A number of signals have chastened the French (and Brussels), other than the election result. They are: Boris’s decision to commit to law that no extension will be requested from the EU at the end of the transition period; the House of Commons’ crisp rejection of the Lord’s amendments to the Withdrawal bill; the Chancellor’s message to British business that their interests will not trump those of the nation; Washington’s clear statement that Britain is first in the queue for a trade deal to be sealed by the end of the year; the decision for Britain to begin trade negotiations with the EU in parallel to the US, Japan, Australia… The tables have turned; negotiations will be with an un-cowed Britain. To misquote Macron’s own 2017 boast: “Britain is back”. Not since Tony Blair’s initial premiership, still admired by the French, who magnanimously disregard the Iraq debacle from the standpoint of French moral victory, have perceptions of Britain seemed so auspicious. We are a country mile from the excoriating and doomsday editorial in Le Monde when Boris won the Conservative Party leadership. The patronising tone has evaporated.
So what will be the French negotiating position given that Paris and Berlin will always be key players in directing negotiations? The Macron mood music points to trade interests being sacrificed to political aims except in a couple of areas crucial to France: banking and fishing, to which we will return.
The main political interest for Macron in the post-Brexit era is in foreign and security policy. There is a naivety in media accounts that trade negotiations take place in a vacuum from broader issues of international politics. While it is true that the two are not directly inter-meshed around the negotiating table, when negotiators refer back and up to their political masters it is a different story. Quid pro quo predates Donald Trump. It is a feature of international politics for as long as it has existed. Michel Barnier’s team will be given a negotiating mandate in February by the EU, but everyone knows that the European Council of Ministers calls the shots and in that theoretically egalitarian forum of 27 member-states it is a platitude that certain states are more equal than others. And behind the scenes the impatient and forceful Macron will press ruthlessly via diplomatic representation, personal contacts and back-room deals for negotiations to cede to Britain so that France achieves her aims. And where Macron will want British political concessions, either via the EU, or outside of it bilaterally between France and the UK, is in foreign and security policy.
Over the last 2 years, realising that nothing is going to come in the short term, or probably longer, from the goal of a European army, the French pushed in vain for the EU to agree that in exchange for French military intervention in the south Sahel to protect Europe’s interest, France should benefit from a rebate in its national budgetary contribution, where like Britain she is a net contributor. This has come to nought. Notwithstanding Macron’s pro-Europeanism, he has no illusions about a European martial spirit or even a near-term meaningful collective foreign policy and he has publicly displayed his impatience with Europe’s painfully slow decision-making. These are long-term aims. In the meantime given general international instability on Europe’s borders and the changing international power centres, Macron’s only realistic international partner in the near to medium-term is Britain. He said so in his magisterial speech on French strategic priorities for the future on 27 August 2019: ‘Whatever the outcome of Brexit, it is indispensable that we continue to think our sovereignty with Great Britain. On the military front, on the strategic front, on all subjects.’ And the reason he gave was the ‘reality’ and ‘determinism’ of ‘history and geography’. That was before the Boris victory. Added to which is the certainty of his being in power for at least 5 years, a more self-confident Britain restored to international player status blessed with foreign policy and military assets that are an attractive proposition for an overstretched and remarkably solitary France stalemated for 7 years in the Sahel with the death toll rising, in a situation redolent of the ‘French Vietnams’ of Indochina and Algeria.
An eventual foreign and defence pact with Britain that would expand the bilateral 1998 Saint Malo and 2010 Lancaster House agreements on foreign and security issues is Macron’s political goal. He will sacrifice much in the negotiations to that end, except in two specific areas.
