CANADA ON CETA AND NAFTA

FIRST CETA, THEN NAFTA

“I think the response from Canada [to the U.S. proposal for renegotiating NAFTA] was a very open response to the possibility of modernizing and updating. And I think you have to look no further than CETA to see what Canada means by that.”

Colin Bird
June 23, 2017

CONTEXT

Colin Bird is the Minister for Trade and Economic Policy at the Canadian Embassy in Washington. As a panelist at the GBD event on June 23, he made several major points in a calm and quiet voice. For us, the biggest of these is that Canada has just notched a big win in trade policy. CETA, Canada’s Comprehensive Economic Trade Agreement with the European Union, is largely a done deal. And it is a big deal. In the words of the EU Trade Commissioner, Cecilia Malmström, “It is the most modern and advanced trade agreement ever made.”

As for when it will be implemented, Mr. Bird said, “We are, I think, very, very close to application of the CETA.” But that was in late June. In early July, Canada’s prime minister, Justin Trudeau, and EU Commission president, Jean-Claude Juncker, met on the margins of the G-20 Summit in Germany, and they set a date. Provisional application of CETA will begin on September 21, 2017.

So, how provisional is “provisional” application? Mr. Bird put it this way:

“When you’re talking provisional application, that sounds very tentative. In reality, it means essentially full application of the CETA, with the exception of certain investor issues that are in member state competence.

“So, what does that mean? You’re looking at 98 percent of tariff lines going duty-free as of day one, as soon as we bring it into force. We’ve got fairly concise phase-outs for those very sensitive products in the sort of 3, 5, 7 year range. So that will be at about 99 percent of tariff lines duty-free by the time the phase-ins are complete.”

But tariffs are just a part of it. Mr. Bird praised CETA for an array of elements including its provisions on labor, on environment, on transparency, on services, and most notably (for us) on government procurement. “You look at the level of ambition on government procurement and it’s really quite dramatic; so that we are down to the provincial, the Member State, [and] city level in terms of openness to procurement.”

And Mr. Bird was quite clear in making the connection between CETA and NAFTA. “We’ve had an agreement [CETA],” he said, that has essentially leap-frogged NAFTA.” That in itself, he suggested, makes the case for the effort to try to modernize and update NAFTA.

As to how difficult the NAFTA project is going to be, Mr. Bird took note of the mixed character of the climate for the negotiations. He spoke positively of the high-level engagement in all three NAFTA countries. On the other hand, he also took note of the “challenges in terms of managing an agreement going forward, particularly when you have rhetoric that can sometimes look win-lose.”

But overall his assessments of the looming NAFTA talks was more positive than negative, more upbeat than otherwise. That, at any rate, is how we understood this passage in his comments:

“The rhetoric around America first and economic nationalism that we’re hearing in the United States does not necessarily have to translate into a win-lose model. And Canada is very focused on keeping a win-win model going forward into these negotiations, or a win-win-win model going forward into these negotiations.”

COMMENT

An honored boss of many years ago would often brush aside our over-reliance on precedence, footnotes, and documentation. “Just assert it,” he would say. So we shall simply assert our belief that any negotiation — and certainly the negotiation of a major trade agreement — is more likely to end successfully if the partner or partners on the other side of the table are strong, confident, and clear in their purpose. In that sense, Mr. Bird’s comments at GBD were full of good omens for the upcoming NAFTA negotiations. For starters, Canada is feeling confident about trade. “We are probably at one of the most unified places I’ve ever seen Canada on trade,” he said.

Even if, from an American perspective, such confidence is a good thing, it’s probably not an unqualified blessing. By itself, it may make it harder for the U.S. to get Canada to budge from the protectionist barriers it still enjoys. When you add in the well-founded concerns in the U.S. that the NAFTA talks could end up doing more harm than good, the situation becomes even more complicated.

That said, count us among the optimists. It is our strong impression that USTR Robert Lighthizer, Canada’s Minister for International Trade, François-Philippe Champagne, and Mexico’s Secretary of the Economy, Ildefonso Guajardo Villarreal, all have a clear idea of what’s at stake  and that each of them is responding to the same unwavering imperative: Don’t screw it up!

