The Telegraph today suggests that Friday's meeting is likely to have as far-ranging scope as laying the groundwork for a free trade agreement between the UK and the US. Of course, the UK Prime Minister is unable to talk about trade outside the EU until we formally separate, and so obviously the pair will instead report they had a jolly nice chat about the weather and the two countries' special relationship now that Churchill's bust is again on display in the White House.
EU leaders will know the truth. We all will. If it turns out that free trade between the UK and USA is on the table, it would be a major coup for Theresa May as she prepares to trigger Article 50 this spring and begin the process of removing the UK from the EU and, she even claims, any form of common market. A free trade agreement with the world's largest economy is about as good an ace as it's possible to have up her sleeve when she goes into talks with the EU, isn't it? You can almost hear the conversation unravelling as the UK warns the remaining members that it will not bend over backwards to take a punishment beating for leaving the EU. If push comes to shove, Brits will happily buy a tariff-free Ford in place of a BMW or Mercedes with a price tag weighed down by import taxes.
In fact, the conversation could go deeper, and it's exactly the same discussion that a merchant banker pal and I had the other day. Imagine the EU then warning Theresa May that she will have to live with a weakened pound not recovering. As our barroom chat concluded, this could actually be one of those moments that you would wish to have been a fly on the wall as May laughs out loud and EU leaders face palm. A weak pound, the remaining members would no doubt be reminded, is absolutely fantastic news for our exporters, but it's truly awful news for the Eurozone. UK exports are made cheaper and the reverse happens to imports. Sure, the price of a bottle of Chablis will head northward, but then a digital marketing agency selling services into Paris and Munich will suddenly find that it's 10% or 20% cheaper than a year before.
And here's the rub. If the EU thinks WTA tariffs will make the UK think again, by putting 10% or so on most goods and services (averaged out), then the UK will probably answer that it just got a 10% to 20% break on its currency, and this just takes us back to where we were. And by the way, those expensive cars and fine wines -- well, we mentioned we're happy to drive Fords or a wide range of Japanese cars made in the UK, but we forgot to mention to the French delegation that we're also rather keen on the fine wines and food of our Commonwealth. You really should try Aussie Chardonnays and Kiwi Sauvignon Blancs -- they're delicious and already far more affordable than most French versions.
It's here where the knife could really be put in as the UK mentions the Commonwealth is next in line to get a trade deal now we're not bound by EU rules. That takes in most corners of the globe -- but particularly Canada, India, South Africa, Australia and New Zealand.
So forget the news headlines and commentators lamenting a weak pound -- it's quite shocking how many British journalists are not portraying this as the country's greatest strength in upcoming negotiations for the reason I have just outlined. Sure, we're going to get some inflation and the next three years are rightly being portrayed as a grind. But at the end of it, if the UK had to accept tariffs with the EU that are pretty much evened out when you factor in a weaker pound, I think most of us would take that. When you throw in the possibility of a free trade deal with the US, then again -- I think we'd take that too.
A huge new part of this dynamic will be how well Trump and May deliver on their threats to companies hiding their revenue offshore so it can't be taxed. With that in place, both sides will have good reason to welcome each other's businesses and the resulting tax bills. The major impact will be two very different ways of working. Fortunately there won't be an attempt to make labour laws the same on either side of the Atlantic -- as we currently have within the EU -- but one can only imagine the high protection afforded to UK workers under EU law will have to be eroded to stay competitive within a whole new trade axis.
It may sound too trite, but I'll say it anyway -- the UK looks like it’s heading for trade deals that drop proximity for people we share a common language with.