According to the widely respected and reported global financial centres index of September 2019, compiled by consultancy Z/Yen, New York comes top with London second, but dropping. But most important of all for the French is that on current trends, according to the Financial Times, Paris and China’s financial centres are on track to overtake London by 2021. That, at least, is the take-away message for the French. They are a people who love rankings – the whole of their elite grandes ecoles system since the 19th century is based on where students are ranked numerically on graduation. The prospect of Paris dethroning London is perceived, on the other side of the Channel, as within France’s grasp. It has snaffled the European Banking Authority on repatriation to the Eurozone from London in the wake of the Brexit referendum, denying Frankfurt its natural home. Macron manoeuvred deftly to get Christine Lagarde, French former Centre-Right Finance Minister to replace Mario Draghi as head of the ECB. In a France Info radio interview on 27 January France’s highly ambitious and powerful Finance Minister, Bruno LeMaire, repeated the line that Paris was about to overtake London as Europe’s prime financial centre. He went on to say that in the Brexit negotiations France can benefit “if we are firm”.
It matters not to the French that such a survey is an assessment of financial environment factors rather than hard trading volumes, or that when you read the survey France is ranked 17th, or that a simultaneously published survey by the Bank of International Settlements shows that London has increased its world lead over New York in the massive currency and derivatives market, where it commands nearly half of the world’s market share, with Paris largely insignificant. As the President of Euronext told a 2017 French Senate Commission on financial centres post-Brexit: ‘there is an opportunity to close the parenthesis of the disproportionate place that London has occupied in European finance for thirty years.’ The French finance sector represents between 4-5% of GDP, ten times that of the automobile industry, employs 750,000 and accounts for 5 percent of France’s total taxation. Expect the French to fight a very tough battle on financial issues in the negotiations. Most notably on Euro-denominated interest rate swaps where much to the EU and France’s chagrin London’s total share has increased post-referendum from a massive 75% in 2016 to an overwhelming 86% of all deals in 2018. Macron and Le Maire will badger Lagarde, and Barnier, for Europe—ergo France—to have more direct oversight, if not control, of that business.
But Boris should make no mistake; at stake is not only French pride, but more accurately amour propre, with its substrata of humiliation. Until 1914 France was Europe’s banker, even if London was the world’s banker. Brexit is perceived as the best opportunity in a century to regain that pre-eminence, what a French Senate report called its “age-old ambition”. France failed humiliatingly to attract City banks to Paris after 2016. But that has further underlined how this is their last chance. It is all the more galling for Macron, the ex-Rothschilds star banker, whose bid to attract City bankers was originally cited as one of the reasons for his labour and tax reforms, which are now costing France dearly financially and Macron in popularity.
The stakes are far higher for Macron than mere league tables. If France can reclaim her former title as Europe’s banker the political benefits are myriad. The prestige will facilitate Macron’s bid to reform the EU and his ambition to lead it, facilitated by the eclipsing of Angela Merkel and the German economic boom. Thus the financial dimension of British-EU negotiations doubles as a political interest for Macron.
At a much lower level so does fishing. Though insignificant in terms of GDP and French fishermen few in number, they are highly militant with the capacity to block ports. Of course, so are wine-makers and peasant farmers. But the difference is that on the day the transition period terminates on 31 December 2020 access to UK waters stops brutally. Whereas French wine-makers’ and farmers’ access to British markets will continue, albeit with greater competition from lower import tariffs on non-EU products. That damage will be progressive. Macron does not want to open another social conflict with fishermen to complement gilets jaunes and transport workers in 2021, a year from the French presidential race.
Since Boris’s victory Macron has prioritised his objectives for the Brexit free trade negotiations. Pure trade interests will play second fiddle to political aims, even if French exports to Britain make up 3 per cent of her GDP, involve 30,000 French firms, and represent her largest trade surplus (9 billion €). Macron has an increasingly Gaullist view of the world. He stated clearly that France should not be aligned to any bloc unconditionally. The General thought nothing of sacrificing short term economic interests for long term international goals, as his rejection of a Ford car plant demonstrated in the 1960s. Nor did the General baulk at pushing Britain around when she was weak. Macron is far and away the global political leader with the best understanding of historical and contemporary global geopolitics. Britain is viewed as key to defending European and French interests for as long as it is strong domestically and internationally.
Prof John Keiger is former Director of Research in the Department of Politics and International Studies, University of Cambridge, and a specialist in French foreign policy.