Transcript: EU pushes a UK-style trade deal with the US
This is an audio transcript of the FT News Briefing podcast episode: ‘EU pushes a UK-style trade deal with the US’
Josh Gabert-Doyon
Good morning from the Financial Times. Today is Friday, June 20th and this is your FT News briefing. Russia’s wartime economy is starting to slow down, and the European Union wants to seal trade talks with the US. Plus, a UN official sounds the alarm on aid distribution in Gaza. I’m Josh Gabert-Doyon, and here’s the news you need to start your day.
[MUSIC PLAYING]
Russia may be heading towards a recession, so says the country’s finance minister. That’s the first time the government has admitted serious economic difficulty since Moscow’s invasion of Ukraine more than three years ago. The Russian economy has been kept afloat so far by sky-high outlays on defence. Military spending was up 25 per cent last year, and that’s led to strong wage increases and low unemployment. But the boost from public spending has since tapered off and stubborn inflation has forced the central bank to keep its interest rates high, and that’s meant higher borrowing costs for businesses. Russia’s President Vladimir Putin, hinted earlier in the week that he’d support a lower interest rate to get the economy growing again.
[MUSIC PLAYING]
The European Union is pushing for a trade agreement with the US, and they want to model it on the trade deal the UK just struck with Washington. Time is of the essence. Brussels is rushing to meet the July 9th deadline, the day when US President Donald Trump’s so-called “liberation day” tariffs are supposed to snap back into place. My colleague Andy Bounds is here to tell us about it. Hello Andy.
Andy Bounds
Hi Josh.
Josh Gabert-Doyon
OK, so what exactly would a UK-style trade deal look like?
Andy Bounds
Yeah, this has become a bit of a buzzword in the trade world because the UK was the first to do a deal with Donald Trump’s administration. Basically it keeps in place the 10 per cent across-the-board reciprocal tariffs that Trump has imposed, and it also gives some carve-out from the steel car tariffs and other sectoral tariffs that he’s imposed. Now, the reason that the EU wants to do something along these lines is they’re beginning to think it’s the best they can get and if they don’t get a deal or at least a sort of agreement towards a deal on July the 9th, then, as you say, the other tariffs snap back, which would be 50 per cent across-the-board reciprocal tariffs.
Josh Gabert-Doyon
OK, you mentioned this idea also of the carve-out sectoral tariff. Which industries are the biggest source of tension right now between the EU and the US?
Andy Bounds
Well, it’s very much cars is a huge one because the EU sends a lot of cars to the US and doesn’t import very many. And steel is a very sensitive subject in the US, and there’s been tariffs on steel for quite some time. So in these areas, what the EU is hoping to do is what the UK did, which is to say some sort of historic levels of quota that they normally send would be a reduced rate tariff or possibly even tariff-free or down to the rate of 10 per cent.
Josh Gabert-Doyon
Right. Let’s say the EU and the US can’t come to an agreement. What happens next? How would the EU respond if Trump puts in place this 50 per cent tariff?
Andy Bounds
Well, that is a very, very big question. Basically, the trade policy of the EU is run by the European Commission, which is the sort of central authority. The member states have to approve by majority actions such as doing trade deals or taking punitive measures. Now, back in April, they did agree to hit the US with tariffs on 21bn worth of goods, but they then delayed that retaliation because there were talks. But of course, the longer this goes on, the more the EU industry is paying tariffs and getting shut out of the US market, while the US industry is not being, you know, discriminated against at all. So you get into this asymmetrical relationship where some EU member states are pushing to say if we don’t get something by July the 9th, we need to hit back. But other member states are saying actually this will be a self-inflicted wound. Why would we want to put tariffs on imports and make things more expensive for our companies and our consumers?
Josh Gabert-Doyon
Andy, it also seems like there’s just a general shifting of the goalposts on global trade. Is this a new era for EU trade with the rest of the world?
Andy Bounds
Yeah, I mean, there’s nobody I’ve spoken to in Brussels who believes that we’re going to go back to the relationship that we had before Trump came into power, which was, you know, tariffs of 2 or 3 per cent across the board on each side, maybe some sensitive products with higher tariffs, you now, agricultural products deal in the odd tit-for-tat. But it’s not just the US that they have trouble with. There’s quite a lot of trouble with China as well. The US has its own problems with what it calls Chinese overcapacity. So lots and lots of manufactured goods coming out of China and being sold on US markets and EU markets. And the EU is looking to protect itself a bit further and protect its market a bit from China and also force open the Chinese market to EU manufacturing to give itself an alternative to the US market. On the other hand, they’re hopeful of doing more trade deals with other countries around the world. And I think this is the one sort of flip side of the Trump tariff story is that, you know, if you’re in Canada or in Australia or in India, and you see the US market closing to you, you want to do deals with other people. So, you know, the EU is trying to find alternative markets for their goods that will no longer be welcome in the US.
Josh Gabert-Doyon
Andy Bounds is the FT’s EU correspondent. Thank you very much, Andy.
Andy Bounds
Thank you.
[MUSIC PLAYING]
The Bank of England held interest rates steady at 4.25 per cent yesterday. That followed their quarter point cut in May. One reason to stick to the current rate? Inflation. It was 3.4 per cent last month, well above the bank’s 2 per cent target. But that’s not the only thing policymakers are wrestling with. There’s also new uncertainty posed by fighting between Israel and Iran. That conflict could have a big impact on global energy prices. Looking ahead, the bank said it might lower interest rates in the coming months to prevent too much damage to the labour market. Over 100,000 people fell off UK payrolls last month, the largest monthly contraction since May 2020.
