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January 11, 2018

The horse taming the dragon - really?

Emmanuel Macron's visit in China has ended, and his charm, skills, and determination, earned him recognition as a serious diplomatic leader on the world scene. Macron brought an eight-year old horse from the French cavalry as a gift to president Xi. He stayed silent on human rights issues, at least in public. He ended the visit with 50 signed commercial contracts and lots of pictures of a symbolic visit.

Macron stepped into the leadership vacuum on the world diplomatic stage and earned the trust of the Chinese as a serious intermediary. But can he deliver - can the "horse tame the dragon", which is how the name Macron translates into Chinese. As this article points out, a horse may be a terrible gift. 

But the more serious issue is how Macron can deliver a European position if the EU itself is divided, not only over trade with China but also over investments from China. China has one leader and a strategy, while Europe has neither a single leader nor a strategy, notes Thomas Hanke in Handelsblatt. There is no European strategy to preserve technological advances nor to cooperate with China. Macron's visit might be symbolic, but we do not see it having a bigger impact.

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January 11, 2018

Budget contributions for market access?

There is a story in the The Times this morning, according to which the EU might consider granting UK financial services companies market access to EU market in exchange for British contributions to the EU budget. The proposal has superficial charm, and it might help the EU plug painful financial gaps that come as a result of Brexit. But the problem with this type of proposal is that it will land the UK with a dirty version of the Norway option - with fewer rights and remedies than those enjoyed by EEA members, and probably very similar levels of budget contributions. Once the details of any such deal become known, people in the UK will be asking themselves whether full EEA membership might not be a preferable option.

The suggested solution would enable the UK to segment the service sector agreements into three categories - total alignment with EU rules, partial alignment, and regulatory divergence. It is far from clear that EU member states would accept this. Angela Merkel is known to oppose what the Germans fear would constitute a form of cherry-picking - where the UK chooses which sectors comply with EU rules and which don't. France is also opposed to this, probably more so than Germany, because Paris is already actively campaigning to attract financial companies away from London. Michel Barnier is also reiterating that the only two deals that are available are the Canada deal and the EEA - with no space in between. 

As the Times article pointed out, Theresa May said it was thinkable that the UK would make contributions to the EU budget for joint projects, but not vast payments. Even if the EU were to agree to the principle of selective service sector agreements in exchange for cash contributions, it could extract a price that the UK might find unacceptably high.

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