix issues in those countries before telling him how to run the U.S. government.

Trump’s tirade was directed at Alexandria Ocasio-Cortez, Rashida Tlaib and Ayanna Pressley, who were born in the U.S., and Ilhan Omar, who arrived in the country as a refugee from Somalia aged 12.

“It is totally unacceptable in a modern multi-racial country which you’re trying to lead,” Johnson said of U.S. president’s remarks.

Asked multiple times whether he thought the remarks were racist, Johnson refused to condemn them as such. But he said: “You can take from what I’ve said what I think about Mr. Trump’s remarks.”

Hunt also refused to describe the comments as racist, but said it was “totally offensive … that people are still saying that kind of thing.”

Those comments may come back to haunt both candidates with a president who has shown he rarely forgets or ignores a crossed word from overseas partners.

And both men acknowledged several times the importance of the relationship with Washington. Earlier, Johnson said he wanted to do a quick trade with the U.S. and suggested that such an agreement would be an opportunity to raise standards in U.S. agriculture.

Asked if he would accept chlorine-washed chicken from the U.S. into U.K. markets, something that is highly controversial with British consumers but the U.S. has made clear it wants, Johnson said he would not.

“I’m not in favor of importing anything from the U.S. that involves lower animal welfare standards or lower hygiene,” he said.

“We should use [a trade deal] as an incentive to lift their standards to match ours,” he added.

Most trade experts expect a post-Brexit U.K. as the far smaller economy to have a weak bargaining position in trade negotiations with the U.S. and so be forced to accept most demands from Washington in order to do a deal quickly.

Immigration clash

The most stark difference of the night between the two contenders was over immigration.

While Johnson, who led the Vote Leave campaign with a pledge to “Take Back Control,” refused to “play a numbers game” when asked about immigration levels, Hunt said people had voted Brexit “with an expectation that overall levels of net immigration would come down.”

“I believe that people would think we were betraying the spirit of that Brexit referendum if we didn’t find a way of bringing down overall numbers,” he said.

With Johnson the clear favorite to take the keys to No. 10 Downing Street, Hunt — perhaps with a view to keeping his job as foreign secretary — appeared to pull his punches rather than go after his rival.

At one point, Johnson was being grilled over whether his partner would move into No. 10 with him. Hunt tried a joke about the Brexiteer figurehead moving in next door to him if Hunt won the top job — a reference to the traditional residence of the U.K.’s finance minister, the chancellor of the exchequer.

Despite the bonhomie, the olive branch did not pay off for Hunt. Johnson refused to return the favor of an implicit senior job offer.

Boris Johnson: Trump’s ‘go home’ attack was ‘totally inappropriate’

LONDON — Boris Johnson, the former U.K. foreign secretary, said Donald Trump’s Twitter attack on Democratic congresswomen of color was “totally unacceptable,” adding that he could not understand why the U.S. president had made them.

“It is totally unacceptable in a modern multi-racial country which you’re trying to lead,” he said of U.S. president’s remarks at a Conservative party leadership debate hosted by the Sun newspaper and Talk Radio, although he refused to condemn the tweets as “racist.”

Trump tweeted Sunday that the four women, who “originally came from countries whose governments are a complete and total catastrophe,” should “go back” and fix issues in those countries before telling him how to run the U.S. government.

His tirade was directed at Alexandria Ocasio-Cortez, Rashida Tlaib and Ayanna Pressley, who were born in the U.S., and Ilhan Omar, who arrived in the country as a refugee from Somalia aged 12.

Asked at the debate multiple times whether he though the remarks were racist, Johnson — who is the front-runner in the contest to be the U.K.’s next prime minister — refused to condemn them as such. But he said: “You can take from what I’ve said what I think about Mr Trump’s remarks.”

“You simply cannot use that kind of language,” he added.

Earlier on Monday, a spokesman for Theresa May said: “The prime minister’s view is that the language used to refer to these women was completely unacceptable.”

Johnson’s rival for the leadership, Jeremy Hunt, who is the current foreign secretary, said it was “totally offensive … that people are still saying that kind of thing.”

The final debate of the leadership campaign was a largely chummy affair, with both candidates agreeing more than they clashed. At one point, Johnson approved of a point Hunt had made on Brexit. “I like the way you’re talking, Jeremy,” he interjected, before Hunt joked back: “Good, good. Join my Cabinet, Boris.”