SOURCES & LINKS

The Diplomatic Panel takes you to the YouTube video of the Diplomatic Panel on the EU and North America from the GBD conference on June 23, 2017. This was the source for today’s featured quote.

On the EU Website. Among other things, this page on the EU website includes a video clip with the above quote from Cecilia Malmstrom.

Date Set takes you to the BBC story about the July meeting between Justin Trudeau and Jean-Claude Juncker, in which they set September 21 as the date for provisional implementation of CETA.

Originally published as TTALK Quote No. 46 of 2017.

© 2017 The Global Business Dialogue, Inc.

 

COMMISSIONER BROADBENT HONORED

ON WINNING THE LIGHTHOUSE AWARD

“We’ll this is an interesting experience to have. Suddenly, you’re thinking, ‘I might know this person. I don’t know. …’

“I love you guys… . Thank you very much.”

Meredith Broadbent
July 12, 2017

CONTEXT

These brief comments from Commissioner Meredith Broadbent of the U.S. International Trade Commission followed almost immediately this sentence from her friend and colleague, the Chief Trade Counsel for the House Committee on Ways and Means, Angela Ellard:

“So, without further ado, we’re presenting the Lighthouse Award tonight to Meredith Broadbent.

***
But let’s back up a little bit. If there is a single event that brings the Washington trade community together each year, it is the Annual Awards Dinner of the Washington International Trade Association (WITA) and the Washington International Trade Foundation (WITF). It’s a tradition that has been going on for a while now. The Trade Prom that was held a little over a week ago, on July 12, was the 23rd. As for the men and women who are given awards, some of them are published in advance. Indeed, the fact that well known Congressional leaders are being given awards is part of the appeal, part of the advertising for the event. This year, for example, Congressional Leadership Awards were presented to Senator Jeff Flake of Arizona, a Republican, and to Congressman Rick Larsen from Washington, a Democrat.

There is one award, however,  that is a secret. Even the recipient has no clue. It is the Lighthouse Award.  In years past the presentation was a joint effort between Walmart’s Sarah Thorn and Caterpillar’s Bill Lane. Together, they turned those ten minutes of the Trade Prom into a routine that would have made George Burns and Gracie Allen envious. Bill Lane has retired, however, and so this year Sarah Thorn was on her own. In the end, she decided to call in assistance from one of the trade world’s big guns, Angela Ellard. Before she did, however, Ms. Thorn offered a few thoughts worth noting. Among other things, Sarah said:

“The Lighthouse Award is my favorite part of the Prom. It’s wonderful because we get to honor one of our own.”

“That’s who we should be honoring — people who are doing the hard work, who believe in trade, and are there consistently.”

After quoting from the Declaration of Independence,
“This country actually went to war partly for the ability to trade. That’s why we need trade warriors. That’s why we need people in the trenches thinking about trade, doing the right thing, and thinking about how trade benefits consumers and workers around the world.”

And then, a few sentences later, Ms. Thorn asked Angela Ellard to come to the microphone, to say a few words, and to present the award. Both Ms. Thorn and Ms. Ellard noted some of the basic career facts of the person they were about to honor:

Now a Commissioner at the U.S. International Trade Commission, Meredith Broadbent is a former Chairwoman of the ITC.

She has held the William M. Scholl Chair in International Business at the Center for Strategic and International Studies.

She served as the Assistant U.S. Trade Representative for Industry, Market Access and Telecommunications at a time when the world was still hopeful about the Doha Round.

She was on the staff of the House Committee on Ways and Means when Congress was writing the implementing legislation for NAFTA and the Uruguay Round.

And, from 2009-2010, she served as a volunteer Trade Adviser to the Global Business Dialogue.

Those are the bare bones of Ms. Broadbent’s biography. More important, in a sense, are the elements added by Sarah Thorn and Angela Ellard. Here is some of what Angela said:

“What is so impressive about [Meredith] is that, not only is she a very substantive person, very policy oriented, she thinks about all the people behind the particular problem she’s working on.”

“And she’s always worked on a very bipartisan basis, bringing excellence to the table and a lot of creativity.”

