EU threatens to pull out of Brexit talks if UK refuses to compromise – Guardian

  • The EU’s chief negotiator, Michel Barnier, has warned David Frost that without a major negotiating shift by Downing Street within the next 48 hours he will pull out of the Brexit negotiations in London this weekend, pushing the talks into a fresh crisis. Should Barnier effectively walk out on the negotiations it would present the most dangerous moment yet for the troubled talks, with just 36 days to go before the end of the transition period.
  • While Brussels might hope such a move would put the UK prime minister under pressure to give Frost new negotiating instructions, it might also embolden those within the Tory party who believe no deal is the better outcome.
  • During a speech in the European parliament on Wednesday, the European commission president, Ursula von der Leyen, said the EU was willing to be “creative” to get a deal with the UK but admitted an agreement was in the balance with “very little time ahead of us”. “These are decisive days for negotiations with the United Kingdom,” Von der Leyen told MEPs. “But, frankly, I cannot tell you today if in the end, there will be a deal.”
  • Von der Leyen said legal texts on judicial and social security coordination, trade in goods and services and transport were almost finalised. “However, there’s still three issues that can make the difference between a deal and no deal,” she added.
  • She said fishing communities needed “predictability” from year to year over access to British waters, in a reference to Downing Street’s wish to hold annual negotiations over catches in UK seas, with the option of blocking access.
  • On state aid, Von der Leyen said the EU was seeking a mechanism through which any breach of agreed principles controlling domestic subsidies could be swiftly remedied. The EU is also seeking a mechanism to ensure there are consequences for either side within the trade deal if standards diverge over time.
  • There is concern among some member states that the UK is successfully pushing the commission into making concessions that will give British businesses an advantage in the marketplace over the decades to come. Von der Leyen offered assurances that the commission’s negotiating team was being open-minded as to how to bridge the gaps between the two sides, but that they were holding firm on key principles. She called on leaders to back any compromise that emerges.
  • EU leaders are due to meet on 10 December. The European parliament is due to hold a special session on 28 December to give its consent to a deal. However, any agreement would need to be finalised in the coming days to allow time for legal and parliamentary scrutiny and translation.

UK grip on European derivatives at risk in fight over post-Brexit rules – FT

  • European regulators have refused to soften rules on swaps trading by EU banks in the UK, threatening London’s post-Brexit hold on a derivatives market worth €50tn a year. The Paris-based European Securities and Markets Authority on Wednesday said EU banks operating in London would continue to be subject to Brussels regulations when the Brexit transition period ends next month.
  • UK regulators had hoped Esma would allow those banks to continue operating under British rules from January, avoiding a clash. The prospect of a doubling-up of regulations means EU banks operating in Britain could be forced to route some trades to New York, which has equivalent derivatives standards recognised by Brussels.
  • The failure to resolve the stand-off will come as a blow to some European banks with London operations, which had hoped to maintain access to the city’s vast derivatives market after the end of the Brexit transition period.
  • Esma blamed UK regulators, saying the dispute was “primarily a consequence of the way the UK has chosen to implement” a requirement, known as the derivatives trading obligation (DTO), which sets out where brokers and investment banks can trade. “We had hedged ourselves by moving derivatives operations to a certain extent, but I am a bit caught by surprise by their actions,” said the chairman of a large European bank affected by the brinkmanship. “It’s a small part of the market, but the actions of the two sides are not encouraging.”
  • Trading under the DTO accounts for about €50tn of the €681tn European derivatives market, most of which is based in London. In France, both the financial-markets regulator and the country’s banking federation said they did not support Esma’s approach, and warned of creating contradictory obligations for UK branches of EU banks.
  • The EU-UK stand-off increases tensions over how far the two sides are prepared to go to maintain access to each other’s markets from January. Both sides have sought to assert regulatory oversight over markets activity centred in London’s vast capital markets.
  • Esma said it was not compelled to adjust how EU rules were applied because the DTO did not threaten the bloc’s financial stability. However, the body acknowledged that its approach “creates challenges for some EU counterparties particularly UK branches of EU investment firms”.
  • The EU agency noted that the European Commission had the power to resolve the matter by taking a decision that UK trading venues are properly regulated and supervised — a step known as an equivalence decision that would open up market-access opportunities. The Treasury has the power to reciprocate for the UK.
  • Esma’s focus on equivalence decisions was echoed by the UK Financial Conduct Authority, which said on Wednesday that “we will also not be adjusting our approach at this time” and that “mutual equivalence would be the best way to avoid market disruption”.

