The White House is “100 per cent certain” of striking a trade deal with the UK. Having visited Washington last week, International Trade Secretary Liam Fox is basking in President Trump’s prediction of a “very big and exciting” free-trade agreement.
As we move toward Brexit, forging trade links elsewhere makes sense. Helping UK exporters sell into the 80pc-plus of the global economy outside EU sends a powerful signal during these Article-50 talks. An agreement with the world’s biggest economy would be a good start. And to think – Trump’s predecessor had us “at the back of the queue”.
The EU has spent almost a decade trying to hammer out a US trade deal. Negotiating as a bloc of countries, often with conflicting objectives, is one reason Brussels has cut so few meaningful trade agreements. The EU has no deal with any top-10 global economy. The 50 or so EU deals we often hear about are mostly with minnows, covering just 8pc of the world economy.
The EU announced a “free trade agreement with Japan” earlier this month – but it was a stunt. The purported cars-for-cheese deal, if it happens, is years away. Both Tokyo and Brussels wanted to make Trump look isolationist ahead of the Hamburg G20 summit, so they issued a joint press release with no technical agreement. Now Trump is getting his own back, rhetorically hugging Britain to keep the EU on its toes.
Away from the niceties of international trade diplomacy, as we go into high summer, the UK economic picture looks mixed. GDP grew 0.3pc during the three months to June, we learnt last week, up from 0.2pc the quarter before – with the service sector leading the charge. Year-on-year growth slowed, though, from 2pc to 1.7pc, as inflation rose, eating into real-terms pay.
The very latest evidence, in contrast, points to higher retail sales in July and a manufacturing boom. Factories raised their output at the fastest pace since the mid-1990s over the last quarter, according to a CBI survey. Accounting for 11pc of GDP, manufacturing may underpin the broader economy during the second half of this year. Much depends on whether a competitive exchange rate translates into higher exports. Optimism among exporting manufacturers is at a 40-year high, despite the drumbeat of Brexit gloom.
As I head off on holiday, I wanted to devote the bulk of my last column for a fortnight to the Republic of Ireland. The Emerald Isle is always interesting – and resolving North-South border issues is integral to our Article 50 talks. For the most part, Dublin is wedded to Brussels. Irish diplomats are overwhelmingly Europhile. The broader population has meanwhile enjoyed years of EU “structural fund” largesse and independence from “the Brits”. Yet during recent trips to the land of my fathers, I’ve sensed attitudes are shifting. This could prove significant, after the summer, as the Brexit negotiations get serious.
The Northern Ireland peace process won’t be derailed by Brexit. Yes, the Republic will stay in the EU’s customs union, as the North leaves with the rest of the UK. Yet the Chairman of the Republic’s Customs Authority is “practically certain” there will be no customs posts. Number plate recognition and e-border technology can work wonders, avoiding a symbolically awkward “hard border”.
Concerns that a “frictionless” Irish frontier might be a backdoor for EU migrants into Britain, with the South still observing EU “free movement” rules, are also surmountable. Outside the Schengen agreement, the Republic already collects passport information for all visitors. With good information- sharing, British and Irish border authorities can contain this problem too.
The big question is how Dublin plays its hand during the Article 50 talks. Officially part of “team EU”, just another EU27 nation, the reality is very different. UK trade totals a billion euros a week, securing one in ten Irish jobs. In some sectors, like food and drink, half the Republic’s exports are UK-bound. Our free-trade, free-movement deal predates the EU, and even the Republic itself – everyone wants it maintained. Everyone, perhaps, except Michel Barnier. The EU’s Chief Negotiator has reason to make life difficult for both the UK and the Republic, mindful of London’s determination not to jeopardize much-improved Anglo-Irish relations.
Smart folk in the Republic are now concerned that, while punishing the UK, Brussels may also punish Ireland. I’ve never said the Republic should leave the EU, but serious people are now raising what was, just weeks ago, an unthinkable threat.
“Simply sitting on the side lines and allowing the EU to negotiate for Ireland is essentially untenable,” boomed Ray Basset, in a Policy Exchange paper this month. An Ambassador until his retirement last year, Bassett is a proper insider. His country, he says, must “seriously consider” leaving the EU.
The Irish like being “part of Europe”. But they didn’t like being forced to hold repeat referenda on the Nice and Lisbon Treaties, or having a bailout foisted upon them in 2010 to stop contagion elsewhere in the eurozone. Brussels keeps moaning about low Irish corporation tax, which has brought huge inward investment. And the Republic has just become a net EU contributor.
The UK and US account for a huge slice of Irish trade. Add in the rest of the world and, post-Brexit, almost two-thirds of Irish exports will be sold outside the EU. Now, what if the UK and US did sign that free trade deal. The Republic would then sit geographically in the middle of trade bloc to which is has massive economic exposure and boundless cultural affinity. Yet it would not be able to join, forbidden by EU rules.
For forty years, “Official Ireland” has never countenanced leaving the EU. That could be about to change.