COMMENT

Your editor was not able to attend the Trade Prom this year. But we have been often enough to know what a fine event it is. WITA does a great job and provides a wonderful service to the Washington trade community. (And because we can’t always be there, we are awfully glad that portions of it are available on YouTube.)

So, we are not inclined to criticize the organizers — and certainly not for the choice of this year’s Lighthouse Award winner. On that score, they could not have done better. We do sometimes wonder, though, if there might be merit in giving the winners a day or two of advance notice and a little more time at the microphone. Yes, we would lose some of the fun of the surprise. But Lighthouse winners are people it would be good to hear from, especially in the setting of the Trade Prom.

In the circumstances, what Meredith Broadbent said was perfect: short, funny, affectionate, and sincere. Of course, we don’t know what she would have said if the setting had been a bit different. But we have heard her talk, and we suspect two themes would have emerged even more strongly, namely, the importance of trade and the importance of law — both the law of the GATT and other agreements and U.S. trade law.

But we are not quibbling. It was a wonderful ceremony, a wonderful award. Our sincere and heartfelt congratulations to WITA and to

                            Commissioner Meredith Broadbent!

SOURCES & LINKS

The Presentation is a link to the YouTube clip from the July 12 Trade Prom that includes the presentation of the Lighthouse Award. This was the source for today’s featured quote.

Highlights is the page from the WITA website with highlights from the Annual Awards Dinner, and

A Biography is a link to Commissioner Broadbent’s biography as it appears on the website of the U.S. International Trade Commission.

***

Originally published on July 21 as TTALK Quote No. 45 for 2017.

© 2017 The Global Business Dialogue, Inc.

 

 

 

NAFTA NEGOTIATING OBJECTIVES

NAFTA AND THE PRESIDENT’S PROMISE

“President Trump continues to fulfill his promise to renegotiate NAFTA to get a much better deal for all Americans.”

Robert Lighthizer
July 17, 2017

CONTEXT

This is a NAFTA week in Washington. We use the indefinite article “a” rather than “the,” because there have been others and there will be more. But this is an important one. On Monday (July 17), the United States Trade Representative, Ambassador Robert Lighthizer “released a detailed and comprehensive summary of the negotiating objectives for the renegotiation of the North American Free Trade Agreement (NAFTA).” Yesterday, July 18, the House Committee on Ways and Means held a hearing on the modernization of NAFTA, and on Thursday, July 20, WITA, the Washington International Trade Association, will begin its NAFTA series.

Today’s featured quote is from the USTR press release announcing the publication of their NAFTA negotiating objectives. Here is the full quote:

“President Trump continues to fulfill his promise to renegotiate NAFTA to get a much better deal for all Americans. Too many Americans have been hurt by closed factories, exported jobs, and broken political promises. Under President Trump’s leadership, USTR will negotiate a fair deal. We will seek to address America’s persistent trade imbalances, break down trade barriers, and give Americans new opportunities to grow their exports. President Trump is reclaiming American prosperity and making our country great again.”

***

So what are America’s negotiating objectives for NAFTA? Well, by our count, there are 159, including items and subsets of items in each category. And there are 22 categories from trade in goods to currency as follows:

Trade in Goods
Sanitary and Phytosanitary Measures (SPS)
Customs, Trade Facilitation, and Rules of Origin
Technical Barriers to Trade (TBT)
Good Regulatory Practices
Trade in Services, Including Telecommunication and Financial Services
Digital Trade in Goods and Services and Cross-Border Flows
Investment
Intellectual Property
Transparency
State-Owned and Controlled Enterprises
Competition Policy
Labor
Environment
Anti-Corruption
Trade Remedies
Government Procurement
Small- and Medium-Sized Enterprises
Energy
Dispute Settlement
General Provisions
Currency

COMMENT

The Sting, which came out in 1973, was the second great movie starring Paul Newman and Robert Redford. The first, of course, was Butch Cassidy and the Sundance Kid in 1969, but it is The Sting we want to talk about because it has a moral, sort of, which is applicable here, sort of.

