Aurelia Butler

Stay informed with free updatesSimply sign up to the More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Europe’s drive to simplify and streamline financial regulation is making top supervisors nervous about the risk of key safeguards being watered down. Two of the EU’s most senior financial supervisors told the Financial Times they were determined to avoid crisis prevention measures being swept away in the push to revive the region’s sluggish economic growth.“If it is about deregulating and lowering the bar on financial protections, we will not be ready to tackle volatility.’’ said Dominique Laboureix, head of the Single Resolution Board — which handles failing Eurozone banks. ‘‘That means crises, which means less growth.” The pointed intervention, which is uncommon for the watchdogs, comes after the European Commission recently announced plans to drastically cut the scope of business sustainability disclosure rules it introduced two years ago. It is also reviewing capital rules for banks and insurers as part of plans to boost financial market activity and growth.Some officials want Brussels to go further. The heads of the German, French, Spanish and Italian central banks wrote to the commission recently calling on it to remove “unduly complex” areas of financial rules that distort international competition without improving financial stability.Laboureix said he was “absolutely ready” to engage with calls for the burden of regulation to be eased. But he warned policymakers not to forget the lessons of the last big banking sector meltdown. “Don’t forget the 2008 crisis. What did that mean? Bailouts everywhere.”“I am ready to discuss simplification, but I am not ready to lower the bar in terms of protecting financial stability,” Laboureix said in an interview.Frank Elderson, vice-chair of the ECB supervisory board, pointed out that after the 2008 financial crisis Eurozone governments spent €1.5tn in capital support and €3.7tn in liquidity support for the financial system. Europe’s economy shrank 4.3 per cent in 2009 as the crisis took its toll.“It’s good to remember why we did that in the first place,” Elderson said in an interview, adding: “We need not be complacent and say the next decade will be rosy — so we have to be wary about doing away with supervisory functions that could lead to this situation repeating itself.”Elderson told a banking conference in London last week: “The debate on competitiveness should not be used as a pretext for watering down regulation.” Instead of lowering regulatory requirements he said the EU should focus on harmonising them across its 27 members. “Don’t cut rules, harmonise them,” he said.The ECB executive told the FT he supported “simplification in a nuanced way” of sustainability disclosure rules, but he warned if this went too far it could deprive banks of the information they need from companies to assess their own exposure to climate change risks.“Was all this perfect? Probably not,” he said. “Can we do better without paying too much of a price? Possibly.” But he added: “If it were to lead to banks not having the data they need to assess these risks, that would be a problem for banks and would make our work as a supervisor more difficult.”The ECB has been pushing Eurozone banks to address risks from floods, droughts, wildfires and the transition away from fossil fuels, threatening to fine those that drag their feet.The central bank has the power to impose “periodic penalty payments” on lenders worth up to 5 per cent of their average daily turnover every day for up to six months.Elderson said there were “a few banks” for which such penalties were still “a concrete possibility” after they missed the first of a series of deadlines to take steps to tackle climate risks in their balance sheets. “There are a small number” of other banks that have been told they could also face penalties for missing the ECB’s second deadline on climate action set for the end of 2023, he said. A final deadline expired so recently it is “too early to say” if any banks could be fined over this. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Japan has not yet beaten deflation despite years of persistently rising consumer prices and the largest round of annual wage increases in three decades, the country’s finance minister has warned.Katsunobu Kato’s blunt assessment in an interview with the Financial Times comes 15 months into the Bank of Japan’s efforts to “normalise” the economy and gradually reintroduce positive interest rates, after a quarter-century-long battle to steer the country away from falling prices.Kato acknowledged that Japan was experiencing rising prices and that other trends appeared positive, but said the government could only declare victory over deflation when it saw no prospect of sliding back.