Saturday, 25 March 2017

Brexit: the end of an error


The EU60 hashtag on Twitter is a potent reminder of why I voted to leave. It is radiating hypocrisy. More than anything the EU is a deranged cult. The Europe the true believers live in is not one I recognise at all. I do not see this malign entity as a guarantor of peace and prosperity. Quite the opposite in fact.

The modus operandi of the EU has always been to capture political institutions in the belief that consent would eventually follow. Only when their agenda is complete do citizens get any kind of say in it. This is why Maastricht and Lisbon were never put to a popular vote. Our rulers knew that we would say no. And we got off lightly.

Against all economic wisdom the EU pressed ahead with its vanity currency and now Greece is a broke and squalid internment camp. The rest of Europe has seen a decade of stagnation with no promise of recovery.

In that we must ask when do the peoples of Europe get a say? When exactly do we see this exercise in consultation? When shall we have democracy? At what point is it turned over to the people? And what price must we pay until then?

For this, the EU has no answers. A new Jerusalem is always just only one more treaty away. Paradise awaits but first you must surrender more power.

From inception the EU has been built on a foundation of lies. Perhaps the biggest is that the EU does not control us. For sure there is no dictator at the centre issuing decrees. What we see instead is a number of roadblocks which prevent governments from acting alone in accordance with the wishes of their peoples. They are many and subtle.

For as long as i can remember there has been running dispute about how much law the EU actually makes. To put a number on it is a rhetorical trap. It did not take all that many laws to give effect to EU institutions and grant supreme authority to the EU. It takes only a few sentences to make our entire statute book subordinate to EU authority.

In so doing, a number of areas of technical administration have been handed over and we have closed down our own systems of domestic administration. Brexit will make this acutely observable as we increasingly find we have to rebuild our capacity for self governance.

The effect of this is that reform of political and policy systems is impossible. Common EU policies, notably fishing, were designed in a hurry chiefly to bring it all under one authority. The view was that they would sort the rest out later.

Decades later we are still waiting for reform while species are routinely driven to the brink of extinction. Commercial and political interests of other Member States stand in the way of meaningful reform, and given the implausibility of achieving significant structural reform, even the UK has given up trying. You can extrapolate and apply this dynamic to any number of policy areas.

The real world consequences of this is a system bogged down in a bureaucratic quagmire where things that need to reform and modernise stay as they are inside contracts predating the internet. It is this that stands in the way of radical economic reform at a time when we most need it.

I have never sought to downplay the risks of leaving the EU. There will be a price to pay simply because change of this magnitude always has its costs - but also because we now lack the political and technical expertise as a consequence of surrendering national competence. We have seen an atrophy inside the civil service which has lost a good deal of its vitality and our influence has suffered because of it.

Meanwhile, we have dismantled our trade and diplomatic infrastructure that will leave the UK in a vulnerable place for many years to come. It is only because we are a former power in our own right that we have any chance of recovery at all. Not so for many EU member states who will be waiting a lot longer for any kind of meaningful political change. It is that which will ultimately nurture populist movements. We can attribute the SNP and Ukip to this dynamic. Eventually the EU will be destroyed by its own inertia.

In that regard, history will judge the EU as the entity which destroyed European prosperity. As to peace in Europe, the other big lie is that the EU is to be credited for it. More than anything it is the memory of two wars that have shaped European psychology along with our unity against the common Soviet foe. It is that which has kept an uneasy peace.

Everything about the EU is a lie. It owes its continued existence to the ignorance of the political class and the casual consent of the politically uninterested who accept the dogma of "unity, peace and prosperity" at face value without applying their critical faculties.

In truth there is no European identity. There is not even unity. The UK is one of the only member states to enter in good faith. The latecomers see it as a safety raft in a storm while the French are only ever true Europeans when it suits their economic agenda.

It is only through British politeness that we do not invoke Article 50 today on this anniversary of the EU. It would be churlish to spoil the party. We should mark this jamboree well though. For all the rhetoric about unity we must take stock. Scottish independence rhetoric was ramped up long before Brexit. We see separatist movements on the rise all over Europe. Beneath that is a burgeoning desire for change and democratic replenishment. Something that is fundamentally muted and restrained by the EU. It is the EU ripping Europe apart, not populism. It's cause and effect.

For all that I am worried about how Brexit will be handled, and for all that I am concerned for the economic penalty we will likely have to endure, I remain certain that leaving the EU is in the best interests of peace and democracy and ultimately the process of a renewal in governance will bring about the elusive economic regeneration we demand. It won't come soon, but late is better than never. For that reason I will be raising a glass to the 52% when Mrs May goes to Brussels. We are finally correcting a monumental error.

Friday, 24 March 2017

Sorry Civitas, it's not ok to walk away


If one were so inclined I could spend some considerable hours dismantling the Civitas report from Michael Burrage. There isn't much point though because when you are dealing with people who believe we can walk away from the EU without agreement you are entering a dialogue of the deaf.

There is much that is factually wrong in the report as already outlined, but then people are entitled to be wrong about technical processes and procedures. God knows I have been on more than one occasion. My tolerance ends though when it crosses the line into wilful distortion. Burrage makes a number of falsely framed assertions with regard to The Leave Alliance's Brexit plan
Flexcit looked to secure a smooth, reasonably quick and economically neutral Brexit, and thought that this might best be done by the UK re-joining EFTA and thereby retaining membership of the EEA and the Single Market. For some unexplained reason, it assumed that the referendum could only be won on the grounds that the UK would remain a member of the Single Market, and therefore decided that the UK should accept free movement, subjection to EU rules and continued UK contributions to the EU budget. Since the referendum was not won on these grounds, and virtually all leaders of the Leave campaign made perfectly clear they wanted and expected the UK to leave the Single Market, its argument has naturally lost momentum. 
Far from being "for some unexplained reason", we made it very clear early on that we could not win the referendum without winning the economic argument and we could not do that without a viable plan. That is the lesson we observed from the Scottish referendum. As it happens, that assumption was wrong - but only by a very slender margin.

Burrage asserts that we said we could only win by making a case for staying in the single market. This is a lie. What we said, with some validity, was that swing voters would not make the leap without some reassurances. That much became obvious fairly early on in the referendum campaign.

We anticipated the usual remainer lie that three million jobs would be lost should we leave the EU. Our argument was that these jobs depended on trade, not political union. It was therefore necessary to show that we could end political union while maintaining favourable trading conditions.

In the end, though we won the referendum, largely by an accident of events, the absence of a plan cost us considerably. I know of a number of people who voted to remain because it would have emboldened the hard right and we would see them pushing us over the cliff. Though we were able to say that there was at least a plan, it was pointed out that it was only a plan, not the plan. Vote Leave failed to reassure voters and consequently we lost votes. I take the view that we could and should have won by a considerably larger margin.

There was, though, a second strategic reason for having a plan. We were thinking in terms of how we could carry over the referendum win into influencing government afterwards. Ultimately the absence of a plan is why the Brexiteers were swept from the board in the immediate aftermath. The Brexiteers, save for David Davies, are all in token jobs and limited in the damage they can do.

The absence of a plan and the insistence on the most economically disruptive exit possible is why leavers will struggle to influence the end game. Once the penny drops that the WTO option is a non starter, the Brexiteers will find their cupboard is bare. As soon as Article 50 is done and dusted, they are history.

One other factor we considered was that lying was not necessary. The egregiously stupid £350m claim was not believed by anyone serious and no opinion former could lend it credibility. Similarly the leaver arguments in regard to regulation were equally slender. We took the view that we would not be taken seriously if we presented the kind of panglossian nonsense classic eurosceptics have a penchant for.