The title of the film may have been “the sting,” but if there is a single word that dominates the film it is “con.” It is a rich word, and no single synonym really sums it up, but “swindle” comes close. Newman’s character, Henry Gondorff, is the more seasoned con man. Redford’s character, Johnny Hooker, more the apprentice. The wonderfully mean character they want to swindle is Doyle Lonnegan, played by Robert Shaw.

Relatively early on Newman offers this advice:

“You gotta keep Lonnegan’s con, even after you spent his money.”

It is good advice and doesn’t just apply to dishonest transactions. As most good salesmen will tell you — reinforced by their company’s advertising — “Your last purchase with us was a great investment (just as your next one will be).”

NAFTA’s big problem was that really no effort was ever made to keep the con of the American electorate after the deal was done. There are several strands to that rope. One of them, of course, is that no one was elected to negotiate an FTA with Mexico, the new element of NAFTA. A second is that a third party candidate, H. Ross Perot, managed to garner a whopping 18.9 percent of the popular vote by running against NAFTA in the presidential election that came after NAFTA had largely been negotiated but before it was implemented. That was in 1992.

There is one more strand that needs to be mentioned. It is just as real but harder to put your finger on than the other two. And it is this. Over the last century, American politicians have regrettably been increasingly quite successful in their efforts to shield the public from unpleasantness, especially unpleasantness that might hurt candidates at the ballot box. In the Vietnam War, they first gave the middle class draft deferments and then went to an all volunteer Army. In the environmental arena, it was polluter pays. Citizens need not worry. The companies would take care of it. And as for NAFTA, well, people don’t like it. So we won’t talk about it.

Whatever one might think of candidate Trump’s extreme anti-NAFTA language, it provoked a national conversation, and that conversation has, among other things, begun to bring out just how important NAFTA has become to the United States. Earlier TTALK Quotes took note of some of the sectors that have become highly dependent on the North American and particularly the Mexican market over the course of the last 23 years. Later today, we will highlight another such sector, namely U.S. pork producers.

Our impression is that these discussions have begun to reshape the public’s view of NAFTA, and they have clearly had a demonstrably salutary effect on policy. The widely shared first and, we think, accurate impression of the NAFTA negotiating objectives published by USTR on Monday is that they are indeed designed to upgrade and improve a valuable agreement and not, as many feared, to destroy it. That is not to say that these objectives are not ambitious. They are. Nor is it to say that the negotiations that are set to begin next month will not be tough. They will be. There is also every reason to believe, however, that in the end they will  be successful.

We will conclude this entry with something Nick Giordano of the National Pork Producers Council said at the GBD NAFTA event on May 25. It was during the final Q&A session.. A reporter asked what would happen if the negotiations failed. Mr. Giordano said he thought a genuine failure of the talks, an end to NAFTA, would trigger a farm crisis in the United States. The heart of his response, however, was more positive. He said:

“The way I look at this, North America is the low-cost production platform for agriculture — really for manufacturing as well. So the opportunity… There’s opportunity all over the world, but the greatest opportunity is in the Asia Pacific Region. It’s in Asia. They need our [North American] products there. And so, we benefit by working together. We benefit by further harmonizing our standards. …”

 

SOURCES & LINKS

NAFTA Objectives Announced is a link to the  July 17, press release from USTR on the newly published U.S. negotiating objectives for an updated and improved North American Free Trade Agreement. This includes the statement from Ambassador Lighthizer that is today’s featured quote.

The Objectives is a link to USTR’s summary of the U.S. negotiating objectives for the upcoming NAFTA negotiations.

WITA Series takes you to the page of the website of the Washington International Trade Association with details for WITA’s upcoming NAFTA series.

Dairy and NAFTA is a link to the TTALK quote for June 14, which deal with this issue.

From Cars to Carrots is the YouTube video recording of the agricultural panel’s presentations, including the Q&A, at GBD’s NAFTA event on May 25, 2017.

Orginally published on July 19, 2017 as TTALK Quote No. 43
© 2017 The Global Business Dialogue, Inc.

 

NAFTA AND THE U.S. PORK INDUSTRY

AMERICAN PORK: AN EXPORT POWERHOUSE

“The U.S. pork industry is the poster child for expanded trade.”