“I believe we need to judge carefully whether Japan has broken away from deflation by not only looking at the consumer prices, but looking at underlying prices and background in a comprehensive fashion . . . it is our judgment at present that Japan has not overcome deflation,” Kato said.The minister’s comments echo some economists’ fears that, while prices are rising, they largely represent the “wrong” type of inflation: driven by a weak yen and high commodity costs rather than a virtuous cycle of rising wages and consumer demand.Headline inflation has remained above the BoJ’s target of 2 per cent for 35 straight months, and consumer prices excluding fresh food rose 3 per cent in February from a year earlier. Some content could not load. Check your internet connection or browser settings.Last Friday, the Japanese Trade Union Confederation, which claims a membership of 7mn workers, said negotiations had resulted in average wage gains of 5.46 per cent, which it said was the highest pay bump in 33 years.But wage growth is stagnant in real terms, consumer confidence has remained soft and, according to the research group Teikoku Databank, companies in February were passing a smaller proportion of their increased costs on to consumers than they were last July.During the deflationary period, said Kato, there was no movement in prices, wages or interest rates — a combination that suppressed economic growth and prevented the country from realising its potential.“It was a very sluggish situation,” Kato said. “However, things are now changing. We are now seeing prices rising, wages rising and in terms of monetary policies, the BoJ is now looking into what the optimal monetary policy stance will be for Japan. So we are now seeing signs of change and normalisation.”Kato spoke to the FT shortly after the BoJ opted to leave the short term policy rate on hold last week because of the huge uncertainties created by US President Donald Trump’s tariff threats and the rising risks to the global economic picture.The BoJ’s normalisation process involved ending negative rates in early 2024, followed by a small rise in July that year. In January 2025, the BoJ lifted rates to 0.5 per cent — the highest level in 17 years. Many economists predict at least one more rise this year.The process of transition into a normal economy, said Kato, depended on ensuring that wage increases outpaced price increases over the long term.He said it was encouraging that larger companies were raising wages, but the real challenge was to ensure that Japan’s small and medium-sized companies were able to pass rising labour and input costs on to customers.Stefan Angrick, Japan economist at Moody’s Analytics, said that while the level of consumer price inflation seemed to rule out a return to deflation, Kato’s comments reflected the fact that Japan did not yet have the kind of inflation it wanted.“And it’s hard to feel very confident that it will,” said Angrick.The supply shock would eventually fade, he added, and then only stronger domestic demand could keep inflation on target. “But domestic demand is quite weak. Consumer spending has been flat for the past three years. Capex spending is treading water. Labour markets aren’t quite as tight as they seem,” said Angrick, who expects inflation to drop below 2 per cent by 2026. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Malaysia is planning to tighten regulations on semiconductors as it comes under US pressure to stem the illicit flow to China of chips crucial to the development of artificial intelligence.The country’s trade minister said Washington was demanding Malaysia closely track the movement of high-end Nvidia chips that enter the country over suspicions that many are ending up in China, in violation of US export rules.He added that he had formed a task force with digital minister Gobind Singh Deo to tighten regulations around Malaysia’s burgeoning data centres industry, which relies on chips from industry leader Nvidia.“[The US is] asking us to make sure that we monitor every shipment that comes to Malaysia when it involves Nvidia chips,” Zafrul Aziz told the Financial Times.“They want us to make sure that servers end up in the data centres that they’re supposed to and not suddenly move to another ship.”The US has imposed export controls on advanced semiconductors and related equipment in an effort to obstruct China’s development of next-generation technologies, including AI, which may have military applications. Anxiety in the region over the illicit chip trade has escalated in recent weeks, after Singapore charged three men in a $390mn fraud case related to the suspected sale of Nvidia chips via Malaysia to China.In the final days of Joe Biden’s presidency, the US introduced export controls that created a three-tier licensing system for AI chips used in data centres, such as Nvidia’s powerful graphics processing units. The system was aimed at hindering Chinese companies’ efforts to circumvent US restrictions by accessing the chips via third countries.Nvidia’s Singapore office accounts for nearly a quarter of its global sales, raising suspicions in Washington that some of the chips are leaking into China. The company has said almost all of these sales constitute invoicing of international companies through Singapore and very few chips pass through the city-state.Three weeks ago, Singaporean police arrested nine people — three of whom were charged — following raids on 22 locations over suspicion of fraudulent sales of servers containing Nvidia chips.Prosecutors said the fraudulent sales included Dell and Supermicro servers. Singapore has requested assistance from the US and Malaysia in investigating the movements of the servers.Zafrul said US authorities believed the Nvidia chips ended up in China after passing through Malaysia. But he said the investigation had turned up no evidence that the chips arrived at the Malaysian data centre to which they were purportedly sold.Malaysia has become one of the fastest-growing markets for