Press

Germany is becoming dangerously Anglo Saxon. John Springford at the Centre for European Reform looks at how the traditional relationship between wage growth and unemployment has decoupled in Germany, mirroring developments in the UK.

Analysts are likewise sceptical that pleas from Macron and other European leaders will successfully stave off a trade war, despite a temporary EU reprieve from Trump's new steel and aluminium tariffs. "The things that Macron wants him to do are things that it would be pretty difficult for Trump to accept without losing credibility with his populist base," said John Springford, deputy director of the Centre for European Reform.

Samuel Lowe, a research fellow at the Centre for European Reform told us that “the guilty secret” of trade is that FTAs “do not deliver much aggregate growth”. According to Mr Lowe, “[a]nything over 1 per cent is massive in terms of long-run growth, and most trade agreements are little more than rounding errors in terms of your long-run impact”.

“This issue is the one cost of Brexit that can’t be wished away by innovative thinking or technological solutions,” said Sam Lowe of the Centre for European Reform think-tank. Navigating the rules, the CBI added, would be a “huge and unprecedented administrative challenge” for the 135,000 businesses that export to the EU.

Trump has not committed to anything, but he "signaled some openness on Macron's idea of keeping the (nuclear pact) while negotiating an additional deal," said Luigi Scazzieri, a research fellow at the Centre for European Reform.

John Springford, deputy director of the Centre for European Reform, says the government could attempt two possible compromises to head off a rebellion but both have serious flaws. One, recently advocated by the Institute of Directors, would see the UK staying in a customs union for manufactured goods but not for most agricultural products.“Tariffs are high on agriculture so we can reduce our agricultural tariffs in future trade deals to help give us access on services,” Mr Springford says. “The trouble is this doesn’t tackle the Northern Ireland problem. There is a huge amount of agricultural trade between Northern Ireland and the republic, which means it would be impossible to maintain a frictionless border.”

The Trump administration does not hide its view that, if London wants a far-reaching trade deal, it will have to depart from its present regulatory alignment with the EU. That would gravely complicate the search for a solution to the Irish border problem, and it would deny the UK unfettered access to EU markets, as explained in this useful article for the Centre for European Reform think-tank.