Nicholas D. Giordano
May 25, 2017

CONTEXT AND COMMENT

Nick Giordano is the Vice President and Counsel for Global Affairs at the National Pork Producers Council. He was the last of nine speakers at the GBD NAFTA event on May 25, NAFTA, From Car to Carrots. As we noted in the TTALK Quote published earlier today, the fear that the United States might withdraw or otherwise scrap NAFTA has lessened in the last couple of months.

That is a welcome development. So too is the clear and steady movement toward an orderly process of renegotiating and upgrading NAFTA. The most recent step in that process was taken earlier today [July 19, 2017] when USTR announced that John Melle, Assistant USTR for the Western Hemisphere, will be America’s Chief Negotiator for the NAFTA negotiations and that the first round of talks will be held in Washington from August 16 to August 20.

As the NAFTA countries prepare for that first round, it is important to keep in mind that, as important as NAFTA is for the United States, it is as or more important for Canada and Mexico. Each of the three NAFTA countries has an enormous stake in NAFTA and in the success of the NAFTA negotiations.

That said, the picture Nick Giordano painted back in May of NAFTA and the U.S. pork industry was an exceptionally useful illustration of that point from the perspective of one segment of the North American economy, American pork producers. After transcribing his remarks, we could not decide what to include and what to cut. So here in its entirety is the speech Mr. Giordano gave at GBD on May 25. (The inserted headlines and added emphases are ours.)

REMARKS OF NICK GIORDANO — MAY 25, 2017

Thank you, Dave.* Thanks to Judge and the Global Business Dialogue* for having the National Pork Producers Council participate in this important event. It’s a great pleasure to be up here with my colleagues from agriculture, who I’ve gotten the opportunity to work with on various issues over the years.

As David knows, I’ve never met a microphone I didn’t like. Don’t worry. I’m going to make your job easy. I’ve written my comments out. So, I can keep us on schedule here. So we can get to questions and Judge can get everybody out in a timely manner.

ON THE COUNCIL
The National Pork Producers Council is a federation of 43 state pork producer organizations, representing the national, global interests of 60,000 U.S. pork producers, who generate $23 billion annually in farmgate sales. The U.S. pork industry supports an estimated 550,000 domestic jobs and generates more than $39 billion a year in economic activity.

U.S. PORK EXPORTS
The U.S. pork industry is the poster child for expanded trade. As recently as 1995, the United States imported more pork than it exported. But, in the past ten years, thanks to new market access through trade deals going back … before NAFTA — the U.S. pork industry, on average, has been, the past ten years, the top pork exporting nation in the word.

In any given year, we ship pork to more than 100 countries. But, because of trade deals, and specifically FTAs, we ship more U.S. pork to the twenty nations with which we have FTAs than to the rest of the world combined. Exports contribute significantly to the bottom line of all U.S. pork producers, adding more than $50 to the value of each hog marketed last year, when about $6 billion worth of U.S. pork was exported.

It’s been noted [that] on May 18th, the Administration notified the Congress of its intention to enter into negotiations with Mexico and Canada to modernize the NAFTA. Today, NPPC [the National Pork Producers Council] released a paper on the NAFTA. The paper is intended to provide background and insights regarding benefits generated by the NAFTA.

In addition, the paper details the costs associated with erecting new import barriers through renegotiation or withdrawal from the NAFTA. The paper is available on our website, nppc.org. The focus of the paper is economy wide, but today I’ll limit my comments, for the most part, to the pork sector. Mexico and Canada represent, in value terms, our second and third largest export markets for pork.

In 2016, we shipped $1.4 billion in pork products to Mexico and $800 million to Canada. Together, these two markets represent 36 percent of our global pork exports and over 15 percent of our total pork production.

THE NAFTA RISKS
According to Iowa State University economist Dermot Hayes, who Judge has had as a panelist in past GBD activities, U.S. pork exports to Mexico have created more than 9,000 U.S. jobs. Dr. Hayes, who, I might add, has forgotten more about the global pork industry than most people will ever know. According to Hayes, if Mexico were to place a 20 percent duty on our pork, and allowed the EU and Canadian pork duty free access, which is likely to happen if there is a termination or duties put on pork, then we would — the United States — would lose all of the Mexican market.

