EU-US free trade talks show why Britain is better off in

Few can seriously claim that UK on its own would have as much clout in trade negotiations as the whole of the EU.

Like it or not, David Cameron had a good win at the EU budget summit last week. After over 24 hours of caffeine-powered talks he got what he came for - a real terms cut in EU spending. That said, it is easy to overplay Cameron's role in the marathon talks. Germany's Angela Merkel was, as ever, the real dealmaker.

In any case, as Will Straw wrote last Friday, the budget deal is hardly something to celebrate. The budget headings that suffered the biggest cuts were "Global Europe" - which includes development spending - and investment in infrastructure projects. In contrast, despite being cut by 11 per cent, spending on the Common Agricultural Policy - possibly the worst and most wasteful of all EU policies - remains the largest single area of spending.

But while 99 per cent of the summit media coverage was about rehearsing centuries-old cliches about European diplomacy - in last week's case, Britain screwed the French by making a deal with the Germans - the importance of the EU budget was actually pretty low. In fact, while over 24 hours were spent haggling over how Europe would spend just over €900bn of its own money, leaders spent a few minutes and several pages of the summit communique talking about something of far greater significance to the EU's future.

The importance of Barack Obama's launch of formal negotiations aimed at agreeing the world's biggest ever bilateral trade deal during his State of the Union speech to Congress yesterday, dwarves the endless debates in Brussels on rebates, "own resources", and the difference in funding for Pillars 1 and 2.

It hasn't happened overnight. Since autumn 2011, diplomats have been working behind the scenes on preparing the ground for a EU/US trade talks. Full negotiations on a deal looking not just on the elimination of tariff barriers but also on harmonising regulatory and technical standards for products could generate 2 per cent of GDP on its own. EU officials think that, by itself, a US trade deal could translate into €275bn per year for the European economy and two million new jobs.

The EU - as both its supporters and critics would agree - is not just about the single market, but its status as the world's largest market is a valuable and, so far, relatively under-used commodity. At the moment, just four of the EU's 29 trade deals are with countries from the G20, and those four are with South Korea, Mexico, South Africa and Turkey. But the EU is now devoting increasing amounts of political capital to trade. An FTA was agreed with Singapore in December while a deal with Canada is expected to be completed imminently. Negotiations with Japan are expected to be launched in Tokyo in April, meaning that the EU will spend the next year brokering trade deals with the two largest world economies. In contrast to the EU's budget talks, there's nothing inward looking about that.

It is also a welcome sign that leaders are recognising that trade is the single most effective alternative to austerity. The collapse of the Doha round of WTO trade talks in 2005 followed by the financial crisis did real damage to world trade and to the European economy. One of the little-noticed developments in economic policy in recent years has been the glut of protectionist measures. The World Trade Organisation stated earlier this year that only 18 per cent of the trade restricting measures adopted by G20 countries since 2008 have been scrapped, amounting to a total loss of 3 per cent of world trade - equivalent to some €350bn.

But while the drive towards trade marks a decisive shift in priorities by the EU, it is also hugely significant to the debate on Britain's continued EU membership and to the Conservative Party's attitude to Europe.

One of the common lines of attack from the 'better off out' brigade is that, shorn of its EU shackles, Britain would be able to go around agreeing its own free trade deals. In response, one of the most convincing argument in favour of Britain being at the heart of Europe is that together we're stronger. In the EU we are one of the most powerful players in a bloc of 27 countries and 500 million people. Outside, we are, at best, a medium-sized power. When it comes to dealing with the likes of the US and Japan, few can seriously claim that Britain on its own would have as much negotiating clout as the whole of Europe.

Besides, an EU pursuing a free trade agenda should be like manna from heaven for most moderate Tories. It should also pacify those who grumble that the EU should be about trade, not political union. At the very least, if the EU continues the shift towards using its muscle to drive international trade deals it will becoming increasingly difficult for Conservative eurosceptics to maintain that we are better off out.

A couple of days before last week's summit, the Europe minister, David Lidington, told reporters that, come 2017, he and David Cameron wanted to be "campaigning with enthusiasm for a 'yes' vote". On his wish list, alongside less EU regulation and a liberalisation of the services sector, was the "fantastic prize" of a transatlantic trade deal. In Lidington's words, failing to go for it would be "betraying future generations". Cameron himself said today that an EU/US agreement would "create jobs on both sides of the Atlantic and make our countries more prosperous." It looks as though his wish may yet be granted.

