In a tumultuous week, Britain came under pressure from both the US and the European Union when London opened trade talks with both economic powers at the same time before officially leaving the EU on January 31.
A proposed “digital tax” on US companies drew the wrath of Washington, while Brussels made it clear where the balance of power was to be seen between it and London.
‘UNITED KINGDOM. is just a country “
Irish Prime Minister Leo Varadkar and the EU’s chief negotiator for Brexit, Michel Barnier, held a joint press conference on Monday.
“If we don’t reach an agreement, it won’t be as usual and the status quo. We have to face the risk of a cliff edge, especially for retail, ”warned Barnier.
Varadkar told the BBC: “The reality is that the European Union is a union of 27 member states. Great Britain is only one country. And we have a population and a market of 450 million people. In the UK there are around 60 million. So if these were two teams playing football, who do you think has the stronger team? “
Financial services are vital to London economically, but fishing rights are a politically sensitive issue despite not adding much to the UK economy by comparison. London wants both, but Brussels has other ideas.
Varadkar told the BBC: “If audiovisual financial services and entertainment are cut off from the single market, the European market, it will mean a severe blow to the UK economy and the South East, particularly London,” he said.
“Perhaps you have to make concessions in areas like fishing to get concessions from us in areas like financial services, and that is why things are usually all in one package.”
British Prime Minister Boris Johnson hit back through his spokesman, saying Britain would “take back control of our waters. We made that clear. “
Digital tax
Britain is negotiating with the EU and the US at the same time. Local media speculate that this is an attempt to pit the two sides against each other for better business.
The American attitude so far has been moody at best.
“We said our goal – your goal – is to achieve it [this] Trade deals concluded this year and I think from the US perspective we are ready to provide a lot of resources, ”said US Treasury Secretary Steven Mnuchin in front of a public audience at the UK foreign policy think tank Chatham House over the weekend.
US President Donald Trump, who won an agreement with China in the first phase, is particularly interested in signing another treaty with Great Britain before the US presidential election in November – or at least something similar, taking into account time constraints.
“I’m pretty optimistic. I think the prime minister and the president have a very good relationship,” said Mnuchin.
He was in London to meet with his counterpart, British Chancellor Sajid Javid. His visit took place in the midst of an escalating dispute over a so-called “digital tax”.
Javid wants a 2% tax on the revenues of digital platforms such as search engines, social media platforms and online marketplaces that are making a profit in the UK. The tax could bring in £ 500 million ($ 653 million) annually if companies like Google, Facebook, and Amazon are tracked.
“We plan to introduce our tax on digital services in April,” Javid told Davos last week. “It’s a pro-rated tax. It is a tax that has been purposely designed as a temporary tax so it will disappear once there is an international solution. “
The US has vehemently opposed such unilateral steps.
“The US firmly believes that any tax designed specifically for digital businesses is a discriminatory tax and is not appropriate,” Mnuchin said.
“International tax issues are very complicated. It takes a long time to look at them, and if people just want to arbitrarily tax our digital businesses, we’re going to consider taxing them arbitrarily on auto companies. “
Javid, like Mnuchin, danced the line between tough and soft demeanor and told Davos: “A trade agreement between the world’s sixth largest economy and the world’s largest economy could benefit all consumers in terms of jobs and prices. It is extremely important. “
France had previously announced plans to introduce a similar tax but backed off to give the Organization for Economic Cooperation and Development (OECD), the most influential economic think tank in the West, time to find a solution.
Like the threat to tax cars in Britain, the US had threatened retaliatory tariffs on French cheese and wine.
British International Trade Secretary Liz Truss joined the debate and said: “Britain. Tax policy is a matter for the British Chancellor. It’s not about the US. It’s not about the EU. And it’s nobody’s business. “
Former British Chancellor George Osbourne told the BBC: “It will be a very brave British government that gets into a trade war with the United States at the moment when the core of its economic policy is to commit to a trade deal with the United States conclude. ”
It has not escaped Brussels that the UK will negotiate at the same time with the US and the EU.
Barnier said London could not expect to be treated with the same “respect” by the US alone, rather than being part of the EU bloc of “500 million consumers and 22 million businesses”.
He was asked by the French media whether he feared a bidding war for Great Britain, to which he replied tersely: “There will be no outbidding on our side.”
The UK will officially leave the EU on January 31st and intends to sign a trade deal with the bloc by the end of 2020.