This turned out to be a correct assumption. Vote Leave likes to take credit for winning the referendum but in fact the vote was won on Facebook. The debate online was of far greater depth and breadth than the one presented in the legacy media. For several months, social media was alight with far reaching debate. In that, Vote Leave was next to useless, providing seasoned campaigners with no useful material and in fact, Vote Leave was a liability on more than one occasion.

With no help from any official sources, The Leave Alliance was able to bring the Norway Option into the public sphere which allowed us to make the distinction between economic integration and political union. That was probably our most useful contribution to the debate.

As to the single market, we took the view that how we leave was as important as question of why. It's all very well having a grand vision of a buccaneering free trade global Britain but that says nothing of how you get there.

We took the view that we most definitely will need a comprehensive trade relationship with the EU. Having been a member for four decades our central premise was that leaving is a process, not an event. We would need a sophisticated mechanism to do it because a basic free trade agreement does not even begin to cover the depth and complexity of the issues. In this, you can either spend years stuck in the EU negotiating one from scratch or you can take one off the shelf with a view to getting out as fast as possible without the inherent risk of failure.

Of itself we are not sold on the EEA per se, only that it is the only mechanism available to us that adequately cushions the blow of leaving. And this is really the difference of opinion between us Flexciteers and the Tory right.

The hard Brexit cult believes that there is no need to cushion the blow because there is in fact no blow to cushion. We are only a skip and a jump away from a trade miracle through unilateral liberalisation - and there are no adverse consequences. Consequently it has been impossible to sell them on the merits of even having an interim solution. It has been an uphill battle just to get David Davies to hint at the possibility.

And that is why the Civitas report is pure garbage. As much as the author wilfully misrepresents our position, the study is an evaluation on the merits of the single market as a destination. We only ever viewed it as a temporary solution and then in the post-Brexit stage we could evolve the EEA agreement into something more suitable.

Whether the single market is good or bad is neither here nor there. The fact is that we are in it and it will take some considerable effort to disentangle ourselves from it. Further to this, there are elements we would wish to keep, not least frictionless customs and the enhanced rights we enjoy for our aviation industry. There is nothing in the WTO option that covers these such EU policy areas.

In this the zombie Brexiteers have fixated mainly on tariffs and trade in goods neglecting to consider that the EU is far more than a trade framework. It is an extensive government with a number of systems we depend on having shut down much of our domestic administrative capability. A point entirely lost on the likes of Burrage.

In essence, the Civitas report is an attack piece aimed directly at Flexcit. Were it an honestly framed report it would not take such a sneering tone. Rather than advocating the single market "for some unexplained reason" we went to considerable lengths to explain the thinking - and in response all we have seen from the likes of Civitas is deflection and denial.

That tells us that we are dealing with a belief system and the very existence of this report indicates that they find our arguments threatening. They should. When you look at the two approaches side by side there is nothing at all to be said for the WTO option.

In any case, if reports are correct, Article 50 will soon be upon us. The waiting will be over and the complexities of Brexit will soon become apparent to the Brexit zombies. I do not expect them to acknowledge the issues even then. We will see more of the same insistence that walking away is viable. To everyone else though the penny will start to drop that a free trade agreement doesn't come close and we will need a more sophisticated departure programme. When the realities are known, the merits of Flexcit will present themselves.

Ultimately Flexcit was an exercise in facing up to uncomfortable truths and finding ways to manage them. It was our attempt to take an unvarnished look at Brexit and examine the difficulties as well as the opportunities. That is why it is still the subject of debate. Ultimately the resistance to Flexcit is because it says things that Brexiteers do not want to hear; that Brexit is complex, we won't get it all our own way and regulation is here to stay. This goes against three decades of eurosceptic thinking on which they have built their identities. They won't give up the ghost without a fight.

What we see from Burrage is a number of tortured contortions to present a rose tinted Brexit model pretending that forty years of economic, social and political integration is undone at the stroke of a pen. Anyone with a shred of integrity can see right through it. But then when it comes to Tory Brexiteers integrity is in short supply. It comes as no surprise that such dishonesty carries weight among their creed.

Thursday, 23 March 2017

More sloppy thinking from the hard Brexit zombies


The trade benefits of belonging to the European Union have been "largely imaginary", according to the social policy think-tank Civitas. Its analysis argues that exports from non-EU countries to the single market have grown faster than the UK's, since its creation in 1993. That, apparently, lends weight to the argument that no EU deal is better than a bad deal.

Michael Burrage, the report's author, said that before joining the single market in 1993, the UK's exports to the EU grew at a faster rate than major economies such as the US, Canada, Australia, Switzerland, Norway, South Africa and Brazil.

The flaw in this thinking is that trade growth will always reach a plateau inside any particular framework. In the early nineties when we enacted the single market we removed a dramatic number of barriers to trade which saw an increase in exports to the EU. After that, there are far fewer barriers to remove so you reach a stage of trade normalisation where volumes reach their optimal capacity. Further increments come from innovations in technology or regulatory interventions.

For the rest of the world however, the barriers remained in place and have only been removed on a piecemeal basis. Over the years, the EU has secured a number of bilateral deals that have proportionately increased trade for third countries at a rate faster than our own. They are seeing the same surge we saw when the barriers came down.

Growth rates in isolation tell you absolutely nothing. You have to look at it as a whole to see which products were being shipped under what tariff regimes, what non tariff barriers they encountered and then you have to look at other trends in market demand.

The truth of the matter is that Civitas never entered this exercise with any other intention than to show the single market has illusory benefits. Their report contains a number of rhetorical tricks and dishonest games with numbers.

The best they are able to say, were they approaching it honestly, is that progress on liberalising trade within the EU has stalled. Nobody could or would dispute that. But all the same, inter-EU trade is fairly liberal so far as trade in goods go. That much is unarguable.

As you probably know by now there is far more to trade and the single market than just tariffs and customs systems. As much as anything the system works well because it runs on a series of systems that buyers and sellers have confidence in. It is that which makes for trusted trading environment. Sitting atop of this are a number of agencies working to ensure supply chains are free of corruption and able to detect fraudulent and counterfeit goods. The value of that is seldom ever accounted for. Without it, the losses would be massive.

What Civitas doesn't say is how we would improve matters by disengaging from all of this. Assuming one could could say in all honesty that EU trade has grown as far as it is ever going to, how does erecting barriers with the EU improve the situation? The answer, obviously, is that it doesn't.

I voted to leave the EU because I know that the UK can do more with trade. We are a services economy and we don't have as much manufacturing to protect as France or Germany. By entering bloc deals we end up losing market access for our services because France won't open up their markets to foreign competition. More to the point, large bloc deals of the type the EU favours take several years and very often fail. It's a bad system and things are done differently now.

That, however, does not mean we can afford to casually throw away our trade with the EU. Almost half of our trade is with the EU and on balance I do not think there is much value in closing ourselves off from EU competition. If we are to leave the EU then it should be to use our new position to augment and enhance non-EU trade. Nowhere does it say this must be a binary choice between the EU and the rest of the world. We can have both so long as we maintain a high level of convergence and integration with the EU.

With the USA being as impenetrable as it always has been, the EU has become the main global regulatory superpower and most countries are now bringing their regulatory regimes into line with the EU baseline. There is nothing to be gained by leaving the single market and having a bonfire of regulations. There is no trade miracle to be had.

Any progress will be by way of a number of parallel multilateral negotiations with regard to specific products and sectors. On an incremental basis we then make progress while the EU is still lumbering around looking for silver bullets like the ill fated TTIP. It is not necessary to leave the single market to do that.