It goes without saying that a transatlantic trade agreement is far from a fait accompli. Both sides like to subsidise large parts of their economy - particularly farming - and both will be under pressure from powerful internal lobby groups hoping to strangle the baby before it is born. But the EU and US have, nonetheless, made a bold statement of intent which could eventually lead to a seismic change in the world economy.

Ben Fox is a reporter for EU Observer. He writes in a personal capacity

European Commission President José Manuel Barroso speaks following a summit with US President Barack Obama as European Council President Herman Van Rompuy looks on. Photograph: Getty Images.
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Will Euroscepticism prove an unbeatable advantage in the Conservative leadership race?

Conservative members who are eager for Brexit are still searching for a heavyweight champion - and they could yet inherit the earth.

Put your money on Liam Fox? The former Defence Secretary has been given a boost by the news that ConservativeHome’s rolling survey of party members preferences for the next Conservative leader. Jeremy Wilson at BusinessInsider and James Millar at the Sunday Post have both tipped Fox for the top job.

Are they right? The expectation among Conservative MPs is that there will be several candidates from the Tory right: Dominic Raab, Priti Patel and potentially Owen Paterson could all be candidates, while Boris Johnson, in the words of one: “rides both horses – is he the candidate of the left, of the right, or both?”

MPs will whittle down the field of candidates to a top two, who will then be voted on by the membership.  (As Graham Brady, chair of the 1922 Committee, notes in his interview with my colleague George Eaton, Conservative MPs could choose to offer a wider field if they so desired, but would be unlikely to surrender more power to party activists.)

The extreme likelihood is that that contest will be between two candidates: George Osborne and not-George Osborne.  “We know that the Chancellor has a bye to the final,” one minister observes, “But once you’re in the final – well, then it’s anyone’s game.”

Could “not-George Osborne” be Liam Fox? Well, the difficulty, as one MP observes, is we don’t really know what the Conservative leadership election is about:

“We don’t even know what the questions are to which the candidates will attempt to present themselves as the answer. Usually, that question would be: who can win us the election? But now that Labour have Corbyn, that question is taken care of.”

So what’s the question that MPs will be asking? We simply don’t know – and it may be that they come to a very different conclusion to their members, just as in 2001, when Ken Clarke won among MPs – before being defeated in a landslide by Conservative activists.

Much depends not only on the outcome of the European referendum, but also on its conduct. If the contest is particularly bruising, it may be that MPs are looking for a candidate who will “heal and settle”, in the words of one. That would disadvantage Fox, who will likely be a combative presence in the European referendum, and could benefit Boris Johnson, who, as one MP put it, “rides both horses” and will be less intimately linked with the referendum and its outcome than Osborne.

But equally, it could be that Euroscepticism proves to be a less powerful card than we currently expect. Ignoring the not inconsiderable organisational hurdles that have to be cleared to beat Theresa May, Boris Johnson, and potentially any or all of the “next generation” of Sajid Javid, Nicky Morgan or Stephen Crabb, we simply don’t know what the reaction of Conservative members to the In-Out referendum will be.

Firstly, there’s a non-trivial possibility that Leave could still win, despite its difficulties at centre-forward. The incentive to “reward” an Outer will be smaller. But if Britain votes to Remain – and if that vote is seen by Conservative members as the result of “dirty tricks” by the Conservative leadership – it could be that many members, far from sticking around for another three to four years to vote in the election, simply decide to leave. The last time that Cameron went against the dearest instincts of many of his party grassroots, the result was victory for the Prime Minister – and an activist base that, as the result of defections to Ukip and cancelled membership fees, is more socially liberal and more sympathetic to Cameron than it was before. Don’t forget that, for all the worry about “entryism” in the Labour leadership, it was “exitism” – of Labour members who supported David Miliband and liked the New Labour years  - that shifted that party towards Jeremy Corbyn.

It could be that if – as Brady predicts in this week’s New Statesman – the final two is an Inner and an Outer, the Eurosceptic candidate finds that the members who might have backed them are simply no longer around.

It comes back to the biggest known unknown in the race to succeed Cameron: Conservative members. For the first time in British political history, a Prime Minister will be chosen, not by MPs with an electoral mandate of their own or by voters at a general election but by an entirelyself-selecting group: party members. And we simply don't know enough about what they feel - yet. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.