Brexit Bulletin: Ripping Each Other Apart

What’s Happening? Britain sets out what it wants from the coming negotiations as France warns things will get sticky.

Britain’s chief Brexit negotiator will set out his goals for the country’s future relationship with the European Union in a speech in Brussels on Monday night. David Frost won’t ask for special treatment, just what the EU has agreed in trade deals with other countries: an agreement that removes tariffs and allows divergence in regulations. 

But he may be in for a chilly reception, as French Foreign Minister Jean-Yves Le Drian made clear over the weekend: “We are going to rip each other apart,” Le Drian said at the Munich Security Conference on Sunday. “But that is part of negotiations, everyone will defend their own interests.”

Downing Street says, correctly, that the EU is seeking more stringent terms than it has agreed in deals with other nations. In those three cases, the EU lifted almost all tariff lines—but didn’t force any of those countries to abide by its state-aid regulations or to follow any future changes to its rule-book. France is now pushing for that final demand, known as dynamic alignment, to be part of any deal with the U.K—a rather closer neighbor than Japan, South Korea or Canada.

The U.K.’s opening gambit is “wrong on so many levels,” trade expert David Henig wrote in a monster Monday morning Twitter thread. The U.K., he notes, seems to be ignorant of the demands the bloc made of Canada and Japan before talks even started. And, as the larger player in the negotiation, the EU can always set the terms. “The U.K. is picking a pointless fight on a subject we can’t win,” Henig said.

So is a deal dead on arrival? Not necessarily. France hasn’t yet persuaded fellow member states to make dynamic alignment part of a deal. And it’s not clear, for all Prime Minister Boris Johnson’s assertions, just how far the U.K. actually wants to diverge from EU rules after Brexit. If Johnson really wants to do that then this could indeed be a very short conversation. If he doesn’t, expect Frost to thaw.

Brexit in Brief

How Much? | U.K. consumers will face higher prices on goods coming from the EU after Brexit whether there is a free trade deal or not, according to a major business group. Mandatory customs declarations and rules of origin paperwork will add costs, “regardless of how good the deal is,” said William Bain of the British Retail Consortium.

House Price Rise | Asking prices for U.K. homes rose to a near-record this month after Brexit lifted confidence, property website Rightmove said. In London, prices were 2.7% higher than a month earlier; nationally, values increased by 0.8%. Meanwhile, former U.K. Business Secretary Vince Cable makes the case for a “mansion tax.”

House Price Bubble? | European “superstar cities” bidding to capture London’s post-Brexit business have helped fuel a boom in home prices. That is catapulting places such as Paris into the ranks of the world’s most unaffordable cities, Lionel Laurent writes for Bloomberg Opinion.

Market Problems | A former senior banker at Morgan Stanley believes Europe’s capital markets are “not fit for purpose” and Brexit will make the situation worse, according to a report in the Financial Times. 

“It is Wrong.” A 95-year-old Italian man who has been in the U.K. for 68 years has been asked to prove he is resident in the country in order to remain after Brexit, the Guardian reports.

Banger Problem | Bad news for continental fans of English breakfasts: Britain could lose the right to sell fresh sausages to the EU under a future free trade agreement. No export health certificate exists to cover sausages, and setting up a new one is tricky. “If the U.K. is looking for a basic FTA, it probably won’t get a deal on this sort of thing,” said Peter Hardwick, trade policy adviser at the British Meat Processors Association.