Brexit: the irony of state aid at the heart of bitter trade negotiations | Economic news

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Here’s the irony: Until recently, if there was one part of the European Union that most Conservatives said they liked most, it was the state aid regime.

It was, after all, the one element of the Single Market that Britain valued most. Indeed, in the 1980s, as it was adapted over successive summits, Britain, more than any other country, really wrote it.

And for good reason: the whole point of state aid rules is to prevent other countries from unjustly supporting their national champions.



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This makes a lot of sense in a single market where people are supposed to compete on an equal footing.

How can British yoghurts or automakers compete with their French and German rivals if these rivals are backed by the state?

So while UK politicians have sometimes complained about the fine print associated with these state aid rules, most of them saw them as one of the most attractive features of EU membership. EU.

Indeed, too often state aid rules have provided a useful excuse when companies come begging for bailouts: “Oh, we’d love to help you, but unfortunately those annoying Brussels bureaucrats won’t let us do it. ”

This is the first ironic thing in the current situation, where number 10 sees the state aid regime as the main reason he is considering leaving the EU without a deal. How can we create national champions, they ask, if we are constrained by these rules?



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The second ironic thing is that it’s not entirely clear that the rules prevent you from creating national champions.

After all, even within the EU, Britain has spent far more on state aid – providing grants and aid to its businesses – than most of its European neighbors. Nothing in the treaties or case law prevents it, for example, from supporting a car battery manufacturer in the future. We know this because France and Germany are already doing it precisely.

Some economists believe that the dispute over state aid must therefore be part of a major negotiating strategy aimed at showing Brussels that this country is indeed serious about leaving without a deal if necessary. Yet documents produced this week suggest the government is serious.

For them, state aid is another area where national sovereignty trumps any agreement to be concluded with Europe. Still, economists say the new rules laid down by Downing Street will open the door to a less efficient economy, as the government tries to pick winners, as it did in the 1970s.

It’s possible that all of this will evaporate in the coming weeks, if Boris Johnson can somehow strike a deal with his European counterparts, but insiders are increasingly pessimistic about the prospect.

All of this points to bumpy months for the UK.

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