Boris Johnson’s plans for Brexit are taking a protectionist turn as he seeks to woo voters in the opposition Labour Party’s former industrial heartlands ahead of next month’s general election.
On Friday, the U.K. prime minister announced he would relax state-aid rules, give companies more protection against foreign takeovers and encourage government bodies to buy British.
The plans will likely disappoint those Conservative supporters who hoped Brexit would allow them to forge a lightly regulated economy, and could also make it harder for Johnson to sign a trade agreement with the European Union by the end of 2020. The bloc puts strict limits on state aid to prevent unfair competition, and has no reason to make an exception for the U.K.
“We shouldn’t free ourselves from the EU in order to just enslave ourselves to the whims of Whitehall,” said Matthew Lesh, head of research at the Adam Smith Institute, a think tank aimed at promoting free trade which was closely linked to former Tory Prime Minister Margaret Thatcher. He branded Johnson’s plans a “form of Trumpian protectionism.”
Despite riling some allies, the prime minister’s message on state aid and favoring British companies may help win support in Labour-held seats in England’s north and midlands he needs for a parliamentary majority. Even as opinions polls show him well on course to do so, many of these local races still look set to to be close.
Deal Pressure
Johnson, who pledged again to leave the EU by the end of January, needs to reach a deal with the U.K.’s biggest trading partner by the time current arrangements expire at the end of next year. But the further Britain departs from the bloc’s labor, environment and state-aid standards, the harder it will be to reach an agreement that will give U.K. companies access to the European market.
The Conservatives said the EU’s current state-aid rules have a “chilling effect” because governments have to wait for the European Commission to approve any measures, delaying measures “to quickly and effectively help companies that are in danger.”
The Tories promised a new system that sets out clear principles for government intervention, based on the U.K.’s needs. Ministers will have “more discretion” over decisions, which they will be able to take within “days.” A new government body would be created to manage the system, the party said.
Taking questions from the press after a speech in London, Johnson said that “of course” the new rules would be compatible with those of the EU, adding that, even with the new rules, he is committed to keeping a “level playing field” — a key requirement for the bloc.
‘Sovereign Equals’
“Were there to be any issues arising, then as you know, under any big free trade deal, there’s a joint committee to arbitrate on whether some unfair subsidy or dispensation has been made,” Johnson said. “But it would be a committee of sovereign equals.”
“I wonder when the penny will drop for that small minority who voted for Brexit because they thought it meant less red tape, lower tax, less government intervention and Britain as a ‘Singapore in the North Sea’ — they’re getting the opposite,” former Conservative Chancellor of the Exchequer George Osborne tweeted.
The promise on takeovers follows a spate of controversial acquisitions of British companies, including defense contractor Cobham Plc and satellite operator Inmarsat Plc, by overseas bidders — a trend fueled in part by a decline in the pound since the Brexit referendum. Meanwhile, China’s Huawei Technologies Co. is vying to be part of Britain’s future mobile communications network — something the U.S. has opposed.
Asked specifically about Chinese investment, Johnson said the U.K. must strike a “balance” between “continuing to be open to investment from China” and making sure nothing happens “that prejudices our critical national infrastructure, our security, or do anything that would compromise our ability to cooperate with five-eyes security partners.”
On public procurement, the Tories pledged to ditch “absurdly complex” EU rules with their “pointless tendering requirements.” The parties also promised “simpler and cheaper” regulations that are “geared toward supporting local business and promoting British business.”