No-deal Brexit would hammer UK economy, warns Office for Budget Responsibility – Independent

  • A no-deal Brexit would badly hit the UK’s recovery from the coronavirus crisis and push unemployment still higher next year, according to the Office for Budget Responsibility. The Treasury’s independent spending watchdog said in its latest report, released alongside the chancellor’s Spending Review on Wednesday, that a failure to reach a free trade deal with the European Union was a “material risk” which would knock 2 percentage points off UK GDP growth in 2021.
  • That would reduce growth next year from 5.5 per cent to 3.5 per cent, significantly hampering the UK’s recovery from the massive shock of this year’s pandemic, which is forecast to knock 11 per cent of the size of the economy. A no-deal Brexit would also, forecasts the OBR, cause unemployment to peak at 8.3 per cent, rather than 7.5 per cent.
  • “The short-term impact is due to various temporary disruptions to cross-border trade,” said the forecasting body. It also cited lasting damage from higher structural unemployment, lower investment and harm to productivity growth.
  • In its main forecast the OBR sees the UK economy returning to its pre-crisis level by the end of 2022. It estimates that a no-deal Brexit would push that back until the end of 2023.
  • The OBR said its assumption about the long-term negative impact of a no-deal Brexit, over the next 15 or so years, would be around 6 per cent of GDP, in line with most other independent studies.

Dumping-hurt Brexited companies will be on their own for new help requests – MLex

  • British manufacturers hurt by rivals’ cheap imports post-Brexit won’t receive government support when it comes to mounting and financing their defense, nor in monitoring the effectiveness of any trade-defense measures, UK lawmakers were told today.
  • Two pillars of help provided by the EU to businesses will no longer be offered, Trade Remedies Authority officials indicated: Investigators won’t have the power to open a probe without the industry first mounting a case, and trade bodies won’t get funding to help shoulder the costs of defense cases.
  • If a foreign company is selling unfairly low goods into the UK and hurting domestic industry — known as dumping — then it will be up to British manufacturers to bring the case to the UK government, the parliament’s trade committee heard today.
  • “We have no power to initiate a case in absence of an application,” Satjit Singh, interim chief executive designate of the Trade Remedies Authority, told the committee. “We can only respond when people apply to us for a trade remedy.” This is different to the EU rules, where the commission can open a case on its own initiative, or “ex officio.” In practice, the European Commission rarely does this; but its blanket safeguard probe on global steel was started this way.
  • Once the UK is outside of the EU’s customs union on Jan. 1, British companies must put forward all evidence of possible dumping or unfair subsidies — a time-consuming and costly exercise. Some industries have already flagged the additional costs as a problem once outside the EU, as they won’t be able to share them with other European companies, as they have done in the past. The EU offers grants to trade bodies and organizations to help shoulder the costs of bringing and working on a trade-defense case. The committee asked whether the UK would offer something similar, but Singh indicated it wouldn’t.
  • Singh did, however, say that a pre-application office has been set up to help companies — in particular, small and medium-sized enterprises — in submitting a complaint. But the evidence gathering is up to manufacturers, the official noted.
  • Companies will also be on their own when it comes to spotting circumvention of duties, which is when foreign rivals sell into one country via another, or slightly adjust their product in a deliberate attempt to dodge tariffs.

Griffiths to head UK’s trade-remedies authority – MLex

  • Oliver Griffiths will be the UK government’s head of trade remedies, according to a top official from the department. Now leading talks with the US on a bilateral trade deal, he will take the new position from Jan. 1.
  • The trade-remedies authority — which deals with issues such as dumping and anti-subsidy matters — was set up in preparation for the UK stepping away from EU rules and developing its own tariffs outside of the customs union from the start of 2021.
  • Simon Walker from the department told the UK parliament’s trade committee this morning that “the new chief executive” for the authority “is going to be Oliver Griffiths, who’s a senior official in the department of trade and who’s been heading up the trade talks with the US for the last four years.” He added that Griffiths “has a strong background in trade matters and in trade defense”.
  • Griffiths has worked in the public and private sector. He trained as a solicitor, formed part of the UK’s strategy team in the Doha Round of trade talks, worked in the British embassy in Washington, and helped develop the Green Investment Group, which aimed to reduce carbon dioxide emissions across the UK’s economy.