Britain will try its best to complete its exit from the European Union within two years from March 2017 as it seeks to avoid potential pitfalls arising from the 2019 European Parliament elections, according to a senior trade official of the United Kingdom.
“There is an European Parliament election in May 2019 and a general election in UK in 2020. We are quite keen that we will complete the Article 50 process in two years… We don’t want it to become an election issue,” Mark Garnier, Parliamentary Under Secretary of State for UK’s Department for International Trade, said in a Hong Kong media briefing on Friday.
If a final deal of Brexit cannot be made before the two major elections, “street politics” will become more dominant to the issue than economic benefits, Garnier said, noting that “timing is very important”.
He also said that “politics may go in a very strange direction” due to parliamentary elections in France in June 2017 and in Germany in September that year.
“We want to make sure that Brexit won’t become an election issue and that we have as much time as we can knowing who we are going to negotiate with,” Garnier said.
The British lawmaker, who was visiting Hong Kong for the first time in two decades, began a two-day visit to the Asian financial hub on Thursday, following trips to Thailand and Japan earlier in the week.
In Hong Kong, he will meet members of the British business community, investors in the UK, officials of the West Kowloon Cultural District Authority, the Commissioner for Sports and the Education Bureau. He attended a launch event for the Detroit Electric SP:01 electric car, which is designed and built in the UK.
The British government will continue to gather opinions from the business community about Brexit and prepare for the coming negotiation with the European Union by talking to a lot of experts.
“Some big themes are emerging. In the banking sector, we know it’s about passporting of the banking branches to EU…In the automotive sector, people may be worried about being charged 10 percent tariff for their exports to EU,” said Garnier.
“We know what the headline interests are but we need to do more work to find the details,” he said, adding that the coming negotiation with EU will be complicated.
He said the Japanese government’s call, issued during the G20 summit in China last month, for free movement of labor and trade after Brexit is an important factor in the debate. More opinions are welcome, the British official said.
“Some people may say the best model for Britain would be the Norwegian model. Some others may say the best model is to just go for tariff and trade completely like a third party…We should go for a model absolutely tailor-made to Britain’s interests, and also to the EU’s interests,” he said.
Different sectors should come up with different deals between the UK and EU, Garnier said. Automobile makers in France and Germany, which rely on export to Britain, will be disappointed if a trade deal cannot be made, he added.
While some disruptive events may happen during Brexit, they could actually provide opportunities as Britain can establish trade deals with countries outside Europe, such as China, more easily.
In morning trading Friday, the British pound dived 9 percent at one point to US$1.1491, hitting a fresh 30-year low before bouncing back to 1.2455 by early afternoon, which is still 1.3 percent off late US levels Thursday.
Worries about a “hard” exit by Britain from the European Union contributed to the currency slide.
“Nobody wants the currency to be volatile,” Garnier said. “What we don’t want to see is the sterling [swinging] around 5 percent on a weekly basis.”
“We are in a slightly strange time at the moment when the parliament doesn’t sit,” he said. Insufficient commentary from the government and media speculation may result in more instability for the British currency as “people cannot predict what the government is doing”, he said.
The Commons Chamber will sit on Oct. 10, according to the UK Parliament’s website.
After the British voted for Brexit in a referendum on June 23, the pound weakened 13 percent to US$1.29 in two weeks.
“The 13 percent correction of sterling is clearly to do with the vote but actually it is not an unwelcome reaction. Broadly speaking, sterling is probably about where it should be,” said Garnier, who is a former investment banker based in Asia.
“We are running a trade deficit for a long period of time but over the years, the sterling did not go down, compared with the US dollar, and more importantly, to the euro,” he said. “Sterling has remained high against the euro…it was probably too high anyway.”
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