data centre development, much of it concentrated in the southern state of Johor.The state has drawn in more than $25bn of investment from the likes of Nvidia, Microsoft and TikTok owner ByteDance in the past 18 months to build data centres, and recently agreed to form a special economic zone with Singapore.Zafrul emphasised the difficulty of tracking semiconductors through global supply chains, which involve chipmakers, suppliers and buyers as well as companies involved in manufacturing and distributing servers. “The US is also putting a lot of pressure on their own companies to be responsible for making sure they arrive at their rightful destination,” he said. “Everybody’s been asked to play a role throughout the supply chain.”He added: “Enforcement might sound easy, but it’s not.”Additional reporting by Mure Dickie in LondonVideo: Nvidia’s rise in the age of AI | FT Film More

This article is an on-site version of our The Week Ahead newsletter. Subscribers can sign up here to get the newsletter delivered every Sunday. Explore all of our newsletters hereHello and welcome to the working week. Or in the case of Britain at the moment, weak and not really working.The headline event over the next seven days for my colleagues on the UK news and economics desks — as well as much of the London newsroom — will be the Spring Statement to the Westminster parliament by chancellor Rachel Reeves. The first thing to watch for is the revision to forecasts for growth, or rather the lack of growth, by the Office for Budget Responsibility. They will be down because the GDP estimates have been worse than expected by the OBR when it published its forecasts for the Budget last year. The OBR has to downgrade this year’s growth figure from 2 per cent to 1.3 per cent even if it keeps its view of the rest of 2025 unchanged. My colleague Chris Giles believes it’s more likely that the OBR halves the figure to about 1 per cent. The main change in the forecast will be higher than expected interest rates, increasing the cost of government debt service by about £10bn a year, or 0.3 per cent of GDP. That is sufficient to wipe out the headroom Reeves had in October against her main fiscal rule to balance day-to-day public spending with taxation by 2029-30. The net result of all this, given the chancellor’s commitment to stability as well as growth, is that Reeves will balance the books with the cuts to welfare announced last week along with slightly lower departmental spending over the rest of the parliament than previously planned. Don’t expect any tax changes — those will have to wait for this autumn’s Budget speech. The Treasury’s ambition this week is to be boring. Reeves’ speech is due to kick off at 12:30pm local time on Wednesday.I need to highlight the less easy to diarise — but arguably most important — event of the next seven days, namely the talks between the US and Russia about the war in Ukraine, hosted by Saudi Arabia. Financial Times subscribers can hear analysis from FT experts on developments on the battlefield, in European capitals and US foreign policy under US President Donald Trump with an exclusive webinar this Thursday between 1pm and 2pm GMT. Register here. In other news, Wednesday is the 25th anniversary of Vladimir Putin being elected president. Just saying.Germany’s new grand coalition will take its place in the 21st Bundestag on Tuesday as the country’s new parliament convenes after last month’s election. It will look a lot different: newly appointed Chancellor Friedrich Merz presides over a coalition of his Christian Democratic Union with the Social Democratic party, but the far-right Alternative for Germany and far-left Die Linke will together hold more than a third of the seats in the new Bundestag.In Asia, there will be anticipation about further details on China’s plan to stimulate its domestic economy. The Boao Forum for Asia (BFA) begins its four-day annual conference on Tuesday in China, often seen as the region’s answer to the World Economic Forum meetings in Davos.In a relatively thin week for earnings announcements, British retailer Next will be among the standout reports. It is expected to reveal a 10 per cent increase in annual profit, making in excess of £1bn for the first time, when it publishes numbers on Thursday. Attention will focus on the company’s perspective on UK consumer confidence (previously pessimistic) and the impact of the national insurance increase, about to come into force, on hiring decisions.The next seven days brings the regular run of end of month surveys: the comparison of G7 economies through the flash purchasing managers’ index reports, Germany’s Ifo and US Consumer Confidence surveys. However, there are also significant data reports: personal income and durable goods orders from the US, inflation, retail sales and trade data from the UK, French, Spanish and Japanese inflation numbers, German unemployment figures and Australia’s monthly GDP estimate. More details on these and other items below. One more thing . . . Europe’s clocks spring forward on Sunday. Do you have better things to do with your time? Email me at [email protected], or, if you are reading this from your inbox, hit reply.And finally a belated thank you to all those who suggested ideas for a coming of age birthday treat for my youngest child. Keeping it simple was the best advice, so we took him to see super stylish spy flick Black Bag, which (unbeknown to me) includes a cameo by the FT’s London headquarters as the entrance to the secret service organisation’s base. I throughly recommend going to see the film — in line with the FT’s review — but please refrain from shouting out: “That’s Bracken House!” This location insight will not endear you either to your fellow film-goers or your teenage son.