- In an interview with Business Insider, Philip Hammond, the UK’s chancellor of the exchequer, talked about Brexit, the tariffs the Trump administration imposed on steel and aluminium imports, and regulating tech companies.
- Hammond was relatively optimistic that a trade war can be averted, and that the UK’s exit from the EU can end up being a good thing for the country.
- But he acknowledged that one of the key issues regarding Brexit – how to handle the border between Ireland and Northern Ireland – involves tough technical challenges.
SAN FRANCISCO – You can colour Philip Hammond optimistic.
Whether the topic is Brexit, the United States’ incipient trade war with much of the rest of the world, or constraining the power of technology companies, Hammond, the UK’s chancellor of the exchequer – the head of Her Majesty’s Treasury, and one of the most senior officials in UK government – is hopeful that things will work out in the end.
They may take a little negotiating or contemplation, he says, but eventually world governments can get to an agreeable solution.
But even he acknowledges how difficult some issues may be, particularly the thorny issue of how to manage the border between Ireland and Northern Ireland after the United Kingdom leaves the European Union. The UK is hoping to wrest control of its own borders and trade policies post-Brexit, while at the same time maintain the current so-called invisible border between the two parts of Ireland – goals that the EU and many observers consider to be mutually exclusive.
In town to get a first-hand glimpse of the scene in the epicentre of the tech industry, Hammond spoke with Business Insider at the Visa Innovation Center here about Brexit, the prospective trade war with the United States, and regulating tech companies. This interview has been lightly edited for clarity.
Hammond thinks the Trump administration will talk about tariffs
Troy Wolverton: I don’t know if you saw today, but the Trump administration announced it was going to lift the exemption on the steel and aluminium tariffs when it comes to the EU. In other words, it’s going to apply those tariffs to the EU. I was wondering what you think about that move.
Philip Hammond: Well, we’re obviously disappointed. We’ve been lobbying for a continuation of the exemption, indeed a permanent exemption. I don’t imagine this will be the end of the discussion.
I will be seeing Secretary Mnuchin [Thursday] in Whistler [British Columbia]. And the discussion will continue.
Wolverton: Do you think there’s room for it to be adjusted or for there to be a further exemption at this point?
Hammond: Look, I have always found the administration to be open to discussion. They have a view. They have a position. But in my discussions with them so far – and I’m not primarily responsible for negotiating trade arrangements – but they have always seemed to me to be willing to listen, to talk about these things.
So, we will continue to talk. This is obviously something that matters very much to the Europeans – broadly. I’m including us in “the Europeans.” And we’ll continue to discuss it with the US.
Wolverton: What do you make of the Trump administration’s trade policies in general and what seems to be its incipient trade war with China and potentially other countries?
Hammond: In the UK, we are strong advocates of free trade. We believe free trade works best, and we will continue to advocate for free trade.
I’ve said before I understand the concerns that the Trump administration is articulating. And we also understand what President Trump is doing is what he said he would do on the campaign trail. He got elected, and now he’s doing it.
Hammond wants to put ‘Britain first’ post-Brexit
Wolverton: If it comes down to it, in a post-Brexit UK, if we get into a tit-for-tat between the US and the EU on trade policy and tariffs, which side is the UK going to come down on?
Hammond: Well, I think I’ll take a leaf out of President Trump’s book and say we’ll come down on the UK side. It will be “Britain first,” will be our trade policy.
Once we’re out of the European Union, we’ll obviously have an independent trade policy. That will be clearly based on the principle that free trade is a positive. And keeping trade as open and free-flowing as possible will be our objective.
Wolverton: Do you have some fear you’ll be caught in the crossfire between the EU and the US?
Hammond: Look, the EU is the world’s largest trading bloc. The US is the second largest trading bloc, market in the world. Obviously, we have very close relations with both. And we will want to maintain strong trade relations and excellent relations generally with both.
So, there is always a concern if there is any tension between the two.
He wants to re-think how to regulate tech companies
Wolverton: You talked recently about the possibility of government intervention to prevent emerging tech companies from amassing the same kind of market power that Google and Facebook have. What would that government intervention look like in your view? And is that something that a post-Brexit UK might be able to do alone? Would you go it alone on that?
Hammond: So, let me answer the last part first. On any of these issues, things are always much more effective if they’re done globally. And where we can build global consensus, that will always be our preference.