Earlier, Johnson suggested that a post-Brexit trade deal with America would be an opportunity to raise standards in U.S. agriculture.

Asked if he would accept chlorine-washed chicken from the U.S. into U.K. markets, something that is highly controversial with British consumers but the U.S. has made clear it wants, Johnson said he would not.

“I’m not in favour of importing anything from the U.S. that involves lower animal welfare standards or lower hygiene,” he said.

“We should use [a trade deal] as an incentive to lift their standards to match ours,” he added.

Most trade experts expect a post-Brexit U.K. as the far smaller economy to have a weak bargaining position in trade negotiations with the U.S. and so be forced to accept most demands from Washington in order to do a deal quickly.

UK trade secretary: Johnson’s pre-Brexit US trade deal won’t work

U.K. Trade Secretary Liam Fox on Monday ruled out a pre-Brexit trade deal with the United States, dismissing reported plans by Conservative leadership frontrunner Boris Johnson to negotiate an agreement with Washington before the U.K. leaves the European Union.

Johnson wants to hash out a limited transatlantic deal before October 31 — the date Britain is slated to leave the EU, barring another extension — if he is elected as the U.K.’s next prime minister, according to the Times. But the trade secretary said doing so would contravene European law.

“We can’t negotiate anything with the U.S. until after we’ve left the European Union,” Fox told BBC’s Today program. “It would be in breach of European law for us to do that.”

Fox also took aim at Johnson’s position on food standards in a potential U.K.-U.S. trade deal. Johnson said in a live Telegraph event last week he would insist the U.S. obey British food standards.

“If you go to the U.S. and you say we’re going to take any discussions on agricultural access off the agenda, you’ll find that they close down pretty quickly in terms of the willingness to discuss things,” Fox said.

But the U.K. “should be trying to get an agreement with the U.S. as quickly as we possibly can,” he added.

Mainstream parties block Euroskeptics from top Parliament posts

Mainstream, pro-EU political parties in the European Parliament moved aggressively to block Euroskeptic and extremist groups from claiming several prominent committee leadership posts on Wednesday.

That blocking effort enraged anti-establishment forces and potentially put at risk an overall deal on the EU’s future leadership.

One group leader, Ryszard Legutko of the right-wing European Conservatives and Reformists (ECR), pointedly warned that his MEPs were less likely to support the deal on top jobs agreed by European leaders last week after one of their members — former Polish Prime Minister Beata Szydło — was blocked from becoming chairwoman of the Employment and Social Affairs Committee.

Anti-establishment forces, including far-right and extremist groups, gained strength in the recent European election. The new Identity and Democracy (ID) group, a partnership between Matteo Salvini’s League in Italy and Marine Le Pen’s National Rally in France, is now the fifth-largest group with 73 MEPs — just two fewer than the Greens.

Together, ID and ECR have 135 MEPs, far more than the 108 seats controlled by the liberal-centrist Renew Europe, backed by French President Emmanuel Macron.

But pro-European forces overall control 519 seats and they wielded that muscle Wednesday to deny the insurgent groups several positions, effectively upending the so-called D’Hondt method by which leadership positions are traditionally apportioned among parliamentary groups.

ID had expected to hold the chair of the agriculture committee but its nominee, French MEP Maxette Pirbakas, was blocked by the four pro-EU parties. They instead elected Norbert Lins, a German MEP from the conservative European People’s Party. Pirbakas was then also rejected for two vice chair positions, before voting was suspended for the final spots.

In one of the most bitter stings for the far right, the pro-EU groups also voted down an ID candidate, French MEP Gilles Lebreton of National Rally, who had expected to be chairman of the Committee on Legal Affairs.

Instead, a British liberal, Lucy Nethsingha, was elected to head the panel, which among other responsibilities maintains oversight of the limited parliamentary immunity enjoyed by MEPs. Nethsingha may be out of the Parliament come October 31 after Britain leaves the EU.

József Szájer, an MEP from Hungary’s ruling Fidesz party who chaired the initial vote in the legal affairs committee, had implored colleagues to respect the handshake agreement and the proportional formula.

“I would like to ask you, as the legal affairs committee, to observe the old traditions of the rule of law of our committees and elections, which is based on agreements by political groups,” Szájer said. “We have worked with those rules for 40 years, and if those agreements are not upheld, the consequences are unforeseeable.”