Civitas has it that leaving the single market will allow us to relax our rules on trade in services. This is a misnomer. EU rules on trade in services are considered incomplete and are in fact the holy grail to complete the single market. In this though it is using global frameworks which are presently becoming the norm in commercial contracts. The private sector is well ahead of governments in this regard. India has expressed an interest in creating a WTO agreement on trade in services to bring about a global single market. That is exactly what we want to nurture and we should join with the EU and India in pushing for exactly that rather than undermining it with bilateral deals.

It should be noted though that Civitas has no interest in what is actually going on. It is running a propaganda effort for hard right Tories who believe that there is a trade miracle to be had by severing all links with the EU and having that bonfire.

They have been pushing for the WTO option since long before the referendum and have never had any interest in a well managed and careful departure from the EU. They are nihilistic wreckers incapable of reason and have been deaf to any pertinent information. They still maintain that the USA trades with the EU on WTO terms despite the fifty or so agreements in the EU treaties database. With such wilful refusal to engage in honest debate there is no point arguing with them. They are contemptible.

Brexiteers are still missing the point


Writing for City AM, Hjörtur Guðmundsson mounts a blistering attack on the EEA option. "Coming from a country with a long experience of the EEA while outside the EU, I simply cannot recommend that path to Britain, either as a temporary transitional arrangement, as some have suggested, or as a permanent one".

Speaking as an advocate of the EEA option, I'm afraid that Mr Guðmundsson has rather missed the point. And it's point that seemly escapes Civitas as well. Were we starting out from scratch I wouldn't recommend the EEA either. I would object to it for more or less the same reasons I object to the EU. But we are not starting from scratch. We have been a member for four decades.

Mr Guðmundsson has it that:
"The EEA Agreement means the EFTA/EEA countries are subject to most of the EU legislation covering the bloc’s internal market and therefore indirectly the EU integration process in that area. This was recently highlighted by a representative from Norway. Like EU membership, the EEA Agreement demands transfer of national sovereignty to supranational institutions. While the institutions in question are run by EFTA and not the EU, they are expected to mirror the decisions made by the European Court of Justice and the European Commission.

The latest EU demand is that the EFTA/EEA countries must become subject to its newly-formed financial authority. The EFTA/EEA countries have already accepted this after it was agreed that EFTA will ensure compliance within their borders. However, Iceland’s most senior legal experts in this field have concluded that EFTA will in fact only be a middleman to make it appear as if the EFTA/EEA countries are not accepting EU authority".
Now this all depends on who you talk to. Some have it that it is an amicable system of co-determination. Others have it that Efta states pretty much roll over and do as they are told. I think, depending on context, the truth lies somewhere in between. That is why I would not wish to join it were we not already in the single market.

The point I would make is that if we wish to maintain frictionless trade then we will necessarily have to adopt EU regulations, and in fact the Great Repeal Bill promises to do exactly that.

There are several issues to consider here. Firstly we have to integrate EU law on to our own statute book which is not so easily achieved outside of the EEA in that EU rules bring into effect a number of protocols, institutions and regimes for which we have no immediate replacement. Across every policy area we are looking at partial or complete re-writes on the fly. It is not so easily done.

The second point being that simply aligning our laws with the EU is not enough. We need a mechanism to maintain conformity and equivalence. Already there is a major programme of food safety reform along with intellectual property and data protection. If we do not have a system of co-determination then we will simply be a passive recipient of rules. More than likely that without the Efta court we are more likely to have to abide by ECJ rulings.

The only other way to avoid this is for any new comprehensive trade agreement to have some sort of court or arbitration system. We need a system for continued relations with the EU. Whether we like it or not the EU has its own gravitational pull and as our nearest neighbour, and the closest of the three regulatory superpowers in the world, it follows that we will be bound to follow the EUs rules in one form or another. If you try to ride two horses you find that one supply chain comes at the expense of the other.

The misapprehension of Brexiteers is that free of the EU we can throw the rule book away and form our own standards in a vacuum where it has no ramifications for trade. They further assume that we will have no further cooperation with the EU medicines agency or other such agencies. If we want to export chemicals and pharmaceuticals then it is more than likely that we will retain some of the functionality, if not associate membership of them. There is no clean slate.

Having ruled out the EEA we are now in a position where our participation in such programmes will be as the junior partner with considerably less say than EEA members. We will also need a far longer transitional arrangement specifically because we will need to develop domestic administrative capability and re-write nearly all of the rules in order to remove EU bodies. We will linger on as a shadow EU member for some time rather than being out.

More to the point, Brexiteers have a woefully limited understanding of the depth and complexity of the trade agreement we will need. There is no magic wand solution nor is there making the inherently complex simpler. If we were talking about trade in goods then yes things might very well be straightforward but we are also talking about everything from chemicals registration to air traffic and space policy.

Had we opted for the EEA we would be taking most of the risk out of negotiations and the process would be subject to far less uncertainty and risk - and there would be fewer points of failure. What we shouldn't forget also is that a trade deal cannot be done in two years. The EEA solves that. Trade is for the most part already dealt with.

There seems to be a universal failure among Brexiteers to understand that we are not starting from scratch. We must undergo a slow and forensic process. Nothing is going to happen quickly and the more radical the approach the more damage we will do. It is entirely unnecessary.

You will get no argument from me that Britain needs to leave the EU in order to enhance its trade globally but the aim should be to enhance and augment the trade we already have. The EEA at the very least safeguards the majority of our EU trade and that which we do via the agreements the EU has with third countries - another factor which seems to escape Brexiteers.

Nobody that I know of has made the case that the EEA is ideal, rather that it solves a number of headaches regarding the exit process and reduces the risk of a trainwreck Brexit, which should be the number one priority for this government. The Efta system is far from perfect and the single market has many serious flaws. I have no arguments with Brexiteers about that. Whether we like it or not though, the WTO option is a total non-starter and there isn't much to be said for the FTA approach either. It does not give us the free hand in regulation that Brexiteers want - especially when you examine trends in global regulation.

I think though, this renewed effort to attack the single market from sources on the hard right is a good sign. They wouldn't be so vocal were they not worried about something. We heard yesterday from the EU’s chief Brexit negotiator, Michel Barnier, that “A no deal scenario is not what we want” saying that failure to reach a deal would have "serious repercussions for the UK". It seems that there is a least one grown up at the table even if he's on the opposite side of it.

I rather suspect this has the hard Brexit zombies worried. Outside the Brexit bubble nobody thinks a no deal situation (their favoured outcome) is viable. It might well be that the penny has dropped in high places and this is their swansong. We can only hope that it is. We are leaving it a bit late for sense to prevail.