In his assessment, Professor Hayes also looked at the possibility of U.S. pork finding alternative markets and concluded that the U.S. pork industry would be left with a net loss of about 600,000 tons or 5 percent of our production. This would cause a 10 percent reduction in live hog prices. At today’s hog prices, that’s about $14 per animal. Now, with 118.3 million hogs harvested in the United States last year, that means the loss of the Mexican market would translate to an aggregate industry loss of about $1.7 billion annually.

A loss in exports to Mexico of that magnitude would be cataclysmic for the U.S. pork industry. Now, make no mistake, pork producers do and will support updating and improving the NAFTA but if, and only if, duties on U.S. pork remain at zero and pork exports are not disrupted. The prospects of going back to pre-NAFTA tariffs are daunting, not just for pork producers but for the entire U.S. economy. And we have history as our guide.

LESSON FROM HISTORY
After the stock market crash in October 1929, when unemployment began to rise, Congress decided it would be a good idea to impose additional tariffs on imports “to save jobs.” Despite the pleas of over 1,000 mainstream economists for President Hoover to veto the bill, the so-called Smoot-Hawley tariffs were introduced in 1930. Jobs were immediately lost in trade related fields and beyond, including dock workers, transportation, distribution etc. And within three months, unemployment nearly doubled to 14 percent. Over the next two years, unemployment soared to 27 percent, as jobs were lost to other factors, including higher inflation, reduced disposable income, and, of course, foreign retaliation against our exports. The Great Depression was then in full force, and became global. The rest, as they say, is history.

COSTS OF FAILURE
Now, I’m not suggesting that a NAFTA renegotiation gone awry would result in another great depression, but it could result in unintended consequences. Mexico will elect a new president in July 2018. The NAFTA renegotiation could have a significant impact on both the presidential election in Mexico and the long term relationship between our two nations. The NAFTA has created jobs to the benefit of both the United States and Mexico. In 1994 our trade with Mexico was roughly in balance at about $50 billion each way. By 2016, our exports to Mexico had nearly quintupled to $231 billion, and these now support some 6 million jobs.

And while imports to the United States from Mexico were $294 billion, those too supported millions of U.S. jobs, and nearly 40 percent of Mexican imports include U.S. content. In short, NAFTA created jobs in both the United States and Mexico. Now, I won’t deny that jobs did go to Mexico as the result of plant closings, but it’s misleading to say that trade under NAFTA resulted in a net loss of jobs in the United States.

We should also keep in mind that as a result of NAFTA, Mexico made substantially deeper cuts in tariffs on U.S. goods than did the U.S. on Mexican goods. If NAFTA were to be terminated, Mexico would have the right to reimpose those much higher tariffs on our goods, thus making the trade deficit bigger.

Mexico has free-trade agreements with many other countries and is pursuing even more. Without NAFTA, those countries would immediately secure huge competitive advantages over potentially thousands of U.S. products, including pork of course, in the Mexican market.

NAFTA is an old trade agreement–23 years. But it has accomplished a great deal. And, it certainly can be modernized. But, if I’m making one point [and] you’ve been listening, there are enormous risks associated with the notion that withdrawal from NAFTA could be an attractive alternative if efforts to negotiate a more modern agreement fail. Thank you.

NOTES, SOURCES AND LINKS

*On Referenced Personalities. Dave Salmonsen of the American Farm Bureau Federation served as moderator for the panel discussion on agriculture. Judge Morris is the president of the Global Business Dialogue, which hosted the event.

The Carrots Part takes you to the YouTube video of the full agriculture panel at GBD’s May 25 event on NAFTA. This was the source of today’s featured quote and the above transcript.

First Round Announced is a link to today’s USTR press release, which included both the dates for the first round of negotiations and the name of the U.S. Chief Negotiator for the NAFTA talks, namely, John Melle.

###

Originally published on July 19, 2017, as TTALK Quote No. 44 of 2017.

BREXIT – BEFORE THE NEGOTIATIONS

ON THE BREXIT OPTIONS

A sovereign decision has been taken to leave by the British people…..But from the perspective of EU member states, as long as the decision on the organization of the exit is not finalized, there is always the possibility of reopening the door.”

