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As the deadline to sign a Brexit free trade deal ticks creeps ominously closer, the issue of state aid has emerged as the biggest obstacle to an agreement, with the UK insisting on rejecting the EU’s rules.
At a basic level, state aid is about economic protectionism: countries giving their own firms an economic boost ahead of foreign companies.
But as with so much of Brexit the row is not really about what it purports to be – it’s about something deeper, more totemic.
To Brexiteers it is about removing the EU’s hand from the UK’s decision-making entirely, while the EU say it is about maintaining a “level playing field”.
It’s a state of affairs leading Brexiteer David Jones says is “incompatible with British independence”.
He is backing the government in trying to “regularise its legal position”.
The Tory MP and deputy chair of the ERG told PoliticsHome: “I don’t know of any free trade agreement ever, under the terms of which one party has got that level of influence over the actions of another party.
Remainers, needless to say, think the row is unnecessary. Former attorney general Dominic Grieve said: “On the face of it, this country has never been in favour of state aid.
“It has been seen as a form of manipulation of the markets and if carried out badly, could lead to legal challenges domestically on the basis of unfairness, if one company were favoured over another.
“But this government appears to have decided it’s a dealbreaker.”
The EU has long insisted a comprehensive trade deal with the UK hinges on keeping the so-called “level playing field”, which they say includes making sure state aid is not used to give British firms an economic advantage.
But the UK has in fact been loathe to use such schemes over the decades, especially compared with its continental neighbours. State aid spending makes up just 0.34% of Britain’s GDP, and that figure is unlikely to change that in the coming months, even as industries struggle to cope with the impact of coronavirus.
However, the government is said to want the ability to use subsidies to help improve the country’s technology sector.
As both James Forsyth in The Times and ITV’s Robert Peston have reported, Number 10 wants to help build up the industries of the future and become less reliant on either the United States or China, both of whom happily boost their own tech firms.
The UK is yet to publish a proposed subsidy regime for its own industries post-Brexit, criticising Brussels for insisting on seeing it before moving on to the next stage of the talks, leading to this summer’s impasse.
It has now become the most important issue on the table in the crunch talks between Lord Frost and Michel Barnier this week after its impact in Northern Ireland has become clearer.
In the existing protocol in the Withdrawal Agreement, Northern Ireland is a de facto member of the single market, and therefore subject to EU state aid law.
And the European Commission said its interpretation of that would cover the UK subsidising a company in mainland Britain which has interests in Northern Ireland.
Mr Jones finds this unacceptable: “If anyone had suggested to them that they would try to impose EU state aid policy on Canada or Japan or whoever, they would have said ‘no we don’t do that’ – but they’re trying to do it in the case of the UK.”
In response to the issue Downing Street is set to publish a new Internal Markets Bill in the coming days, allowing UK ministers to take charge of customs issues on the Irish border, and also diluting Northern Ireland’s obligations to EU state aid rules.
That has been met with anger by Brussels, who claim doing so threatens the legitimacy of the Withdrawal Agreement and peace in Northern Ireland.
Mr Jones accused the EU of refusing to act in good faith by “refusing to talk about anything other than their red lines” of level playing field and fisheries.
“I think it’s more than arguable that they’ve acted in bad faith and in breach of the Withdrawal Agreement, so it’s a wee bit rich if they’re now squawking about it because that’s something they should have been doing for the last nine months, but they haven’t,” he added.
The UK has tried to dampen down the row, an official insisting they are only making “minor clarifications in extremely specific areas” to the existing deal and fixing some legal loopholes, but it is clear behind the scenes that this is now the biggest issue in the negotiations.
And Number 10 appears willing to walk away from the whole thing if it cannot be agreed, not wishing to cave in to Brussels’ leading demand almost on principle.
Mr Grieve said the EU is not going to back down on state aid, and the impasse will threaten the future of the union.
“The truth may well be that the government wants the freedom to do state aid, but in practice it is most unlikely it would ever be carried out.
“But from an EU point of view, this sort of assurance – ‘we have the power to do this on paper, but we probably won’t’ – does not suit them when they are operating a strictly rules-based system.”
He added: “It was the same with fisheries – to join the EU in 1974, we to an extent sacrificed our fisheries and I think it’s an inescapable conclusion that they were deemed not economically important.
“We decided, as a matter of state policy, that opening up our seas to EU control was acceptable, and it’s become totally talismanic as an issue.
“Economically, except of course for the fisheries communities, it’s an absolute drop in the ocean. It’s actually probably the only thing in which leaving the EU is advantageous to UK – we will regain complete control of our economic seas.
“But the idea that that should end up being the stumbling block on a deal that might be worth billions is an extraordinary reflection of the way in which emotion has come to be much more important than economic sense in forging our future international relationships.
“I think the EU may well back down on fisheries. I fail to see how it can on the state aid issue, when it would so clearly go against its international rules and regulations.
“For me, there was a slight inevitability about all of this and behind it all is the question of whether the union in the UK survives at all.