Wednesday, 22 March 2017

A Fysh out of water


Marcus Fysh, MP for Yeovil, yesterday remarks on Conservative Home that:
"It is in the interests of both the UK and the EU to achieve a fully negotiated preferential trade agreement or binding framework for such between them within the UK’s two-year Article 50 withdrawal process, and I urge national governments across the EU to ensure that this happens. Were this not achieved it would be a major missed opportunity and a blow for the credibility of the EU. However, the view that the alternative is “no deal” which would be “deeply damaging” to the UK, as has been mentioned by some in the House of Commons and elsewhere, is in my view not supported by the evidence.
Somehow not having the freedom to export chemicals or pharmaceuticals is not "deeply damaging". Having to divert animal products to ports with inspection facilities is also fine apparently. No problems there. Having no permission to pick up air passengers from Schiphol seemingly doesn't trouble him either. Losing the UK aviation sector is no big deal. Having no agreements on standards and conformity - and having trucks subject to spot checks is seemingly not a big deal either. As for having tariffs on all other goods, well that's all in the game. Trashing all EU supply chains overnight is somehow abated by multilateral activity at the WTO apparently.
The negative view of the “WTO Option” fails to take proper account of the potential for a growth dividend from the UK’s service sectors if we can take a leading role in new rounds of multilateral service liberalisation via the WTO. It must be said that WTO members and the secretariat are excited and enthusiastic about that prospect. This includes liberalisation of trade in services. Renewed impetus in this area could also dramatically improve the prospects for bilateral or pluri-lateral discussions of other preferential trade agreements which the UK may undertake.
I'm not going to argue that there is scope for new rounds of multilateral talks but see, thing is, multilateral talks are, well, multilateral. Long and difficult. To get any kind of agreement you have to break off a policy area where agreements are likely such as a global agreement on tyre standards - which itself was years in the making. To suddenly find ourself cast adrift with no preferential terms for selling in the single market, with no customs cooperation, leaves us starting from ground zero. Mr Fysh does not say what we would do in the meantime.

But it seems that what you or I take to mean "no deal", ie not having a deal, doesn't mean not having a deal to Mr Fysh. He thinks it means something else.
To return to the nub of the issue about future frameworks for trade with the EU, the overarching requirement of the Lisbon Treaty is for the EU to establish or maintain close relationships with neighbouring countries, as under Article 8. Furthermore, under Article 50 the withdrawal process has to take account of the framework for trade that will replace that which exists while the UK is a member.
Not if you walk away with no deal. That's the point. Failure to reach a deal ends the Article 50 process. You then stand as a third country without an agreement of any kind. No agreements on tariffs. No agreements on conformity. No access to market surveillance systems or cooperation programmes. Nothing, nadda, zilch.

Meanwhile we lose all of our existing agreements with other countries via the EU. Any future trade agreement with the EU would be starting over from scratch in an entirely new set of negotiations after everything grinds to a halt. 

The EU is then bound by its own rules to seek close cooperation with its neighbours as per Article 8 - which is why it does have a number of comprehensive agreements on trade with them - but there is no compulsion to enter immediate trade talks and nothing that obliges extensive access. Fysh does understand that this would be a separate process after the fact.
Not to grant the UK successional arrangements on departure from the EU which at least establish mutual recognition, equivalence of assessment and conformity processes at its borders such as to maintain reasonably frictionless trade would arguably be a breach of Article 8, and for the EU to refuse to discuss these matters in parallel with discussion of the terms of withdrawal would arguably be a breach of Article 50.
This is, in a word, drivel. The EU has no obligation to drop any of its standard frontier controls. Frictionless trade doesn't happen by casually waiving inspections. It is a product of long standing systems integration from which we are pulling out. If we have no deal then all of that comes to an end and so does our European trade.

The whole point of negotiating in the article 50 process is to ensure we retain some degree of future interoperability. You either have an agreement on trade or you don't.

In this the EU cannot discriminate, but all that means is that it cannot impose any barriers that it would not impose by default to all third countries. There may be some economic merit in unilateral liberalisation on our part but the EU is not compelled to reciprocate nor can it. The single market is above all a system with rules and systems within systems - and it is far more than a system for the free movement of goods.

It doesn't seem to matter what we write or how much work we do on this subject. We are dealing with people who don't know and don't want to. We are dealing with people who don't know how the system works and have little hope of understanding it. Their frame of reference is so out of kilter with reality that there is now little left to do but watch it unfold with exasperation and dread.

"Demonising WTO framework per se is wrong from an economic point of view that's my point" says Fysh on Twitter. This gives us some clue. Fysh thinks the WTO is some kind of global free trade platform with a series of defaults on which we can operate. This is incorrect. It is a rules based system but it does not grant any special rights or privileges. It provides standard parameters for trade agreements but if you don't have a trade agreement with the EU then you do not have a trade agreement with the EU. I can't see why that is so difficult to grasp.

It would appear that Fysh confuses full and active participation in the WTO with the "WTO option" which is a wholly different ballgame. Everybody in the Brexit field seems to understand this, except for MPs. How we get to a week before triggering Article 50 and still have our law makers not even knowing what the basic constructs are I really don't know, but that is almost as big a political crisis as the one they are about to unleash on us. The system is not working.

Tuesday, 21 March 2017

Yes, Brexit is a mess. So what?


This Tory government has next to no idea what it's doing. Brexiteers seem not to have a clue between them. They're a pretty dismal bunch. But then you do have to wonder how dumb you have to be to expect that leaving things as they are means everything sails along as normal.

It's all very well trotting out the I told you so's as Brexit descends into farce, but let's be fair here. Yes, David Davies is an arrogant quarterwit, yes Boris Johnson is an oafish slob, and yes Theresa May is out of her depth, but then what are the alternatives? Tim Farron? Jeremy Corbyn? Chuka Umunna?

To anyone with even a scintilla of intellect it is self evident that political competence is thin on the ground. The only thing even approaching sagely statesmen are the dinosaurs of previous governments who themselves were not known for competence. Certainly I'm not going to take any lectures on what is good for the country from John Major or Tony Blair.

It is not that Brexit is necessarily damaging either. A well managed departure could be more or less economically neutral. We're just going to suffer from a lack of domestic political adroitness. It is that lack of competence that ultimately makes Brexit necessary.

Our political class seems unable to grasp that there has been a seismic shift in global economics over the last decade. We escaped a global financial meltdown by the skin of our teeth and the cupboards are bare should there be another nasty surprise. Worse still, the old habits are drifting back.

Just this morning I noted Theresa May announcing that the Swansea Bay tidal barrage "is part of our plan to deliver an economy that works for everyone and will mean £1.3bn of investment and 9,000 jobs". They haven't learned anything.

We are not a country that can piss money away on eco-vanity projects any more. We stopped being that country in 2008. The politics of binge and splurge to keep the plebs in make-work jobs is dead in the water. We want the fundamentals addressed. 

As it happens I would bet on the Swansea bay barrage being the last such sticking plaster venture of its type (if it goes ahead at all). Brexit will see to that when there's no money in the kitty. Or at least I hope so. This notion that a Welsh super paddling pool is an investment is continuity Miliband. 

When people voted for Brexit, more than anything they were voting for change. The political class wasn't going to change. It hasn't even changed now. It's not going to change until they are forced to confront certain realities - that being that we are pretty much a hollowed out economy propped up by the City and we are pissing money away not to confront the issues but to mask them. 

Had we not voted to leave, we would have retained the Milibandesque economic model - and the EU would most certainly promote more of it. No doubt a big dollop of "EU funding" would have gone toward this and other such "green" energy projects. It's all in the game. Meanwhile if the UK's economic fundamentals are unsound then that goes double for most of the EU. 

Our European "elites" live in a fantasy world where the 2008 crash never happened, whereby they can keep writing cheques on our behalf, caring not a jot if they will bounce. We just don't have adults at the wheel. 

And this is why I could get more than a little bit cross with "liberal" remainers. They are infants. This so-called progressive dream world they inhabit does not seem to ever intersect with reality. They buy into the EU utopian image entirely uncritically. Greece is turning into a an internment camp for refugees. The Hungarian border is becoming a new iron curtain. The European far right makes our own look like the Women's Institute. By European standards we don't even have a far right.

Over the last couple of years things have never looked bleaker and the world is turning darker somehow. In this the EU stands crippled with indecision, passing the buck to member states in the face of crippling pressures. The EU doesn't even have a clear idea of its own destiny or direction. The stock answer of "more Europe" just means a further retreat into fantasy land.