Emmanuel Macron
June 13, 2017

CONTEXT

French President Emmanuel Macron, who won a stunning victory in the French runoff election on May 7, welcomed UK Prime Minister Theresa May to Paris five days after her electoral setback in the UK’s snap election on June 8.  After their private meetings and before watching a football (soccer) match between the teams of France and England, the two leaders held a joint press conference.

Brexit was not their top priority then. Expressions of solidarity were the theme of the day, with Prime Minister May noting that “Both our countries have sadly experienced the horrors of terrorism all too recently.”

But Brexit did come up. How could it not? The serious work of the Brexit negotiations is set to begin on Monday, June 19, with a Frenchman, Michel Barnier, as chief negotiator for the EU, facing David Davis, the UK’s Secretary of State for Exiting the EU.

Mrs. May addressed the Brexit issue at the close of her statement. “On Brexit,” she said, “we have been very clear that we want to maintain a close relationship and a close partnership with the EU and individual member states into the future.”

Today’s featured quote is something President Macron said in response to a question. Here is a bit more of his answer to that Brexit question:

(As translated from the French)
“Evidently, the door remains open until negotiations come to an end. That said, a sovereign decision has been taken to leave by the British people, and I respect the sovereignty of all people, be it the French or the British when they make a decision for themselves. It is not for me to say whether or not this decision should be called into question. But from the perspective of EU member states, as long as the decision on the organization of the exit is not finalized, there is always the possibility of reopening the door. But we must be clear and, once underway, we need to all be aware that it is difficult to reverse.”

COMMENT

Well, actually, just a bit more background.

The Article 50 Trigger. On May 29, Prime Minister May formally invoked the provisions of Article 50 of the Treaty on European Union in a letter hand- delivered that day to Donald Tusk, the President of the European Council.

So the clock is ticking. The situation is succinctly described in a short article on the website of the European Union. The article poses the question, what happens next? Part of the answer is in these starkly clear sentences:

“During negotiations under Article 50, European Union Treaties and law continue to apply to the UK. If no agreement is reached within 2 years of the UK activating Article 50, the UK would leave the EU without any new agreement being in place.”

The British Election. When Prime Minister May called a snap election on April 18, her Conservative party had a majority of 12 in the 650-member House of Commons. Her goal was to increase that majority and thus give herself a stronger hand in the coming negotiations with the EU. Well, that didn’t work out. Though still the largest faction in the Commons, the Conservatives didn’t just lose seats, they lost their majority, and Mrs. May’s leadership now depends upon the alliance she has formed with the Democratic Unionist Party of Northern Ireland.

What does that mean for the Brexit talks? We don’t know and we doubt that anyone does. The June 8 election was not a do-over referendum on the UK’s membership in the EU. It was an election in which Brexit, though referenced, was largely taken off the table, with the parties jockeying for position on other issues. Arguably the Conservatives didn’t handle those other issues well, but it is hard to know what the results will mean for Brexit.

There are few if any parts of the globe that are totally unaffected by the UK-EU negotiations set to begin on Monday, and the problem is that the uncertainties they are meant to address will almost certainly become more acute over the next few months. Indeed the world may have to get awfully close to the March 2019 deadline for the negotiations before anyone has a sense of just how this will play out. That is because the nature of the beast is such that the party most willing to walk away is the party with the strongest hand. And that being the case, it is hard to imagine many early concessions from either Mr. Barnier or Mr. Davis.

RELATED EVENT

Endless Outreach: The EU’s Trade with the World and with North America. This event will lead off with a keynote address from Ambassador David O’Sullivan of the European Union and will include panel discussions from the diplomatic and business communities. While only a part of the story of the EU’s trading relationship, it is nevertheless an issue that is likely to come up. The event will be held at the St. Regis Hotel in Washington, and the title link will take you to the announcement for this program, including registration options.

SOURCES AND LINKS

The Press Conference is a link to a transcript of the May-Macron press conference on June 13 available on the U.K. government’s website.

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Originally published on June 16, 2017, as TTALK Quote No. 39 of 20717.   © 2017 the Global Business Dialogue, Inc.

 

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