“This has huge implications for Northern Ireland, and I fail to see how it helps keeps Scotland in the union, although obviously that is a separate – but linked – issue.”
Why Amazon and Reliance are fighting for Future Retail in India
What’s at stake is strategic access to a network of popular grocery stores and retail shops in India — something both Amazon and Reliance want to either have for themselves, or to prevent the other from acquiring.
“If someone backs down, it will give the impression that one has lost and the other has won, when the fight has just started,” said Counterpoint Research analyst Tarun Pathak.
Amazon has 31.2% market share in India’s e-commerce industry, just behind Walmart-owned Flipkart’s 31.9%, according to a recent report from market research firm Forrester. But Ambani has made no secret of his ambitions to upend the market with JioMart, which is part of his sprawling conglomerate.
Then Covid-19 hit. India enforced one of the strictest nationwide lockdowns, ordering shops to shutter and millions of people to stay indoors for months.
A legal dispute
The announcement took industry watchers by surprise.
“Everyone knew Amazon had a stake in Future Retail, and the deal didn’t mention what would happen to Amazon’s stake,” said Satish Meena, analyst at research firm Forrester.
Amazon responded by filing a complaint to the Singapore International Arbitration Centre (SIAC).
Indian companies and foreign companies operating in India often agree to settle disputes in Singapore because “it’s a neutral jurisdiction with high integrity and international standards,” according to Ashish Kabra, a lawyer who heads the International Dispute Resolution & Investigations Practice for Nishith Desai Associates in Singapore.
The arbitration process is confidential and none of the submissions are public.
Amazon argued that the 2019 deal struck between it and the Future Group entity included a non-compete clause, a person familiar with Amazon’s perspective told CNN Business. The clause listed 30 restricted parties with which Future Retail and Future Group could not do business, and Reliance was on that list, the person said.
“The key question really is what’s the validity of contracts if you just ignore them,” said the person familiar with Amazon’s side.
“Are companies just going to ignore contracts and do what they please?”
Future Group had argued that if the deal with Reliance falls through, its retail unit will be forced into liquidation and 29,000 people will lose their jobs, according to Reuters, which cited the Singapore order. The order is not public, but the person familiar with Amazon’s perspective confirmed that Future presented this argument.
“We welcome the award of the Emergency Arbitrator. We are grateful for the order which grants all the reliefs that were sought,” an Amazon spokesperson said in a statement.
CNN Business contacted Future Group for comment, and received a statement from Future Retail.
Future Retail said it “is examining the communication and the order” from SIAC.
Reliance (RRVL) said in a statement that its deal with Future Retail is “fully enforceable” under Indian law.
“RRVL intends to enforce its rights and complete the transaction in terms of the scheme and agreement with Future group without any delay,” said the statement.
But in the past, Indian courts have usually followed the lead of orders passed by emergency arbitrators outside of India, according to Kabra, the lawyer.
“What parties have previously done, is they approach Indian Courts and ask for similar reliefs in India, while relying on the order of the Emergency Arbitrator. Indian Courts usually grant the same relief,” said Kabra.
A ‘clash of the titans’
For Reliance, which operates 11,000 stores throughout India, and Amazon, the No. 2 e-commerce player in the country, Future Retail’s 1,500 stores are not a must have, says one analyst.
“It’s not like without it you can’t have your ambitions, if you don’t have Future [Retail],” said Pathak, of Counterpoint Research.
This is “less about Future and more about the clash of the titans,” as well as “protecting your turf,” he added.
To compete with Amazon and Flipkart, Ambani’s JioMart has been growing its presence in India. It expanded to hundreds of cities across India earlier this year and plans to branch into electronics, fashion, pharmaceutical and healthcare soon. The company will also likely tap into Reliance Retail’s network of physical stores across the country to fulfill online orders, according to analysts.
The industry had expected Amazon and Reliance to forge some kind of deal in the future, because they need each other’s expertise, according to Meena, of Forrester. Amazon needs more shops to expand inventory and use retail spaces as storage and delivery hubs. And Reliance doesn’t have a lot of experience in e-commerce, according to Meena.
But any kind of partnership between Amazon and Reliance in the future “depends upon how much bad blood is between them now,” said Meena.
“It might end up becoming an ego battle between the CEOs of both the companies,” he said.
Ivory Coast elections: Voters go to the polls amid opposition boycott
Polls are set to open in Ivory Coast’s controversial presidential election.
At least 14 people have been killed since riots broke out in August after President Alassane Ouattara said he would run again following the sudden death of his preferred successor.
The main opposition candidates, Pascal Affi N’Guessan and Henri Konan Bédié, say it is illegal for Mr Ouattara to stand for a third term.
They are boycotting the vote and have called for civil disobedience.
What is it so controversial?
According to the constitution, Ivory Coast has a two-term presidential limit. Mr Ouattara – who has been elected twice – initially said he would stand down.