The fact is that Britain no longer has the luxury of deferring the adult decisions. We need a pragmatic and cost effective energy policy. We very seriously need to rethink how we do healthcare. We need major land and planning reforms and we need a new approach to agriculture. In this virtually everything is bogged down by targets and EU social and environment policy. There was a time when we could afford such indulgences but that time has passed.

The ideals of 90's EU policy were built on a foundation of sand. Now that the tide is coming in, we need the realists back. As to whether that political competence still exists I do not know. We will have to rediscover it somehow. But we do have the next best thing to competence. We have wreckers.

I'm now pretty sure the Tories will make a pigs ear of Brexit. Even if I'm wrong and they do manage to pull off a workable settlement we are still up a certain creek.  But I would surmise that we have been up that creek for a while. We have travelled up the EU cul-de-sac to find we can go no further and we are out of ideas. To fix it, it is going to take something far larger and more profound than what our current political class can provide.

This now goes one of two ways. Either we confront and rid ourselves of the present political class and the system it inhabits or we surrender to it and pay the price. I am optimistic. The Tories are enjoying a firm lead at the moment - but I think it is an illusion that will melt away as soon as the effects of Brexit are known. We will then see their incompetence in the full light of day.

When that happens we will be presented with a pretty bleak choice. The Tories, or whatever else is on offer. There won't be much in it either way. We can expect the next government to be just as bad or worse and see major political strife.

Remainers would have it that Brexit sends us back to the dark days of the 70's and the winter of discontent. It very well might and in fact I rather hope it does - because that was a political reckoning that brought about a running dispute over a number of years - the result of which has defined my entire adult life. It brought about a new settlement for a new era. And that is what we need. This cycle is in terminal decay.

In that regard I have a certain respect even for the most cretinous of Brexiteers who at least recognises that it is time to start the ball rolling. There are those who mistakenly believe that Brexit leads to sunlit uplands and, for sure, that's pretty risible - but then the notion that remaining in the political stasis of EUtopia saves us from our fate is every bit as bankrupt.

When I look at anti-Brexit protesters I see petulant whining millennials and snobby middle class liberals who have never had it so good - and want to remain because they do not want the status quo to be disturbed. There is a word for that. Cowardice.

More than that, it is a a deep-seated insular selfishness that assumes that because economic tides do not affect them directly they can be denied outright - and that we can continue as we have been unabated. These are people who look at the existing political class and don't see very much wrong with it. Frankly, if you're looking at Tim Farron right now and think he's the one with answers, well, it's really you who's the inward looking thicko, isn't it?

No, the UK's problems are not solved by splurging money at the NHS. No, we're not going to revive the economy by borrowing and spending on green energy. HS2 isn't going to revive the north. Nor is another hashtag fad like the "Northern Powerhouse". No. We need hard headed adults back in charge making the decisions our present crop of politicians have been too gutless and too facile to take.

Some of us don't want to be treated like children and some of us would rather face up to reality. Remainers may whine, but politically they have had it all their own way for a generation. That's ok, we could afford them for a while. It's nice to take a break from grown up responsibilities every now and then. But times have changed and it is long past the time that kidult Britain put on the big boy pants.

Saturday, 18 March 2017

Brexit: the end of the great British ponzi scheme


According to Reuters, a poll reports that a third of European companies expect to cut investment spending due to Brexit uncertainties and a tenth of those with operations in the Britain plan to pull out of the country.

"Over half the companies said they did not expect Britain leaving the European Union to change their investment plans, but 24 percent anticipated reducing investment "somewhat", and 8 percent "significantly", the survey, published on Friday, showed."

There's two points I would make here. Firstly we don't know exactly what Brexit looks like. It might well be that for many businesses, the trading environment does not change.

Secondly, I'm not bothered. Right now, the only thing propping up the economies of the regions is massive state spending. Hinkley Point, Trident, HS2 consultancy, the QE carriers, F35 etc.

When we are told that European firms are investing in the UK we have to ask what they mean by investing. What it tends to mean is buying failing shell companies just to make use of their established infrastructure such as a UK headquarters then bidding for OJEU contracts. They won't bring any expertise of their own. They will hire engineers and managers on a zero hours basis and cream off a cut for themselves. They are shell companies that add no value - and many of them are subsidiaries. I've worked for three of them in recent times.

With Hinkley Point, the eye watering strike price is much the same as the Renewable Obligation Certificate scheme. An incentive to make a bad idea attractive to business. Rather than being direct taxation it effectively grants corporates a licence to raid our wallets through our energy bills.

Politicians love it because it notionally creates jobs - but that is a result of government spending, not foreign investment. EDF is not a charity either. They are not putting money into the EU economy for shits and giggles. They have spotted a number of opportunities to fleece us. The Short Term Operating Reserve system is a massive money spinner.

And who does this keep in jobs exactly? Middle class engineering graduates. People who vote Tory/Blair. Effectively, since 1997 the UK national grid has been an elaborate corporate welfare scheme whereby the mug punters are obliged to fund the vanity schemes of politicians peddling their eco credentials.

Brexit will shut a lot of this down. We don't know if the OJEU system will carry on as before. Not sure I would miss it. Meanwhile, since trade takes a hit and tax receipts decline, a lot of the batshit stuff will likely be shelved. The Swansea tidal lagoon and HS2 might very well be put on the back burner indefinitely. We will also see a number of nuclear energy projects put on hold.

What this means is an emergency situation where we are no longer on track to keep the lights on so we will be forced to build CCGT plant. Gosh. Imagine that. Actually buying the kit we need at the price it should be!

As to whether we want "investment" in our defence sector, I can't say I will miss Thales or any of the other thieving French defence parasites.

There is free market investment and then there is the stagnant economic model we have been operating pretty much since 1987. All of it financed with debt, entitling ever more greedy corporates to shave off slices of our income.

Brexit shatters these economic norms. In fact, if the Tories do make a pigs ear of the Brexit process then in all likelihood we won't be able to borrow and spend our way out of this as our credit rating will be shot to pieces. Again, my give-a-fuck-o-meter needle is barely moving.

As it happens, Brexit is going to cause quite a lot of economic realignment and abandonment of long standing policies. And that's the whole point of it. And will be be substantially less well off for it? For the time being, yes. It will be made even worse by the Tories who have no idea what they are doing. But then that's what you get for handing over governance to Brussels for forty years.

I've been noticing quite a lot recently that the UK economy is a ponzy scheme and ever since the 2008 crash we have been operating on cartoon physics. We don't fall until we look down. Brexit bursts that bubble.

As I see it, the fundamentals of the UK economy are not sound. The City is a life support machine and little else is generating any serious revenue. I even see it manifested in the countryside where agriculture is gradually being abandoned. One of the more distressing facets of that is seeing Somerset plastered with solar farms.

We could have maintained the status quo without addressing any of the fundamentals, and we might well have continued to evade the consequences of 2008. It could well have continued making us fatter, lazier and pampered. But there is a price for that.

China is waging an economic war on the West and the Chinese don't give a shit that we're doing less and producing less. It will only take a generation or two to rob the West of its financial hubs and then we are left with nothing. All the while, as we become dumber and less capable we see a gradual bleed of vitality. We will lack the ability to bring about any kind of economic restoration.

Further to this, Brexit has not caused any new divisions in the UK. It has only revealed them. There is a massive economic and social disparity between London and the regions and that cannot continue. It is that more than anything that is breaking the Union. Anything Scotland can say can also be said by Yorkshire - only Yorkshire doesn't have a clan of knuckle scraping nationalist gobshites to make noise in Westminster.

