UK PM's plan to pick business winners stalls brexit talks

FE Team | Published: September 08, 2020 22:18:26

EU trade negotiations have stalled in part because of UK Prime Minister Boris Johnson's vision for more state intervention to bolster Britain, report Wall Street Journal.
For decades, Britain's Conservative Party politicians decried the European Union for its supposed aversion to free markets.
Now trade negotiations that will define the future relationship between the UK and the EU from next year have stalled, in large part because Prime Minister Boris Johnson's government wants the freedom to ignore EU rules limiting state subsidies of private companies.
With trade talks restarting Tuesday, and little sign of quick progress, this impasse is increasing fears among officials on both sides that a trade deal won't be secured by the end of the year, resulting in tariffs and a host of other barriers to trade amounting to $800 billion annually. Mr. Johnson said his government would walk away from talks if a deal wasn't reached by Oct. 15.
"If we can't agree by then, then I do not see that there will be a free-trade agreement between us," Mr. Johnson said Monday. "And we should both accept that and move on."
EU officials say the bloc remains intent on striking a deal but that Mr. Johnson's government will need to make some major concessions. The bloc's chief negotiator, Michel Barnier, has said the end of October is the effective deadline for an agreement. The pound has fallen against the dollar on fears that talks will collapse.
Across the world, big government spending is on the rise, spurred by state interventions to stave off the economic calamity caused by the Covid-19 pandemic and by rising barriers to trade. In Britain, this-combined with Brexit-is driving a political U-turn.
Britain left the EU in January but continues to follow its rules during this year's transition period. The two sides are now hashing out how they will trade in the future. The British government wants freedom from the EU to set its own rules. The EU doesn't want Britain subsidizing businesses that then get tariff-free access to its market.
This debate is colliding with Mr. Johnson's vision for more state intervention to bolster post-Brexit Britain. His position is far removed from the free-market economics of his Conservative Party predecessor, Margaret Thatcher, who questioned the government's ability to pick winners among private companies.
"Here we are 30 years out from when Thatcher left office and we have a government contemplating a no-deal final Brexit settlement so that it can subsidize companies and choose national champions," said Tony Travers, a professor at the London School of Economics.