LONDON — The British government is moving ahead with developing a global student exchange program as an alternative to the EU’s Erasmus+ scheme.

That’s raising concerns the U.K. will walk away from the hugely popular European program from January — a decision that British universities warn would be detrimental to their connections to the Continent and could also see thousands of European students miss out on exchanges to Britain.

A spokesperson confirmed the U.K. government is “preparing a wide range of options for future exchange programmes, including a domestic alternative to Erasmus,” as it considers how to promote the country’s education connections after Brexit.

With negotiations between London and Brussels over the Erasmus+ scheme currently blocked, U.K. universities minister Michelle Donelan told an online event on Wednesday that it was “prudent” to prepare an alternative.

A British-led scheme, she said, would also give the U.K. “an opportunity to be more international,” since it would extend beyond universities in Europe. That follows suggestions that remaining a member of the EU program after Brexit doesn’t fit with the government’s Global Britain ambitions.

With the U.K. set to drop out of all EU programs at the end of the year, negotiations for Britain to participate in Erasmus+ beyond December are not going brilliantly.

Although Donelan stressed the U.K. is “still very much open to participate” in Erasmus+ from 2021, her words have not reassured the British university sector, which fears the U.K. is taking strides away from the EU programs.

Vivienne Stern, director of Universities UK International, a lobby group that represents British universities around the world, warned that the government “is increasingly moving” toward a domestic alternative even if officials maintain the idea is still plan B.

“A lot of work has been going on behind the scenes to develop it. This is one of the reasons why I’m so nervous about the Erasmus+ discussions, that there has always been a risk that plan B becomes plan A,” she said.

Stern warned the British option could be far less reaching, at least initially. Universities UK International has estimated that leaving the European exchange program could cost Britain up to £243 million a year because of the economic value of international students, and deprive young people of valuable work experience.

Erasmus+ would also be weakened without the involvement of British universities: Around 32,000 European students go to the U.K. every year on an EU grant.

Deep freeze

With the U.K. set to drop out of all EU programs at the end of the year, negotiations for Britain to participate in Erasmus+ beyond December are not going brilliantly.

Donelan in March said the British government was “open to participation in elements of Erasmus+ on a time-limited basis, provided that the terms are in the U.K.’s interests.”

London wants to participate in the mobility part — by far the biggest element — but not in the so-called cooperation actions, which fund leaders of universities across Europe to come together to discuss areas of common interest, such as diversity.

But there’s little appetite in Brussels for what is viewed as a plea for special treatment.

Thomas Jorgensen, senior policy coordinator at the European University Association, said partial association to Erasmus+ is not a model foreseen in the program’s rules, and said the reasons for the U.K.’s request is “a mystery.”

“You would have to change the European legal structure and invent something just for Britain, and that is something that the EU has been very reluctant to do. What they want is a unicorn,” he said.

The economic crisis caused by the coronavirus could also limit the size of the U.K.’s scheme | Christopher Furlong/Getty Images

Jo Johnson, a former U.K. universities minister and brother of the prime minister, this week outlined the case for a global scheme to replace participation in Erasmus+, arguing: “In its post-Brexit vision for Global Britain, simply continuing as a member of Erasmus is unlikely to appeal to this government.”

The U.K. should enhance its relevance through mobility schemes “not just to its closest 33 neighbours but also to the growing powers and developing nations of the world, from India and China to Nigeria and Brazil,” he wrote in a report for King’s College London. “There is little reason to ignore the experiences and knowledge these countries offer to U.K. students in an exclusive relationship with its closer European neighbours.”

Jorgensen said it came as a surprise for many on the Continent that such a small but successful program had become such a thorny topic, and said there is nothing stopping the U.K. setting up a global program in addition to remaining in the European scheme.

“The door is open, there’s no need to choose between Erasmus+ and a national mobility program. Nobody expects Germany to choose between Erasmus and the DAAD [the German Academic Exchange Service],” he said.

Money problems

Not everything is looking rosy for a domestic scheme. Although there seems to be consensus in the British higher education sector for the scheme to be run by the British Council, which already acts as the national agency for Erasmus+, question marks remain over the budget for a new program.

Unlike Erasmus+, in which students from all over Europe are funded centrally by the European Commission using allocations from the EU budget, the British government would only fund its own students.

That means the U.K. would have to strike bilateral deals with other governments interested in funding their own students to go on an exchange to British universities. That work has not yet started, according to Stern.

Some of the program’s cost could come from the U.K.’s international aid budget, Johnson proposed, but he admitted that will not be sufficient. There is precedent in using aid money to fund research projects linking scholars from Britain and developing nations, but the government might struggle to justify using development money to support Brits abroad.

The economic crisis caused by the coronavirus could also limit the size of the U.K.’s scheme, Stern said, urging the Treasury to reassure universities that it remains “willing to fund something of the ambition and the scale that the Department for Education is considering.”

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Europe is facing the prospect of a new transatlantic trade war with its trade chief muzzled and mired in a potential conflict of interest.

Washington this week walked out of negotiations aimed at striking a global deal over digital taxes, and said it would instead impose tariffs on any country levying such taxes. European leaders, including Bruno Le Maire, the French finance minister, and Paolo Gentiloni, the European economy commissioner, reacted defiantly, saying they would now pursue national or EU-wide digital levies despite the U.S. tariff threat.