But the pro-EU MEPs were unmoved by the request from Szájer. Sylvie Guillaume, a French socialist, accused ID of having transparent motives in seeking to lead the legal affairs committee, known as JURI. “It fools no one that they chose the JURI committee, where parliamentary immunities are waived,” Guillaume said.

When Le Pen was an MEP in 2017, for example, Parliament voted to lift her immunity over pictures she tweeted of Islamic State violence.

While the blocking maneuvers essentially maintained the cordon sanitaire that pro-EU groups have used to limit the power of extremists and nationalists, the rising strength of the anti-establishment groups raises the possibility of a backlash.

Several MEPs, infuriated by the blocking effort, warned of just such reprisal in the months and years ahead.

The Euroskeptics and nationalists currently do not hold any vice presidency position in the Parliament, a remarkable absence from leadership given their overall numbers in the assembly. That means they still have no MEPs to chair plenary sittings nor any representation in the Parliament’s “bureau,” where the most important decisions on the workings of the Parliament are made.

One Euroskeptic in Parliament accused the pro-EU groups of hypocrisy, by claiming to be defenders of democracy while denying representation to minority parties.

“This is the only parliament in Europe that doesn’t give any minimal guarantee to minorities,” said a senior official from the ID group.

Pro-EU MEPs even moved quickly to disqualify candidates from the EU-critical Fidesz, which is led by Hungarian Prime Minister Viktor Orbán and has been suspended from the EPP’s pan-European party organization, but not the parliamentary group.

The Committee on Civil Liberties failed to elect its full leadership after a center-left coalition blocked a Fidesz candidate for vice chair. Rather than allow the election of Hungarian MEP Balázs Hidvéghi, the pro-EU groups nominated Damien Carême, a French Greens member.

Fidesz was not entirely denied, however: Its MEP Tamás Deutsch won a vice chair position on the budgetary control committee.

The vote against Szydło, Poland’s former prime minister, prompted the fiercest response. After she was voted down, ECR leaders warned their MEPs were far less likely to support the overall cross-party deal on the EU’s future leadership including the nomination of German Defense Minister Ursula von der Leyen for Commission president.

“We are incredibly disappointed with the behavior of some MEPs in the employment committee today,” said Legutko, the Polish leader of ECR. “At the European elections, Beata Szydło received the highest number of preference votes in Polish history and one of the highest of any individual across the whole EU. That MEPs in the Parliament’s employment committee would reject her candidacy as chair is an insult to her voters and hardly encourages us to support a cross-party consensus next week.”

Lili Bayer, Laurens Cerulus, Laura Kayali, John Rega and Eddy Wax contributed reporting. 

The next European Commission: What we know so far

The next European Commission is taking shape.

The current EU executive remains in office until the end of October but some governments have already announced their candidates for the next five-year term.

That doesn’t mean all of those nominees will end up at the Commission’s Berlaymont headquarters in Brussels. Every nominee will need the approval of the Commission’s new president and the European Parliament to take office.

Ursula von der Leyen, the European Council’s nominee for Commission president, herself still needs to be confirmed by the European Parliament.

But the announcements so far give a good indication of who’s staying, who’s joining and who’s leaving.

Here’s what we know so far:

WHO’S STAYING 

Valdis Dombrovskis, Latvia, European People’s Party (EPP)
Current role: The European Commission’s vice president for the euro and social dialogue
Expected role in the new Commission: Latvia is hoping to get a portfolio connected to finance and the economy, according to one official.

Mariya Gabriel, Bulgaria, EPP
Current role: European commissioner for digital economy and society
Expected role in the new Commission: 
Bulgarian Prime Minister Boyko Borissov has said that he turned down the post of high representative for foreign policy for his country and wants a “a commissioner with a real portfolio.” He also said he would be keen to keep the digital portfolio for Bulgaria.

Phil Hogan, Ireland, EPP
Current role: 
European commissioner for agriculture
Expected role in the new Commission: 
Hogan could stay on as agriculture commissioner, but his name has also been floated as a possible trade commissioner.

Maroš Šefčovič, Slovakia, Party of European Socialists (PES)
Current role: European Commission vice president in charge of the energy union
Expected role in the new Commission: Slovakia is hoping to get a vice president role with a “strong portfolio,” according to one official.

Frans Timmermans, Netherlands, PES
Current role: European Commission first vice president
Expected role in the new Commission: While Timmermans’ party is not in power in his home country, the Netherlands is nevertheless expected to nominate him. He is likely to take the position of first vice president in the new Commission.