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayBank of England governor Andrew Bailey is guest speaker for the University of Leicester Chancellor’s Distinguished Lecture, talking on growth in the UK economyHargreaves Lansdown’s acquisition by a consortium comprising CVC Advisers, Nordic Capital XI Delta, SCSP and Platinum Ivy is expected to become effectiveEurozone, France, Germany, India, Japan, UK, US: S&P Global/HCOB/HSBC flash services and manufacturing purchasing managers’ index (PMI) dataResults: Science Group FY, Social Housing Reit FYTuesdayHSBC Global Investment Summit, hosted by the bank’s chair Mark Tucker, in Hong Kong. Speakers at the two-day event include Hong Kong financial secretary Paul Chan Mo-po and Hong Kong chief executive John LeeShell publishes its annual report, including details of chief executive Wael Sawan’s pay packageGermany: ifo Business Climate IndexJapan: minutes of the last monetary policy meetingSpain: February producer price index (PPI) inflation rate dataUS: Conference Board’s March consumer confidence indexResults: AG Barr FY, Ashtead Technology FY, Bellway HY, Fevertree Drinks FY, Heidelberg Materials FY, Henry Boot FY, IP Group FY, Kingfisher FY, McCormick & Company Q1, Regional Reit FY, Smiths Group HY, Tullow Oil FYWednesdayAustralia: February consumer price index (CPI) inflation rate dataFrance: INSEE consumer confidence surveyJapan: February services PPI inflation rate dataUK: February CPI and PPI inflation rate data. Also, UK House Price IndexResults: Cintas Q3, Commerzbank FY, Dollar Tree Q4, Evoke FY, Exor FY, PayChex Q3, Porsche FY, Vistry Group FYThursdayEU: European Central Bank General Council meetingUK: Bank of England February capital issuance figuresUS: revised Q4 GDP estimate and weekly export sales figuresResults: M&C Saatchi FY, H&M Q1, James Halstead HY, Lululemon Athletica Q4, Next FY FridayBoohoo shareholders vote on name change to Debenhams GroupCanada: January GDP estimateFrance: February PPI and March CPI inflation rate dataGermany: February labour market statistics. Plus, March GfK consumer climate surveyUK: revised Q4 GDP estimate, plus February retail sales figures for Great Britain US: February state employment figures. Also, February personal income dataWorld eventsFinally, here is a rundown of other events and milestones this week. MondayCanada: parliament resumes business, for the first time under new prime minister Mark CarneySouth-east Asia: the Asian Development Bank publishes its Asian Economic Integration reportJapan: Brazilian President Luiz Inácio Lula da Silva arrives in Tokyo for a state visit, including meetings with the Emperor and Prime Minister Shigeru IshibaTuesdayAustralia: Budget Night, when treasurer Jim Chalmers presents the annual federal fiscal statement to the parliament in Canberra at 7:30pm local time. The Labor government, preparing for an election, faces pressure to boost cost of living spending while not adding anything that might fuel inflation, a tightrope walkChina: Boao Forum for Asia beginsGermany: 21st Bundestag, the federal parliament of Germany, meets for its inaugural session after the February 23 electionsGreece: Independence DayUK: Financial Conduct Authority chair Ashley Alder and chief executive Nikhil Rathi appear before the Treasury select committee to answer questions on the regulator’s workWednesdayBangladesh: Independence DayGermany: the country’s constitutional court decides whether taxpayers must continue to shoulder a so-called solidarity tax surcharge introduced after the German reunification three decades ago to support poorer eastern states. If the court sides with plaintiffs, federal tax revenues annually worth about €12bn could be in jeopardy, potentially putting further strains on state coffersRussia: 25th anniversary of Vladimir Putin being elected presidentUK: Chancellor Rachel Reeves presents her Spring Statement to parliament, while the Office for Budget Responsibility publishes its spring economic and fiscal forecastThursdayMyanmar: Armed Forces Day, this year commemorating 80 years since conflict with the Japanese army in the second world war. Myanmar has been in crisis since the army chief Min Aung Hlaing led a coup and arrested members of an elected government led by Nobel laureate Aung San Suu Kyi in February 2021UK: Tom Hayes, a former Citigroup and UBS trader, and the first person in the world to be found guilty by a jury for conspiring to rig the London Interbank Offered Rate, is due to hear the verdict of his appeal against his conviction at the Supreme Court. His appeal will be heard alongside that of former Barclays trader Carlo PalomboFridayUK: Reform UK party stages a mass rally in the Utilita Arena, Birmingham — billed as its “biggest event yet” — to launch its campaign for local elections on May 1, as well as building momentum for the upcoming by-election in RuncornSaturdayJapan: Prime Minister Shigeru Ishiba will join US secretary of defence Pete Hegseth and Gen Nakatani, the Japanese defence minister, on the Pacific island of Iwo Jima for a joint memorial service to commemorate the 1945 battle that involved some of the fiercest fighting of the second world war and the location for the famous US marine flag raising image. Hegseth is likely to use the occasion to lobby Japan to increase its defence spendingSundayEid al-Fitr (End of Ramadan)EU: European daylight savings time beginsUK: British Summer Time begins. Also, Mothering SundayRecommended newsletters for youWhite House Watch — What Trump’s second term means for Washington, business and the world. Sign up hereFT Opinion — Insights and judgments from top commentators. Sign up here More

