French Minister focuses on EU’s trade with UK and US

Foreign trade – Trade relations – Interview given by M. Jean-Baptiste Lemoyne, Minister of State attached to the Minister for Europe and Foreign Affairs, to France 24 (excerpt)

Paris, 22 February 2020

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BREXIT/FRANCE/EU

Q. – What’s the impact of Brexit on France’s finances in terms of trade? Historically, there have been special relations between the two countries. So Brexit will necessarily have significant consequences. Let’s find out the state of play from Axelle Simon [reporter]: “France will pay a high price for Brexit. Of the 27 EU countries, it could suffer up to 20% of the loss of earnings, due to its geographical position in relation to Britain and its long-standing trade links. In 2018 the United Kingdom was France’s sixth-largest customer, with €32 billion of exports across the Channel. It was also its seventh-largest supplier, with €20 billion of imports to France. The three export sectors most affected by Brexit will be machine tools, chemicals and agrifoods, and particularly fisheries. In the 2016-2018 period alone, Brexit already caused losses of €6 billion for French exporters. In total, according to studies, the annual Brexit bill for France will stand at between €4 and €8 billion. That’s 0.2% of GDP. In addition to that, there are the sums already paid out: an extra 700 customs officers have been recruited between 2018 and 2020. As for the port of Calais, it’s already invested €6 million to get customs control zones up and running.” In the immediate term, this Brexit, which is quite difficult and painful, means a big loss of earnings in this case, both for trade and for France’s overall portfolio.

THE MINISTER – The relationship between France and the UK is of course very close, and your presentation showed the figures; in other words, the UK accounts for France’s largest trade surplus, in the order of €12 or €13 billion, so it’s significant! Now, you have to distinguish two things. 2020 is a transitional period where nothing changes. However, from January 2021 onwards, the future relationship will apply, and we have indeed begun this race against the clock, along with Michel Barnier, the European negotiator, to define that future relationship. Of course, it’s desirable for everyone if trade is as smooth as possible, but this mustn’t all be done in any old way. There’s a good way of summing things up: there can be zero quotas and zero customs duties only if there’s zero dumping. Conversely, if there are significant divergences at regulatory level, on state aid etc., then by definition there will be quotas, there will be customs duties, but we can’t act as if the UK is like Canada or Japan. We’re a few dozen or hundred kilometres apart, it’s completely different, and so we must ensure, in every case, that the divergence between us remains managed and acceptable.

Q. – You really embody the feelings of Europeans who would like the UK to pledge, in a future relationship, to respect the same rules as the European Union, and even adapt to them over time in many significant areas: the environment, competition, taxation and labour rights, to avoid distortions and dumping. For its part, the UK intends to negotiate a free trade agreement with Brussels on equal terms – I’m obviously quoting David Frost, Britain’s Brexit negotiator: “We won’t agree to the European Union contravening our freedom to set our own rules”.

THE MINISTER – Once again, there’s British sovereignty, there are national sovereignties and there’s European sovereignty. There will be this discussion, but what I want to say is that we can’t act as if geography didn’t exist. There’s a closeness. What’s going to change in January 2021 is that there will be checks on products, because we must ensure that European consumers are protected and products entering Europe’s territory comply with its standards. We also remember where a number of outbreaks linked to BSE etc. came from.

Q. – When they say, “We don’t want that, we want an agreement in the style of Canada or Japan” – which are obviously much further away –, is that acceptable to us?

THE MINISTER – That’s just it: as you know, with Canada, for example, there are mechanisms for talks on the regulatory and normative aspects, etc. So I think the Canada agreement shows there can be dialogue from that point of view.

But the UK is different from Canada and it’s different from Japan. There’s a shared history, and so it’s important, at any rate, for us to diverge but not to diverge to such an extent that it prevents any agreement. I also note that when the British signed the EU-UK joint statement on the future relationship, in the spirit it was mentioned that the parties would strive, in any case, to maintain a relatively homogeneous regulatory environment. And in the statement by Prime Minister Boris Johnson a few days ago…

Q. – Yes, things really hotted up! Did you sense the change?

THE MINISTER – I wouldn’t say that. I’d merely say he said things that are contrary to the British signature on that statement of a few months ago. Moreover, that’s so true that when I hear the Northern Ireland Secretary saying there won’t be any checks, etc., it contradicts what was signed, namely that checks would indeed be carried out.

So we can clearly see that the British sometimes have a tendency to unsay things, or say things which aren’t the same as what they signed a few months ago.

US/EU/TRADE

Q. – It’s not only the British, there’s also a certain Donald Trump, across the Atlantic in this case, who is threatening a 25% tax on European cars and has condemned the much-talked-about trade deficit favouring the European Union. He doesn’t like the digital tax championed by France either. Can we negotiate with the United States, or do we always have a gun to our heads? Is it more a trade war than negotiation?

THE MINISTER – As we’ve said, between allies there are some things you don’t do. Saying, for example, that steel and aluminium are threats to national security, or that European cars are threats to American national security…

Q. – …or French wines.

THE MINISTER – …is hard to understand. I think Donald Trump sees international trade through the lenses of a gentleman from the 1970s, because he focuses above all on trade surpluses and deficits. I’ve focused on the issue because it’s my daily work: France, for example, does have a trade deficit – which is in decline, incidentally; we had some very good results in 2019; for the first time since 2015 our trade deficit fell –, admittedly there is this trade deficit, but alongside this trade deficit there’s also a French presence in the world, thanks to subsidiaries all over the world which themselves enable higher dividends and wealth in France to invest, to the tune of €70 billion.

So you can’t look at a country’s international presence solely in the light of exports and imports.

Q. – And what about those who say, “ultimately it’s succeeding for him, as a policy of permanent economic confrontation”?

THE MINISTER – I’m not sure that’s the decisive factor in America’s economic success at the moment; rather, it’s a very aggressive tax reform, together with a massive cut in rates. It’s not so much these trade successes, because in reality, look: he got into a power struggle with China and yet his trade deficit with that country hasn’t decreased.

So I think, on the contrary, that we must reach out. We’re in favour of dialogue. For example, we French, Europeans, constantly say that on the issue of aerospace subsidies we should instead agree on disciplines to avoid fighting at the WTO for years, because while we’re fighting at the WTO, China is arriving on the aerospace market. So let’s find good agreements to provide discipline rather than entering into bad trade wars./.

Published on 12/03/2020

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