Margrethe Vestager, Denmark, Alliance of Liberals and Democrats for Europe (ALDE)
Current role: European commissioner for competition
Expected role in the new Commission: Vestager is also expected to take a senior post in the new Commission, under a deal agreed by the European Council of EU leaders.

WHO’S JOINING 

Josep Borrell, Spain, PES
Current role: Spain’s minister for foreign affairs
Expected role in the new Commission: The Council has nominated Borrell as the next EU high representative overseeing foreign affairs and security policy.

Nicolas Schmit, Luxembourg, PES
Current role: Member of the European Parliament and former minister for labor, employment, and social economy. Luxembourg’s government is set to nominate Schmit as part of a coalition deal.
Expected role in the new Commission: Schmit has expressed interest in a social policy portfolio.

Kadri Simson, Estonia, ALDE
Current role: Simson served as Estonia’s minister of economic affairs from 2016 until 2019.
Expected role in the new Commission: It’s not certain what role Simson could receive, but in a letter to the Council, Prime Minister Jüri Ratas highlighted her expertise in energy, transport and the internal market.

László Trócsányi, Hungary, EPP
Current role: Trócsányi served as Hungary’s justice minister from 2014 until 2019 and is now a member of the European Parliament.
Expected role in the new Commission: “I certainly have some preferences in this matter but I think it’s too early to talk about them yet,” Trócsányi said in response to a question from POLITICO. According to one senior Fidesz official, Trócsányi is interested in the enlargement portfolio.

Jutta Urpilainen, Finland, PES
Current role: A member of Finland’s parliament, Urpilainen served as the country’s finance minister from 2011 until 2014.
Expected role in the new Commission: While it remains unclear what position Finland would get, Urpilainen’s experience could lead to a finance-oriented portfolio.

Ursula von der Leyen, Germany, EPP
Current role: German defense minister
Expected role in the new Commission: The Council nominated von der Leyen to become the next president of the European Commission.

OTHER POSSIBLE MEMBERS

Johannes Hahn, Austria, EPP
Current role: European commissioner for neighborhood policy and enlargement
It’s possible that Austria will nominate Hahn for another term. As the country is currently being governed by a technocratic interim Cabinet, the major parties in the Austrian parliament will have to agree on a candidate. The far-right Freedom Party’s leader Norbert Hofer, for one, has said he can “imagine” Hahn staying at the Commission.

Věra Jourová, Czech Republic, ALDE
Current role: European commissioner for justice, consumers and gender equality
Jourová is hoping to stay at the Berlaymont, but much depends on a brewing domestic political crisis in Prague.

Pedro Marques, Portugal, PES
Current role
: Member of the European Parliament and former minister
Portugal’s government is hoping to nominate Marques and is eyeing the regional development portfolio.

WHO’S LEAVING

Andrus Ansip, Estonia, ALDE
Current role: Ansip was the European Commission’s vice president for the digital single market but has resigned to take up a seat in the European Parliament.

Elżbieta Bieńkowska, Poland, EPP
Current role: European commissioner for the internal market, industry, entrepreneurship and SMEs

Miguel Arias Cañete, Spain, EPP
Current role: European commissioner for climate action and energy

Corina Creţu, Romania, PES
Current role: Creţu was the European commissioner for regional policy but has resigned to take up a seat in the European Parliament.

Jean-Claude Juncker, Luxembourg, EPP
Current role: President of the European Commission

Jyrki Katainen, Finland, EPP
Current role: The European Commission’s vice president for jobs, growth, investment and competitiveness

Julian King, United Kingdom, unaffiliated
Current role: European commissioner for the security union

Carlos Moedas, Portugal, EPP
Current role: European commissioner for research, science and innovation

Neven Mimica, Croatia, PES
Current role: European commissioner for international cooperation and development

Federica Mogherini, Italy, PES
Current role: High representative for foreign affairs and security policy

Pierre Moscovici, France, PES
Current role: European commissioner for economic and financial affairs, taxation and customs

Tibor Navracsics, Hungary, EPP
Current role: European commissioner for education, culture, youth and sport

Günther Oettinger, Germany, EPP
Current role: European commissioner for budget and human resources

Marianne Thyssen, Belgium, EPP
Current role: European commissioner for employment, social affairs, skills and labor mobility

Laura Kayali contributed reporting.