[MUSIC PLAYING]
In the last few weeks, Israel has allowed limited amounts of food to be distributed across the Gaza Strip. It’s coming in through an organisation called the Gaza Humanitarian Foundation, a new US-backed group that’s staffed by private security contractors. But most aid organisations, including the UN, have refused to work with the group. Gazans, for their part, need to travel long distances to the aid distribution centres. And according to local officials, dozens have been shot and killed while queueing for food. Journalists have not been allowed into the enclave to witness what’s going on, but James Elder, global spokesperson for Unicef, recently spent 10 days in Gaza. He joins me now. Hi, James.
James Elder
Josh, hi there.
Josh Gabert-Doyon
Talk to me about this distribution programme. In theory, how is it supposed to work?
James Elder
Well, we’ve never seen anything like it, Josh. So it’s hard to say how it’s supposed to work. Humanitarian aid is based, Josh, on going to where people need it. So the ceasefire in Gaza was perfect. Hostages go home and we had 400 distribution points across the Gaza Strip, 400. In fact, Unicef would go door to door on malnutrition.
What’s happened now is that we’ve got a virtual blockade again, less than 5 per cent of humanitarian aid, and these sites, there’s less than a handful. So you’ve gone from 400 across the Gaza Strip to around three or four. As one person said, those with knives prevail and 90 per cent of people go away with nothing. It’s a combat site, which was always our fear. Humanitarian aid can’t be militarised. We have to work with all parties.
I mean, I sat with a little boy who simply went to get food for his family. He was given money to get bread and he saw this flood of people heading south and he thought, this is my moment to come back with a box of food. It was chaos, quadcopters, tank shell, the shrapnel from the tank shell ripped through his body. I sat with him in the hospital bed as he told me the story in immense pain because there’s no painkillers. And we visited him a couple of times and the day I left after two weeks. He died yesterday. These sites are reinforcing the horrors of Gaza. They’re deepening despair for a population.
Josh Gabert-Doyon
You said these are combat sites, private military contractors, like I mentioned, are the ones running distribution here. What does that mean for the aid operation?
James Elder
Exactly. So I can’t go to them. I would not have clearance to go to them, but I could see them from a building and I would look at them at night-time and people would start arriving from say, 8pm to midnight and they’re corralled into sort of cages. And then around midnight, you start hearing fire. I’ve got footage of all of these immense fire, gunfire, tank fire, quadcopter fire. There’s no clarity on when the sites are open, Josh. And remember, you’ve got half-a-million people facing starvation. Now, contradictory information in a war zone gets you killed. So then, you know, people that go still go, they’re guessing, they’re hoping, they are waiting. And it turns into mass casualty events, day after day, unfortunately, increasing in terms of numbers of people killed and wounded.
Josh Gabert-Doyon
The situation sounds incredibly chaotic. What do you think needs to be done to improve the logistics of this operation?
James Elder
Well, you can’t improve an aid operation which is guarded by one party to the conflict who chooses who gets food and who deems it to be a combat site because that’s always the reason why all these people were killed was it’s a combat site. So, you know, we get to these points where you get famine warnings and every time there’s a famine warning, the international community puts pressure and says, no, this is not OK. Things are loosened and aid is allowed in, but then attention wanes and it’s tightened again.
Now, that’s very dangerous because famine is always too late. Worse than this, we have a water famine now. Water relies on fuel, fuel pumps to salination plants, fuel pumps wells across the Gaza Strip and fuel is for trucks to take water. Fuel has not been allowed into the Gaza strip for more than a hundred days. If this continues, we start to see children dying of thirst.
Josh Gabert-Doyon
James, final question. Do we have any signs of things changing? What’s going to happen next?
James Elder
What happens to happen is the same thing as always. Any type of ceasefire to get hostages home, at the same time that allows us to flood the Gaza Strip. Josh, if not, then just let aid come in. Let’s deal with those arguments of looting because looting occurs based on the economics of scarcity. If you have a blockade and then you let a few trucks in, the economics of scarcity are that people will loot them. So we’ve just got to go back to allowing aid to civilians who have hit breaking point many months ago.
Josh Gabert-Doyon
James Elder is a spokesperson for the United Nations Agency, Unicef. Thank you so much, James.
James Elder
Thanks, pleasure.
Josh Gabert-Doyon
The Israeli government did not respond to a request for comment. In the past, Israel has said that its restrictions on food and medicines are in place to stop provisions being diverted to Hamas.
[MUSIC PLAYING]
You can read more on all of these stories for free when you click on the links in our show notes. This has been your daily FT News Briefing. Check back next week for the latest business news. The FT News Briefing is produced by Sonja Hutson, Fiona Symon, Mischa Frankl Duval, Ethan Plotkin, Kasia Broussalian, Henry Larson, Marc Filippino, and me, Josh Gabert-Doyon. Our intern is Michaela Seah. Our show was mixed this week by Alex Higgins, Kelly Gary, and Blake Maples. We had help this week from Michael Lello, Peter Barber, David da Silva, and Gavin Kallmann. Flo Phillips is our executive producer, our acting co-head of audio is Topher Forhecz, and our theme song is By Metaphor Music.