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UK defence companies have been excluded from a £125 billion EU defence fund. The fund is intended to develop European alternatives to US weapons supplies. The EU reportedly wanted the UK to sign a formal defence pact and make financial contributions to the fund in order for British companies to benefit.
The US is pressuring the UK to scrap a digital services tax which mainly affects large American tech companies. The tax was supposed to raise £800-900 million this year, but President Trump has indicated that scrapping the tax may also mean avoiding punitive tariffs set to be imposed next month. UK officials have said that the tax is under active discussion.
Starmer under pressure on tax and tariffs
The Prime Minister has said that the UK will increase the “scale and pace” of plans for security guarantees in Ukraine. Reports suggest that deployments of troops in Ukraine are being considered, alongside extensive sea and air support. The rush is a response to reports that talks between American and Russian delegates are making significant progress. President Zelensky has said that a lasting peace is possible this year.
EU plans to provide €40 billion in military aid to Ukraine have descended into chaos, as member states fail to see eye to eye. After an original plan was vetoed by Hungary, the Vice President of the Commission proposed an opt-out package of aid. This was met with scepticism in Italy, where enthusiasm for supporting Ukraine is lower than in other countries, but was finally killed off by French diplomats, who were apparently frustrated by the Vice President’s forthright diplomacy.
Commission VP clashes with French officials
The fire at Heathrow and the disruption it caused should be a wake-up call for the government. Whether or not there was nefarious activity involved, it exposes deep vulnerabilities in critical infrastructure. Why was there no functional back-up energy supply? Why did it take so long to restore power?
Media
Matt Goodwin on Reform Conservative alliance
Policy Exchange’s paper on the impact of Brexit on UK trade: “Less than meets the eye”
Blog
Dirty Deals in Ukraine by Adrian Hill
Former diplomat and soldier Adrian Hill digs into US sources including the Institute for the Study of War (ISW) to shed some light on the dirty deals being discussed between Trump and Putin.
Ring mastering this betrayal took Putin less than a week. We have four more years of Trump, if he lasts that long, This is not how you make America great again. Quite the opposite. Trump is nearly 80 and clearly not up to the task. He looks tired, overweight, grumpy and aging fast. His ramblings show he is living on another planet. Fiona Hill’s observations imply the lure of personal gain may lurk along the corridors of power. If the United States remains keen to stay at the diplomatic table they need to make some serious contributions.
Key Points
Policy Exchange published a paper this week on the impact of Brexit on UK trade. It touches on many issues which Briefings has been raising for years – dodgy inferences from dodgy models and data being misconstrued – and comes to the same overall conclusion: Brexit itself has had, at most, a small effect on UK exports. Now that remainer myths are being exposed more widely, thinktanks should refocus on the future and identify Brexit opportunities that will have a lasting positive impact on UK trade.
The paper rightly criticises the use of ‘doppelgänger’ models, which compare the performance of the UK economy to a ‘doppelgänger’ constructed from a set of economies with some statistical historical similarities. Such models are cited by remainers who claim that Brexit has reduced GDP growth by 5%, but the models are deeply flawed. The statistical similarities between the UK and the countries which make up the doppelgänger are superficial, and cloak significant differences which make comparisons inappropriate. Even if the comparisons were sound, the models cannot isolate the impact of Brexit from other economic forces (like, for example, a global pandemic).
Another point which the paper picks up is the confusion that is caused by re-exports. Relying heavily on work by Briefings contributor Catherine McBride, the authors show that sudden drops in UK export data are explained not by a sudden drop in the number of UK-produced goods being sent to Europe, but by a sudden drop in the number of foreign-produced goods which travel through the UK on their way to Europe. Re-exports contribute very little to the UK economy, but can make a big difference to trade statistics. Remainers looking for a dramatic story seize on the figures without enquiring any further.
It is good that Policy Exchange and others are finally getting to grips with the reality of post-Brexit UK trade – the remainer myths should not have persisted for so long. But the focus should shift away from evaluating what has been to making plans for the future. Brexit was supposed to be an opportunity to pursue a new trade strategy independent of Europe. Successive governments have failed to capitalise fully on this. Instead of litigating old arguments, policy wonks would do better by identifying how Britain can best take advantage of its new found freedom.