The future of UK services trade is unlikely to be bright, whatever form Brexit takes

When it comes to trade in services, leaving the Single Market will result in increased regulatory costs and could have significant effects on the volume and composition of UK services exports, writes Olga Pindyuk.

In the Brexit debate, trade in services has been largely overlooked in favour of trade in goods. This is despite the UK being the second biggest exporter of services in the world and having one of the highest shares in total exports among leading economies (Figure 1). Moreover, the EU is a major market for UK services, having accounted for about 49% of the country’s total services exports in 2017.

When talking about sector specialisation of services exporters, London as the UK’s financial hub comes to mind. But the UK is competitive in a broad range of services, with ‘other business services’ – a combination of legal, accounting, management consulting, and public relations services – being most prominent in cross-border trade, having accounted for 33.5% of the sector’s total exports in 2016 according to WTO data. The second biggest subsector is architectural, engineering, scientific, and other technical services (14.6%), followed by advertising, market research, and public opinion polling services (10.1%). In the transport sector, air transport accounts for almost two-thirds of exports.

As a member of the Single Market, the UK has access to a market of over 500 million consumers, to the free flow of data between EU members, and to passporting rights, which allow financial companies to sell services in any EU country without having to set up a branch there. In other words, the Single Market allows the UK to supply more services through cross-border trade rather than through costly commercial presence. Passporting rights are also a very important reason why the UK has been used as an EU base by US and Japanese financial firms.

Important for the professional services sector is also the free movement of people. For example, UK companies can employ European staff in the UK or send their workers on trips to the EU to consult clients, provide technical support to users of their products, broker and draft contracts, and so on. As migration concerns were crucial for the Brexit vote, movement restrictions are probably the most binding constraint on the government, making free movement unlikely to be a part of any deal, which significantly limits the options available for the services trade.

If the UK opts for a divorce that precludes it from participation in the Single Market in services, it will inevitably face increased regulatory costs: relevant providers in the UK will face heterogenous regulations in each Member State, which implies an increase in trading costs. With a rise in cross-border trade barriers there would also be a relative increase in the proportion of services provided via a more costly commercial presence within the EU. The process has already started due to the political uncertainty that has surrounded Brexit since 2016, and has so far been most visible in the financial sector where more than 250 firms have moved or are moving business elsewhere.

The biggest losses would take place if the country crashed out of the EU without any agreement and had to trade with the bloc on WTO terms, which envisage a very limited scope of liberalisation under the General Agreement on Trade in Services. Even concluding a free trade agreement with the EU will result in a significant rise in the barriers to services trade – the EU’s recent agreement with South Korea and Japan, for example, does not address regulatory issues around authorisations and licensing, with processes varying between Member States.

It is nonetheless possible that Brexit could result in more advanced services liberalisation than previous EU agreements. But in order to achieve this, any preferential access to the EU market that the UK might seek will need to be part of a comprehensive agreement, otherwise the EU may be obliged to extend more favourable conditions to its other trading partners according to the most favoured nation principle. Politically feasible options of such an agreement are deals similar to the Comprehensive Economic and Trade Agreement or CETA+, which offer limited scope of liberalisation. The UK could possibly secure mutual recognition that would cover some professional qualifications and licensing for various sectors. Still, the scope of a deal will most likely be limited.

Comparison of the values of the OECD Services Trade Restriction Index  for intra- and extra-EEA trade (Figure 2) shows that countries outside the Single Market face the highest barriers to trade with EEA members in air transport and a range of professional services: legal, accounting, architecture, and engineering. It is in these sectors that the UK is likely to experience the highest increase in trade costs.

The US is the most important market for UK services exporters outside the EU (20.5% of total services exports in 2017), but substantial reorientation of British services exports to this and other non-EU markets is unlikely as geography matters to services trade almost as much as to trade in goods. This is due to factors such as the need of face-to-face interactions, the inconvenience of operating in different time zones and so on, all of which tend to result in services exports being quite localised geographically.

Just how severely Brexit will affect the services trade will depend on the form it takes; however, it seems increasingly likely that under all feasible options the UK will face increased regulatory costs.

______________

Note: the above draws on the author’s published report available here.

About the Author

Olga Pindyuk is an Economist at the Vienna Institute for International Economic Studies.

 

 

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image credit: Pixabay (Public Domain).

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