While the Brexit drama is all over again, the UK’s discount to Japan, in terms of the recently signed trade deal, may recede the Tory diplomats’ negotiating stance during this week’s trade talks, as revealed by the Financial Times.
Key quotes
The UK’s new trade deal with Japan commits it to tougher restrictions on state aid than the ones it is currently offering the EU in the Brexit talks, potentially undermining its negotiating position with Brussels.
In the bilateral UK-Japan agreement announced in principle on Friday, London and Tokyo have agreed to replicate the restrictions on subsidies in the EU-Japan deal that went into effect last year. That agreement prohibits the governments from indefinitely guaranteeing the debts of struggling companies or providing an open-ended bailout without a clear restructuring plan in place.
By contrast, the UK has repeatedly told the EU that it must have total freedom over state aid after the end of the Brexit transition period with complete autonomy over future subsidy decisions, subject to WTO (World Trade Organization) rules.
FX implications
Although the news fails to offer any immediate moves, GBP/USD stays pressured around 1.2800, the lowest since July 27, by the press time of early Monday morning in Asia.
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