Stay informed with free updatesSimply sign up to the More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe world looks different from the North Pole. Most maps chart the planet from east to west. But look at the world from the top down, and you suddenly see America’s relative position anew. Russia dominates the region. Greenland suddenly seems important, as does Canada. China, a “near-Arctic” nation, is a bit too close for comfort. The US, by comparison, is small. Alaska, its biggest state by territory, is a fraction of the view.That world view is at the centre of the Trump administration’s new goal to “make shipbuilding great again”, courtesy of an upcoming executive order (which may drop as early as this week). This lays out the most ambitious industrial strategy in the shipbuilding sector since the Americans turned out 2,710 “liberty ships” in the space of four years during the second world war.It will also be a topic at Monday’s Office of the US Trade Representative hearings on proposed remedies to combat China’s ringfencing of the global maritime, logistics and shipbuilding sectors.In the 19th century, the British and Russian empires battled for primacy in central Asia, in a multi-decade struggle that became known as the “Great Game”. The territorial lines drawn across Persia, Afghanistan, Tibet and India in this period defined the geopolitics and economics of the next century.Today, there is a new Great Game being played — not in central Asia, nor even in modern hot zones such as Ukraine, Gaza or the South China Sea, but rather in the frigid waters of the Arctic. Dominance in this region will be crucial to strategic control of the entire western hemisphere, which is a goal of the Trump administration.BlackRock’s agreement to buy ports in the Panama Canal from Hong Kong billionaire Li Ka-shing goes some way towards that goal. This comes at a time when military experts say risk is as high as it has been in decades thanks to increased piracy, Russia’s invasion of Ukraine and the Black Sea, underwater cable snapping in the Baltic, Houthi rebel attacks in the Red Sea and more Chinese military activity in the Pacific.But the Arctic, where the Chinese and Russians conducted naval drills together last year, is one of the few places where new sea routes are actually opening (due to climate change). A key element of the new Great Game will be building US maritime capacity to exploit mineral resources and lanes of commerce, lay new fibre optic communication cables that can be better policed by America, and create more security presence in the region.Icebreakers are top of the list for Donald Trump, who came up with the plan to build polar cutters with the Finns and Canadians at the end of his first term (a deal that was inked by the Biden administration, proving maritime and Arctic security are a rare bipartisan point of agreement). The US hasn’t built one in over a quarter of a century, but a White House source tells me Trump would like to see this done by the end of his second term.The US also wants to control more of its own commercial shipping. America today has 185 ocean-going commercial vessels. China has 5,500. In theory, Beijing could turn off the American economy by choking off access to that shipping fleet and blockading the most important supply chains through the South China Sea. Given that it is from commercial fleets that the US military gets most of its supplies, even in wartime, it could also incapacitate any future American war effort.A key pillar of the Trump strategy will be to bring together the commercial and military sides of shipbuilding. “This new office aims to reform procurement, boost demand and remove barriers to US shipbuilders’ competitiveness — giving them the confidence to invest in the industry’s long-term future,” says Ian Bennitt, special assistant to the president and senior director for maritime and industrial capacity at the National Security Council. This is a big deal. It is very much the industrial strategy that put the Chinese on top in this domain and so many other industries, and it also represents a radical departure from the Reagan approach of decoupling the two areas, as part of a larger decrease in public subsidy of industry.By contrast, many people within the Trump administration — from national security adviser Mike Waltz to secretary of state Marco Rubio, to White House economic adviser Peter Navarro and USTR Jamieson Greer — are pushing ships as the new chips, to paraphrase former Biden security adviser Jake Sullivan, who praised the Trump plan.A leaked draft of the executive order shows the administration is planning to use a variety of carrots and sticks, from port fees on Chinese vessels, to a Maritime Security Trust fund (utilising tax credits, grants and loans for building and workforce training) to trade sanctions to bolster the industry. That will inevitably require working with allies such as South Korea (Hanwha has bought the Philadelphia shipyard), Japan, Finland, Canada and others.  