But the U.S. move comes at a moment when Brussels is particularly weak in its ability to counter the threat. Its trade chief, Phil Hogan, has just publicly announced his interest in running for the post of chief of the World Trade Organization, a position for which he would require the support of the United States.

Three EU diplomats and several industry officials told POLITICO they were worried about Hogan’s apparent weakness at a moment when the EU needs to show strength.

“It’s an ill-conceived and ill-thought-through plan. The EU needs a strong commissioner on trade and not one that has inflicted self harm on himself and therefore our trade instruments,” said one EU diplomat.

People close to Hogan said he would take a leave of absence from his job as commissioner if he decides to apply for the WTO post.

Brussels muzzled Hogan on Tuesday to prevent him from speaking about his interest in the WTO job. The commissioner should no longer speak publicly if his appearance threatens to “distract” from official EU trade policy, said Commission spokesman Eric Mamer. Any decisions on EU trade policy would now be supervised by Commission Vice President Valdis Dombrovskis, Mamer added.

Despite these concerns, Brussels on Thursday said Hogan is still the EU’s point man for trade talks with the Trump administration.

That stoked worries that a compromised commissioner would not be able to defend the EU’s interests in a trade war.

“If he fails to secure the [WTO] job because of American or Asian resistance, how will he be a credible negotiating partner,” said the same diplomat. “How is he to discuss lobsters or cars with the very people that rejected him and know he’s not in it wholeheartedly?”

Not all trade experts agreed that Hogan’s muzzle was an immediate problem, however. Bernd Lange, chair of the European Parliament’s trade committee, said there was not much of a chance for conflicts to emerge before the U.S. presidential election in November.

“I don’t see at the moment any real conflicts of interest, because there is not much to negotiate before the elections,” Lange told POLITICO.

Asked whether Hogan would be able to defend the EU in a trade war, Lange said it was clear the EU would not cave in, but said he did not expect Washington to impose new tariffs in the coming months. “I doubt that Washington will do this before the elections; and after the elections, we’ll have to see,” he said.

That means Hogan’s muzzle is not an immediate problem. “It is not really necessary — or even helpful — to do sabre rattling from our side as well,” Lange said.

Indeed, it was not clear whether Washington would quickly follow through on its threats.

But there is a risk. Washington is in the midst of a public comment period for investigations into other countries’ digital tax plans that ends on July 15. After that, its usual procedure would be to make a determination whether the taxes are unfair and discriminatory, announce proposed retaliation lists and then hold another public comment period before actually imposing any tariffs.

U.S. Trade Representative Robert Lighthizer on Wednesday told Congress that the Trump administration had written to four EU countries informing them that Washington is pulling out of the digital tax talks and would instead impose tariffs on any country pursuing such a tax.

Washington “made the decision that rather than have [other countries pursuing digital services taxes] on their own, we’d just say we’re no longer involved in the negotiations,” Lighthizer said.

France reacted strongly. Le Maire on Thursday called Washington’s withdrawal a “provocation” and said his government will apply its own digital levy regardless of threats of retaliation. “There will indeed be, as I have always promised, a digital tax in 2020 in France,” he said.

Robert Lighthizer on Wednesday told Congress that the Trump administration had written to four EU countries | Pool photo by Anna Moneymaker/Getty Images

In 2019, Washington had already threatened to slap tariffs on $2.4 billion of French luxury goods but agreed to postpone such actions until an agreement could be reached within the OECD global talks. Since Washington has ended those talks, the trade war is now back on the cards.

“What they’re doing is fundamentally unfair to American companies,” Lighthizer told U.S. lawmakers on Wednesday. “They’re picking on them because they’re the best and they’re American companies.”

EU diplomats, as well as liberal MEPs and industry officials, said they feared that a formal run by Hogan for the WTO post would damage the EU’s trade interests in the longer term. If he failed, he would look weakened, they said. But liberal EU countries are just as worried, if not more, that Hogan might succeed in Geneva.

If he secured the WTO job, Brussels would need to find a new trade commissioner. Some diplomats and industry lobbyists said they were worried this would set off a reshuffle within the Commission in which the trade portfolio could end up falling into the hands of a more protectionist candidate.

“His candidacy is leading to a lot of frustration with EU capitals precisely for this reason: It can harm EU trade policy in the future, just while we’re facing such big challenges,” said one MEP from a Benelux country.

Hogan’s office referred all questions on his current status to the Commission’s spokespersons service, which said it had nothing to add to Mamer’s comments.

People close to Hogan said he would take a leave of absence from his job as commissioner if he decides to apply for the WTO post, as former Commissioner Kristalina Georgieva did during her failed bid to become U.N. secretary-general in 2016.

In other words, regardless of whether Hogan succeeds, if he decides to run he could further weaken the EU’s trade agenda, the diplomats said.

This article is part of POLITICO’s premium policy service Pro Trade. From transatlantic trade wars to the U.K.’s future trading relationship with the EU and rest of the world, Pro Trade gives you the insight you need to plan your next move. Email pro@politico.eu for a complimentary trial.