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Britain's Fox says UK-EU trade deal 'easiest in human history', sterling falls

LONDON/GENEVA (Reuters) - British trade minister Liam Fox said on Thursday a bespoke trade deal between Britain and the European Union should be “one of the easiest in human history” to reach - although his country could manage without one if necessary.

Liam Fox, Secretary of State for International Trade, leaves 10 Downing Street after a cabinet meeting, in central London, Britain June 13, 2017. REUTERS/Stefan Wermuth

Sterling slipped back below $1.30 on concern about the Brexit talks coming to an end with no deal in place, something many economists have warned could cripple business activity.

Fox, a eurosceptic who campaigned for Britain to leave the European Union, said a trade deal should be simple because the two sides already have similar regulatory rules and no tariffs.

“The only reason that we wouldn’t come to a free and open agreement is because politics gets in the way of economics,” he told the BBC in a radio interview.

But he added that Britain could “survive” without a deal, in comments that contrast sharply with the view of finance minister Philip Hammond, who has said that no deal with the EU - the largest trading bloc in the world - would be a “very, very bad outcome.”

British and EU negotiators ended their first full round of Brexit talks on Thursday having found some common ground, but big differences remain over citizens’ rights and there is uncertainty over the financial settlement and the Irish border.

Fox used a speech in Geneva to call for new global trade liberalisation, portraying Britain as a beacon of free trade and urging the World Trade Organization’s membership to bring their rules on services and e-commerce up to date.

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However, diplomats were sceptical that Britain’s voice would be enough to unblock negotiations at the WTO, where the slightest reform requires the consent of all 164 members, and even efforts by smaller groups to reform trade in services or environmental goods have seen little success.

“He has 99 problems in digital trade on day one,” one WTO diplomat said in response to Fox’s optimism.

Lee Hopley, chief economist of the British manufacturers organisation EEF, said the government must ensure continued tariff free access to Britain’s biggest and nearest market.

But Fox told the BBC that Britain could not remain in the EU’s customs union or the single market, since they were “EU legal entities”.

He told the Geneva audience that 2018 would be Britain’s last full year in the EU, and it needed to get a lot of legal work done, such as bringing EU free trade agreements, including those deals currently under negotiation, into British law.

It also needs to disentangle its WTO membership terms from those of the EU before Britain leaves the EU in 2019.

Diplomats fear that entails a tricky sharing out of agricultural quotas, but Fox said Britain would use a “sensible” method of using three years’ trade as a baseline, which would ensure there were no disputes.

He told his Geneva audience that it was “impossible to say” how the British economy would develop in the next decade, but that it was experiencing an explosion of technology and that fintech might soon reshape the financial services sector.

As it withdraws from the EU, Britain will get closer to Commonwealth countries, and should replicate the “trade audit” it is doing with India, and which will be published by the end of September, Fox said.

Britain is also looking at getting quick improvements in bilateral trade with the United States while it studies the ground for a future trade agreement, he said, adding that Britain was keen to steer its ally away from protectionism.

“It’s very important that we keep the United States oriented towards an open free trading approach because it is the world’s biggest economy and what happens there will affect everybody else,” he said.

Reporting by Andrew MacAskill in LONDON and Tom Miles in GENEVA; Editing by Hugh Lawson