What we need is an economic forest fire to allow light to fall on the green shoots. This economic era is one belonging the previous century and we need to remodel it to cope with the globalised Internet world.

The remainers would rather duck this question. It's expensive, it's time consuming, it's a hassle and yes, it's quite a bit scary. Nobody my age or younger has ever experienced political upheaval of this magnitude. We are presently in a phoney war where nobody quite understands just how profound Brexit is and just what will happen when it hits. There will be economic casualties. Our habits will change and so will attitudes. We're going to be correcting a few mistakes and making a few new ones.

There is no real certainty to be had save for one. Things are changing. And that's good because they need to change. This unreality bubble of bogus prosperity has to be popped. If we don't do it then we will hand this poisoned chalice to the next generation and leave a bigger mess for them to sort out.

So no, I don't care about foreign investment. I don't care to maintain the status quo nor do I wish for my generation to preside over the stagnation and cultural decay caused by political inertia. Just look at Westminster. That's all the proof you need that we cannot go on like this.

Trump is right to shun Merkel


I'm not exactly sure what game Donald Trump is playing. What I can see happening on present trajectory is NATO becoming a redundant shell and little more than a flag of convenience for joint UK/US operations. Keeping Europe on the fringes will likely lead to ramped up efforts toward greater European defence cooperation.

NATO is pretty much a cold war relic and like the EU is part of the post-war peace architecture. The NATO aspect though is the framework for the US military empire. It is key to US defence exports. If the US is rowing back from NATO then it is pretty much ending its military dominion over Europe - with the exception of the UK.

Britain is locked into NATO, or at least US defence cooperation for a time to come. Chinook, Apache, Trident, F35, Poseidon are all service mainstays and fairly recent undertakings that will define UK procurement for the next two decades at least.

What we can expect in the wake of Brexit is a retrenchment of the European defence sector, with several big names drawing down their UK operations - to be replaced with Boeing and Lockheed Martin.

With Britain leaving the EU and ending freedom of movement defence industry cooperation is made less attractive and so we will see more continental defence integration but without the UK. Britain will also take a more junior role in European space projects.

I expect defence cooperation between the UK and France will stay as strong as ever. In logistics, intelligence and electronic warfare we are mutually dependent. RAF Waddington is Europe's eyes and ears. This is what gives us considerable leverage in Brexit talks.

In terms of the much vaunted "European army" we are already seeing acceleration toward that end now that the British question has been resolved. How far it can go is all really dependent on how much EU citizens are willing to tolerate further erosion of their defence sovereignty.

This is actually why Brexit is brilliant. Britain can participate in joint EU military efforts but will always remain detached as a non-member. It keeps doors open to Norway and close Commonwealth naval allies.

As far as trade goes the Commonwealth is dead but in terms of military ties, Canada, New Zealand and Australia remain key allies and Brexit ensures that they will not be frozen out. Through the UK's carriers are largely useless they are prestigious defence assets and will buy us considerable EU cooperation. Politicians and generals like big shiny toys.

In effect we have stopped the creation of a European military superpower and the EU is now the junior partner in a Western alliance. This is why UK defence spending is more crucial now than ever.

If you're a peacenik, you may not see the point of all this but ultimately this is about power and empires. It always has been. The EU has always had ambitions of being a superpower and we've just killed that dream.

The left will have it that it means the UK now is a servile military outpost of the United States, which is not entirely incorrect but at the same time, who cares? It is far better to have a broader, looser Western defence alliance than two allied but competing superpowers. I cannot imagine anything worse than the EU having the tools to be the interventionist power it has always wanted to be. Libya is instructive as to how well that pans out.

Thanks to Brexit, EU defence cooperation will remain a disjointed and unpopular platform struggling for relevance. It survives only as long as the political elites driving the EU - which is not for much longer by the looks of it.

As to NATO, it will probably linger on in a semi-dormant state for as long as Trump is president. Trump though, will eventually be gone. What the world looks like then is really all dependent on his successor.

In a lot of ways our commitment to the US in its ill-conceived adventures has paid dividends in that our operational compatibility with the USA has remained intact and it makes the USA the obvious direction for future defence relations. In a roundabout way, the Iraq war has preserved our defence sovereignty.

As to procurement, Brexit probably rules out any more ideological me-tooism. The EU likes to have all the baubles of empire. The USA has Boeing, so the EU must have Airbus - which has always been a political venture. This has given rise to the ill conceived A380 and A400M. Both epic failures. Brexit means we will likely continue to buy US military hardware off the shelf - which is usually better - and of more value to the UK economy.

I for one could not be more delighted. For all that cretinous bilge from remainers about us Brexiteers "stealing my European identity", I say bollocks. You have no European identity. It is a figment of your imagination. You weren't watching a French cop show on Netflix last night were you? You didn't go and see a Spanish superhero film at the cinema last week. You know more about US politics than you do about the EU. Culturally, militarily and politically we are Anglospheric. That is a fact.

For all that we have seen remainers amphibious with grief, I say go and look at the traffic jams and the behaviour of drivers in Rome or go and watch the Spanish torture a bull to death and tell me that your culture is in any way reflected in Europeans. That's when I tell you to fuck right off.

If I have to pick an empire to be allied with, I choose the USA every single time. The land of The Wire, South Park, Rick and Morty, the First Amendment. The country that never needed any persuading that Communism is the manifestation of evil on earth.

Say what you like about Donald Trump, but Donald Trump is not America. Trump is for four years or so. Moreover, Trump is a good sign. Yes, he's a brash, oafish wrecker but he was elected on the back of a total rejection of American leftism. That which has aggressively moved to bury all moral norms and free speech along with it.

This is why Trump is weakening relations with the EU. Ultimately the diseased politically correct establishment in the USA is the consequence of a detached and corrupt liberal elite. In that respect the USA is in a more advanced state of decay than the EU - but we should view it as a warning. The soft left political consensus of the EU, with its deeply ingrained NGOcracy is that same disease. Brexit is not Trump. Brexit means we avert having one of our own.

In 2003, I was handed a pirate CD with a few low quality rips of early South Park episodes. I laughed until I hurt. And why was that? South Park drove a horse and cart through American liberal political correctness and spoke to a certain truth - that the left has totally lost the plot. To me, South Park marked the beginnings of a conservative reawakening. It was viewed as edgy at the time when really it was just the truth that nobody dare speak.

Well now that truth is being spoken openly - and that's a good thing. Now we are dismantling the empire of the Left. The one installed by Blair and Brown. And that makes Brexit all the more necessary. It is fashioned in their image.

In that regard I can understand the "Brexit at any cost" mentality. Politically our survival depends on it so that we do not follow the USA into its current cultural hole. Without that moral backbone there is no way our politics or indeed our economy can survive in the long run. I would rather the Tories didn't make a total pigs ear of it, but as a whole I would still vote to leave every single time.

In that respect, we are "taking back control". We are snatching Britain back from Euro cultural oblivion. The all pervasive creeping erosion of our institutions has already left us weak and vulnerable. You can see it in how Brexit is being handled - by a crop of criminally incompetent and stupid politicians lacking any guile or wit. This is what happens when national governments atrophy. Sooner or later that starts to manifest in more noticeable ways where we cannot respond to existential threats with any moral certitude. Which is exactly what the self-hating left has always wanted.

To that end, it is no surprise that the fightback has started in the USA. We may not like the messenger, but we are seeing a return to that conservative order - the one that defeated fascism and communism and brought about great leaders like Thatcher and Reagan. For all their many faults, they were staunch defenders of liberty and ensured we had the means and the will to fight our enemies.