What I said was that the changing shape of the economy and, in particular, the digital revolution, is presenting new challenges to our established institutions and structures, like competition policy. And for example, in some areas we’re seeing a business model which involves big established players buying up potential challengers with new technologies, competing technologies, in a way that consolidates – what starts to look quite like monopoly power.
And I think many people feel that our long-established competition policies and competition regulators are not necessarily well-equipped to deal with the issues of concentration in the digital economy. So it’s something we need to look at, we need to make sure that our institutions and our structures and our regulatory environments evolve to respond to the evolution of technology.
The tax system, the same. There are well-known issues around the taxation of digital businesses, and our tax systems have to evolve to reflect the changing nature of business.
Wolverton: The EU made a big case against Google, in terms of antitrust. It’s been going after it on antitrust issues. The EU also went after a number of companies, including Apple, and the UK went after Facebook on tax issues. So it would have to go beyond what we’ve seen so far, those type of interventions?
Hammond: Well, those were interventions made under the current institutional arrangements that are essentially “old economy” structures. What I’m suggesting is that as the economy digitizes, we need to think through what that means.
We need to ask ourselves the question: In every area, are the structures that we’ve got in place, that were mostly designed in the pre-digital age, are they fit for purpose for a digital-age economy? And the answer may be they are, but I think we have to ask the question.
He thinks its possible to resolve the Irish border question
Wolverton: I wanted to talk a little bit about Brexit. My understanding is one of the big issues of the day in the UK is the issue of the border between the Republic of Ireland and Northern Ireland. If you had to choose between maintaining the invisible border that you have now between Northern Ireland and the Republic of Ireland and allowing the UK, giving the UK the freedom to negotiate its own trade policies with other countries, between those two choices, which would you choose?
Hammond: Well, we don’t accept that there is a trade off in that way, between those two issues. We’ve made clear that we will have an independent trade policy. But we also have a commitment to maintaining the open nature of the border in Ireland. And that’s exactly at the heart of the discussion we’re currently having about how we can move forward on the remaining elements of the withdrawal agreement, including what we call the backstop guarantee to the Irish government about keeping the border open.
Wolverton: So my understanding from what I’ve read and people I’ve talked to is that pretty much all the academics and people in Europe who have looked at this issue say that’s an impossible dream, that you have to choose between one of those two things.
Hammond: Well, we don’t accept that. So, we think there are ways of doing this. For example, we’ve put forward a proposal for a hybrid system, which would involve the UK collecting the common external tariff on behalf of the European Union. And where the UK chose to set a lower tariff, UK and borders being able to reclaim the difference where they were able to demonstrate the point of end-consumption had been in the UK.
Now that is a model that will need some more work. It will need some technology to make it effectively implementable. And it probably wouldn’t be available immediately. But conceptually, it is possible to reconcile an independent trade policy with an open border in Ireland.
But he acknowledges there are technical challenges
Wolverton: My understanding is that that proposal – the hybrid proposal, and the “max fac” proposal – have both been at least initially rejected by the EU negotiators.
Hammond: So, not quite. The EU negotiators have an objection in principle to the so-called max-fac option. And that is that it requires an exemption for small traders across the Irish border, which they object to.
Their concerns about the hybrid model are, as I understand it, more practical concerns. They’re not objections in principle, but they’re objections about the deliverability of the model. We accept those challenges.
Wolverton: “Deliverability,” meaning?
Hammond: The technical feasibility of implementing the model. We accept that there’s more work to do here – there’s still more work.
Wolverton: Theresa May has famously refused to say whether or not she thinks that Brexit is going to be a good thing for the UK in the end. What’s your take; is this going to be a good thing for Britain?
Hammond: We’re a democracy, and we had a vote on this issue. And the British people decided that we should leave the European Union. So, the question now is how to do that in a way that makes it a good thing for Britain. The challenge is to do Brexit in a way that delivers a positive outcome. And that’s our focus in these negotiations.
Wolverton: And is that possible – to make it a good thing?
Hammond: I hope and expect we will get a good deal. But it has to be a deal that works for both sides. The only way you get a good deal is if it’s a good deal for both parties.
Wolverton: [EU chief negotiator] Michel Barnier has described Britain’s asks – what Britain is asking for in the negotiations – as unrealistic. Do you accept that characterization?
Hammond: Well, I think Michel Barnier’s a skilled negotiator, and I would expect him to characterise our asks in a negative way. That’s what skilled negotiators do.
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