Can Trump stay the course here? He’s already told the Canadians he won’t let them use US icebreakers until they become the 51st state of the union, though sources tell me that the ICE Pact work with Canada and Finland is continuing, unaffected by trade issues. America’s maritime capacity has atrophied to such an extent that alliances will be crucial to rebuilding it. This Great Game can’t be played [email protected]      More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Belatedly but determinedly, Europe is taking up the burden of its own defence. Part of this will be to spend more on weapons. As big a part will be to overcome the parochialism that has left arms procurement across the region uncoordinated and inefficient. That parochialism was made a lot worse by Britain leaving the EU. Goodwill and political footwork are helping to contain the impact of Brexit on the joint European security effort. The British, in particular, are keen to keep a common interest in defence collaboration uncontaminated by differences in other policy areas. The risks of that are low. The dismay registered at the EU’s decision to reserve the bloc’s common funding for its members and closest associates will dissipate if the UK decides to enter a defence and security pact.But pooling some defence spending will not change the UK’s self-exile from European supply chains that its hard Brexit entailed. Trade frictions between the EU and UK are, admittedly, not the greatest obstacle to Europe’s rearmament. But they are not irrelevant.Even within the EU itself, the European Commission identifies what are essentially trade frictions as obstacles to fully efficient defence procurement. Brussels lists insufficient recognition of product certifications, excessive red tape on military mobility, non-harmonised customs procedures and overregulation of intra-EU transfers of defence-related products.These and other frictions are much more severe vis-à-vis the UK, whose chosen form of Brexit puts it demonstratively outside any EU rulemaking or adjudication. The resulting barriers — for trade, people, data and capital — hamper exchange in all economic sectors, defence included. Finding a way to lower those threatening Europe’s common security is a worthwhile cause.What would it mean to create a frictionless market specific to the defence industry? Its goal would be, for activities within the sector, that companies could ignore national location and the associated costs of diverging rules or crossing borders. Frictions must be minimised not just for physical goods but for the delivery of services, flow of capital and movement of specialised workers.A sectoral version, in other words, of the EU’s internal or single market (in its ideal version, not its present incomplete form) and customs union. To avoid triggering the UK government’s neuralgic attitude to those terms, it is best to call it a “common market” for defence. A pan-European defence-industrial common market would face practical and political challenges. Practical ones include how to delineate the sector. This would be more complex than the exclusion of the primary sectors from the European Economic Area agreement, since defence work includes much more than goods only. On the other hand, countries already treat the defence sector as special — with regard to licensing requirements, for example — so there is something to build on.Another issue would be how to remove frictions at the border. Inspiration could be taken from the creative solutions in Northern Ireland. Special transport lanes could be accessible for pre-certified shipments from defence contractors, for example. Passport stamps could authorise non-EU/EEA nationals working in defence to enjoy greater professional mobility rights. As for capital, service and data exchanges, these are regulated behind rather than on the border, so it is largely a matter of adapting laws and putting resources behind policing any abuse.It’s the politics that would be the greater hurdle. There is no way around such a scheme having to run on EU legislation, including European court jurisdiction (again, Northern Ireland offers lessons). That has been anathema for successive British governments — although Labour has opened the door a crack with its product regulation and metrology legislation and its openness to a veterinary agreement.The EU, for its part, would have to abandon the dogma of “the indivisibility of the four freedoms”, according to which frictionless economic exchange with it is an all-or-nothing affair. This was always slightly hypocritical, as shown by the EEA’s exclusion of agriculture and fish. More recently, the EU’s new agreement with Switzerland shows that it can give partial frictionless access to partners willing to align dynamically with the bloc’s relevant rules.So it should be possible to find a meeting of minds. If the greater good of common security cannot justify concessions from both sides, what could? Even British Eurosceptics and continental Britain-bashers should acknowledge the overarching advantage of smooth Europe-wide weaponry supply chains — an advantage exceeded only by the greater trust and unity such a common market could build over time. [email protected] More