Right now the focus is on Russia. The EU is pushing Russia away and half of the eastern bloc with it. I can see Poland eventually leaving the EU. We have made an enemy out of a potential ally in a future conflict. If you pay any attention to trade at all you will see that China has been waging an economic war on the west for more than a decade.

China is undermining Western power overseas and weakening our economic power. There is nothing in the EU Arsenal to counter this not least because there isn't even a recognition of what is happening. Trump may not have the right strategy but he at least sees that there is a threat. If the fightback has started, I am glad that, once again, Britain stands with America.

Monday, 13 March 2017

Scotland again


Twitter is in smugness overload this evening - with remainers gloating that they warned a second Scottish independence referendum was a consequence of Brexit - and we dismissed them as fearmongers. The truth of the matter is that we rather hoped it wouldn't come to that but ultimately we didn't care enough to be blackmailed. Even if Scotland becoming independent was a dead cert I would still have voted to leave the EU.

Adding to the tedium is the rather predictable response that Brexiteers not wanting Scotland to be independent are hypocrites - wanting to preserve the Union while leaving the EU. Except of course the Union is a genuine demos with a common history and culture - forged in blood and war. That's a real union. Not a bureaucrat's managerial construct. The two are not remotely comparable. The nations of the Union are bound in battle and song.

We have to accept though that EU membership has weakened that union. The modus operandi of the EU was to erode national unity, not least by bribing the regions and institutions, alienating them from London, making them more loyal to Brussels. The damage is done now. Exactly why Scotland has fallen for it after the eradication of Scottish fishing, turning the East coast into heroin racked slums beats the hell out of me but that's a topic for another time.

The point though is this. It is not Brexit that has brought about a second referendum. Or at least it isn't Leave voters. Scottish independence had already jumped the shark but its corpse has been exhumed by the media and the remain inclined as a political device to make Brexit a pyrrhic victory. There is nothing they would like to see more. Such is their churlishness. Sturgeon is the ideal noisemaker to give the remain-o-sphere a launchpad for another attempt to delegitimise Brexit.

In that regard I am happy to call their bluff. If Scotland feels that trashing the Union is right for them then fine. Independence as a principle in its own right is a worthy enough reason and technical arguments aside, it's the same reason I voted for Brexit.

What Scotland should know though is that if the economics do not stack up for Brexit - and they really don't, then that goes double for Scotland. There are plenty of English who would be more than happy to cut off the umbilical and there are no Brussels bailouts to be had without a price. The EU is not going to tolerate a leftist tax and spend splurge and it will slap Scotland down in much the same way it did Greece. It will be a most hollow independence.

Between now and then though, Scotland will learn that "taking back control" is not so simple - as per the example set by Brexit. There is no taking back Scottish fishing waters - especially if Scotland intends to rejoin the EU. Moreover the quotas are now private commercial property. There is no secret hoard of North Sea oil either.

On the whole I expect Brexit will leave the UK bruised and humiliated for a time and we are going to lose a substantial amount of trade. It was avoidable but political competence is in short supply. The question Scots must ask is whether, based on the SNP track record, they are any more likely to make good of a split than the Tories have in leaving the EU. Good luck with that.

The short of it is though, Britain is leaving the EU. It was always going to leave. And Scotland's attachment to the EU is only as strong as its usefulness as a stick with which to beat England. That fever will pass. Eventually.

Scotland may piss and whine about it but culturally and economically, independent or not, it is always going to be tied to England. The sheer force of human behaviour will undermine any barriers the EU erects. That's because there is a real and lasting bond that transcends the EU and the SNP. Whatever barriers go up will only last as long as the EU - which isn't for that much longer. So it's time to let Scotland run its own experiment in democracy. We can ride it out.

Ultimately European Union is a falsehood. It is a narcissistic delusion. There is nothing about it that compares with the Union of the United Kingdom and though ossified structures may melt away into history, we will remain as one - because we are one. Scotland will find that divergence is little more than bagpipe dream and that our fates are linked - economically, socially, technically, geographically. It will remain so long after the EU has crumbled to dust. The EU has failure in its DNA.

Brexit is political, not economic.


A recurrent debate I keep having with Sam Lowe of Friends of the Earth is over the issue of Rules Of Origin. Using his own words, in order to take advantage of a preferential tariff rate, a business needs to prove that goods, or at least a significant chunk of its value, originates in the UK. This can be expensive -  sometimes so expensive that, along with other fixed costs (see: paperwork), it wipes out the potential savings of paying a lower tariff.

This is true, however, what is often overlooked is the fact that Nissan and Airbus are multinationals with their own top grade mainframe systems, and in the case of Airbus they can trace the materials right down to the quarry the ore came from - as per requirements of airline safety. This all operations on major systems like SAP which have their own rules of origin systems and setting up features native to the software is not that much of a big deal. The data is already held on all of the components including price, origin and supplier.

In short, I'm not going to lose any sleep over the special pleading of car manufacturers who have to do this sort of thing anyway. Sam has it that some businesses may conclude that the savings on offer aren’t big enough. "For example: If I want to sell just one bit of machinery, and the preferential tariff rate is 5%, and the WTO rate is 6.5% … the extra paperwork just isn’t worth it for me or the importer".

This tends to be SMEs and when you're dealing with small volumes it really isn't worth bothering to learn the rules, and as Sam notes the utilisation rates on some trade deals remains low because of it. You might as well just pay the tariff and be done with it. This is important but not a show-stopper in that currency fluctuations are a far greater consideration than tariffs in some instances, and in the case of luxury or specialty items there simply isn't a competitor. Prices go up because prices go up. British steel for instance survives because it is high grade and it has tolerated bigger problems before. 

I'm not sure what circumstances ROO may be applied but assuming our government is wise enough to avoid a crash and burn Brexit we can safely assume the corporates will be pulling the strings from both sides so Airbus and Nissan get their way. 

Sam has it that it could lead to relocations but in the case of Airbus, for example, there are only so many places you can go with the right skills base and while you can very easily pick somewhere else to build a factory, rebuilding a supply chains from scratch has its own costs - and is in fact a gamble of its own. We have seen in recent years businesses reversing their decision to offshore production due to increased delays and corruption. Turbulent though Brexit may be, the UK still has a fairly reliable business culture. Business is also mindful that union action is much less prevalent in the UK.

Meanwhile it should also be noted that while Brexit puts UK politics in flux, parts of the EU are not faring much better either. It would seem that Germany is the only safe bet for now.  

What I don't understand is why there is such a fixation on rules of origin. Corporates don't seem to have much of a problem avoiding tax in every other area. It is likely we will see them pulling off some innovative stunts to get around ROO. It may even see an increase in investment for 3D printing and similar techniques - which is where the smart money is already going. Supply chains across borders are messy in whatever conditions. 

As far as I am concerned though there are far bigger issues than ROO, not least REACH and the EMA where we could find entire sectors excluded from the single market even if tariffs were at zero. It really does seem like bicycle shed syndrome to me. 

A wider point I would make is that ROO is generally a lag on trade and nuisance and since as a independent country we have right of proposal in terms of regulatory initiatives we might very well take it to the top table - the WCO - where there are already multilateral initiatives underway to reform this dismal system. You could with advantage look at the issue of harmonising cumulation rules. One of the issues is not ROO, per se, but the fact that there are so many different rules. This is where the UK, as a global player, could help. We are not dealing with a static situation.

Finally I would add how little I care. When I look at Nissan and Airbus I mainly see massive job creation schemes which have a history of taking big government money - largely as part of an industrial strategy to keep jobs in the regions. Though valuable they are a sticking plaster masking a more deep rooted economic decay. Our present economic policy is not working and the status quo is life limited. 