But, in July, the ruling party’s previous presidential nominee, Prime Minister Amadou Gon Coulibaly, died of a heart attack.
Mr Ouattara subsequently announced that he would run for president after all.
His supporters argued that a constitutional change in 2016 reset the clock and that his first term did not count.
His opponents do not share that view, arguing instead that it is illegal for Mr Ouattara to run for a third term.
What’s the background to the tension?
There has been a decades-long quarrel between some of the country’s leading political figures.
In 2010, Laurent Gbagbo, who was president at the time, refused to concede to Mr Ouattara following the election in that year and this sparked a bitter civil war.
More than 3,000 people were killed in the five months of violence.
Mr Gbagbo also put himself forward to stand in this year’s election but the electoral commission blocked him because he had been convicted in the Ivorian courts.
He was one of nearly 40 potential candidates who were turned down by the commission.
Who are the four presidential candidates?
- Alassane Ouattara, 78, an economist. Became president in 2011, serving his second term after years in opposition.
Party: Rally of Houphouëtists for Democracy and Peace (RHDP)
- Henri Konan Bédié, 86, career politician. Served as president between 1993 and 1999, deposed in coup. Party: Democratic Party of Ivory Coast (PCDI)
- Pascal Affi N’Guessan, 67, career politician. Served as prime minister between 2000 and 2003 under then-President Laurent Gbagbo. Party: Ivorian Popular Front (FPI) faction
- Kouadio Konan Bertin, 51, career politician, known as KKB, was once youth leader in the former ruling Democratic Party of Ivory Coast, is now an MP. Independent candidate
Bugatti unveils a super light hypercar that can top 300 mph
The Bugatti Bolide — a name that comes from French slang for “very fast car,” according to Bugatti — is a concept car designed solely for track driving, not for use on public roads. The Bolide has a modified version of the huge 8.0-liter 16-cylinder engine found in Bugatti’s Chiron, the brand’s core model. It’s built to be super light and can reach a top speed of well over 300 mph, according to Bugatti.
Bugatti hasn’t said whether it will sell the Bolide, but performance brands like Ferrari and Lamborghini offer track-only cars for wealthy customers who want to experience driving in their own private racecars. Cars like this don’t have a lot of the crash safety equipment required in road cars, like airbags, but they do have the specialized safety gear required on many race tracks, such as fittings for racing harnesses.
Designed for optimal aerodynamics, the Bolide is a little over three feet tall, which is about a foot shorter than the Chiron. To get in, occupants must sit on the door sill and put their legs inside before sliding over into the seat.
In designing the Bolide, emphasis was placed on reducing weight and improving aerodynamics. The air scoop that rises from the roof is covered in a special skin that forms blister-like bubbles at high speeds. The bubbles improve air flow over the scoop by 10% while also reducing aerodynamic lift by 17%, according to Bugatti.
All the screws and fasteners in the car are made from titanium, according to Bugatti, and much of the rest of the car is made from lightweight carbon fiber and titanium alloys. The Bolide weighs just over 2,700 pounds, compared to 4,400 pounds for the Chiron. A lot of weight was also saved in the Bolide by giving no consideration to luxury and very little to comfort. The interior is extremely sparse and simple with thin, light racing seats instead of the nicely upholstered seats used in the Chiron.
“All of Bugatti’s expertise has been condensed into the Bugatti Bolide,” said Stefan Ellrott, head of development for Bugatti.
Engineering the Bolide was an opportunity to try new techniques with the aim of reducing weight and increasing performance, he said. For instance, the turbochargers attached to the engine were specially designed to enable more power at high speeds. Bugatti’s already high-performance lubricating systems were redesigned to deal with extraordinarily high cornering forces that can cause oil to move away from where it’s needed.
Should Bugatti ever decide to sell the Bolide, the price tag would certainly be in the multiple millions of dollars, based on the price of Bugatti’s other cars and the cost of similar types of cars from other automakers.
A more practical Bugatti?
Interestingly, engineers and designers at Bugatti had been working on something radically different for the brand: a lower priced and more practical model. But that work has been put on pause due to the pandemic.
“We were looking at a four-seater with a completely different design — not an SUV, not a sedan, something really, really unique in terms of design and creating a new segment,” Cedric Davy, chief operating officer of Bugatti of the Americas, said in a recent interview. “It’s not dead, but for now, nobody is working on it.”
Adding a more practical model to the lineup is something other supercar companies have embarked on as they seek to appeal to more customers and boost profits.
The reason for the temporary halt to development of the four-door model isn’t any sort of financial constraint, a Bugatti spokesperson insisted, but simple uncertainty caused by the pandemic. Developing a new model involves working with and vetting suppliers, creating prototypes and gauging what the market might be after the pandemic is over, all of which is hard to do at this time.
At any rate, Davy said he’s not terribly concerned.
“I’ve been with Bugatti four years and it’s probably the fourth or fifth time that I’ve heard that the company is being sold, so I’m not too worried,” Davy said.
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