If you've been watching China in recent years you will see that their aerospace sector is catching up fast and soon both Boeing and Airbus will have to make some serious reforms to stay afloat. Historically they have been used to bailouts and subsidies for bad designs (A400M/A380). Chinese regional single aisle jets are now becoming a serious market contender. Sooner or later Airbus will have to be run as a business rather than a social policy. And that has massive repercussions for Toulouse which is bloated beyond belief. Filton, by contrast, is the model of efficiency. 

As much as Brexit is about a democratic realignment the public have also voted for an economic reordering. A quick visit to Newport or Huddersfield shows you that some regions do not grow regardless of the economic weather and the status quo is not delivering for them. You can argue that Brexit won't make it better, and may even make it worse, but in the end what the economy suffers from the most is the stagnation of the status quo and any movement is sure to bring out a new pattern of economic activity in which there will be winners as well as losers. 

It might well be that Brexit does create new barriers - and that will have to be accounted for. Some of the old patterns may reassert themselves. Certainly in the 80's Mercedes and BMW were regarded as prestige brands because they were expensive - when if you went to Germany, you would find the same "luxury" brand as town taxis. Prestige is in the eye of the beholder. Meanwhile the likes of Nissan will have to double down on mass producing cheap and cheerful for the domestic market. Who can say?

What we can say is that there will be change. It's tempting to get bogged down in technical minutia, but we should not lose sight of the fact that Brexit is a deeply political, not economic movement. There are stresses and strains aggravated by Brexit but they were always there. Brexit is the process of settling some of these divisions. 

What happens is likely what needs to happen. The economic disparity between the regions and London needs addressing. The Scottish question needs to be settled one way or another. We have to stop pretending there has been a peace process in Northern Ireland. We need a genuine rethink of our economy to meet the demands of the globalised economy and if that means letting go of some of the sticking plasters which have stood in the way of real reform, then so be it. It is a mistake to believe the EU status quo could linger on forever. 

The EU has always overreached and its mandate was fragile. Even if the remain camp had won by 2% it would not be sufficient to settle the matter. The same stresses would still exist and would limp on unaddressed until there was a reckoning. It may be inconvenient and costly to have that reckoning now but it was coming anyway. Growth in the the City has been masking a zombie economy for some years now and though we have seen minor increments in GDP, for most of us it's just numbers on a screen. It's the finance tier that is immune to trickle down economics. 

As it happens, I would rather the government take a measured and intelligent approach to Brexit and in fact I would prefer we remain for a time in the single market, but it would appear that is now off the table. So would I still vote for Brexit? Yes. Since this all needs sorting out - and has done for a while, I'd rather we get started now. 

Saturday, 11 March 2017

Let it burn...

By now, if you've examined most of the popular reasons for leaving the EU you will have found they are a bit thin. This rampant global free trade agenda of Brexiteers increasingly looks like a delusion. As to deregulation... fuhgeddaboudit!

There is one reason though that seems not to be spoken which is "I just don't want to be in the EU". Of itself, superficially, it is a wholly irrational reason. It's not even a reason. But for me, it very much is. The EU is all about the creation of a supreme government for Europe. I don't think Europe needs one and if it does I do not want the UK to be a subordinate of it.

I could list a number of philosophical arguments as to why, but ultimately it comes down to whether a large construct like the EU can ever truly be a democracy. I do not believe it can - and I don't think that is the direction of travel. But my reasoning is even more superficial than that. I'm British and I very much want to stay that way.

We are told that such irrationality is the basest of nationalist sentiment, but what it is, is identity politics. And what's good for the goose is good for the gander. How many times have we seen tear soaked remainers blubbing to the camera that "My European identity is being taken away from me". Course this is utter rubbish. Identity is entire a construct of the mind and the EU, as much as it pretends to the contrary, is not Europe. It's just a political construct. So why are their irrational identity proclamations more valid than my own?

Well, the answer is... they're not. And so we have have a free and fair way of settling the argument. Referendums. We had one and it turns out that for whatever reason, the majority of the UK does not want the EU for a government. Cool beans.

Now that matter is settled we now move on to the more pressing question of how we leave. There should be no reason on earth why Brexit should be an economic armageddon. In fact, doing it carefully with skill and patience would mean no discernible difference in the short term. In that regard, Brexit ought to be a fairly mundane procedure. So why all the fuss?

Well, the problem here is that Brexit most likely will be something approaching an economic armageddon precisely because we are not doing it with skill and patience. That gives even me pause for thought where I start to wonder if this whole enterprise is worth the bother. It is, but not for any of the reasons I went into this for.

Last night I had a long chat with blogger, Devil's Kitchen, who was asking what we need to do, as activists, to ensure we make a success of Brexit. I had to disappoint him. At this point I don't see how this can be anything other than a total mess. All the best advice has been casually discarded and we have a political class not even the least bit interested in the details. The government doesn't really understand how Brexit must be done. They think it's a case of hopping over to Brussels to give Johnny Foreigner a swift handbagging and then talk turkey on tariffs.

To be blunt, there's not a lot any of us can do about that. All the best possible research has been made available for anyone who cares to look and if eureferendum.com isn't your bag then even Open Europe has grasped some of the basics. Howsoever, you can lead a horse to water, but if it's not thirsty then what is to be done?

The problem we have here is a clan of born-to-rule Tories with a sense of entitlement, who know nothing and can't be told anything. They're surrounded by ambitious social climbers and party hacks, aided by cowardly civil servants who don't want to put their head above the parapet, and they take their information from a media incapable of learning or retaining knowledge. As far as they are concerned, anyone not in the gang is not entitled to an opinion.

This is a rather toxic recipe that will ultimately lead to a national humiliation. If we get a half way workable deal from the EU it will be by way of an accident of events rather than sound political judgement. At this point, since an intelligent and measured Brexit is out of the window then I'm prepared to let the chips fall where they may. One might even say that a national humiliation is exactly what is necessary.

The way it looks to me is that we have lost the capacity to make a success of Brexit - or indeed anything else. Back in 2003 I was a supporter of the Iraq war. I believed that if we could do for Iraq what was done in Germany in the years following the second world war then such an enterprise might well be transformational. I still think, had a few variables been different, it could have been done. What was missing though was the political and institutional competence.

What we saw from the army was a certain hubris in telling ministers they knew what they were doing having cut their teeth in Northern Ireland. The political system lacked the necessary inquisitiveness and ability to scrutinise and left it largely in the hands of the army. By the time Westminster realised the adventure was falling apart it was already too late to do anything to correct it.

I think we are suffering from a systemic decay because our political system is overwhelmed by a self-serving class of entitled incompetents and nothing short of a purge is going to fix it. To me it's a wonder that anything still works at all. I think we achieve a base level of good governance because we have good legacy systems but on the whole our political class is incapable of responding and effecting successful change - and Brexit will show this dynamic in its full glory. With a system this broken, the only solution might very well be to knock it all down and start over.

Wednesday, 8 March 2017

A status quo too big to fail


From a report in The Independent, "Britain’s economy is being kept afloat by an “unsustainable” spending binge last seen just before the crash, the Treasury watchdog has warned. The independent Office of Budget Responsibility (OBR) highlighted the danger of the ‘savings ratio’ going “negative for the first time since the middle of 2008”. It means people are spending beyond their means on credit cards and by dipping into their savings, to cope with an incomes squeeze.

Earlier today I painted a picture that things outside the bubble were not so rosy and indeed we see some other unwholesome signals that familiar problems are returning. Meanwhile, though we still see signs of anaemic growth, UK productivity remains stubbornly at a standstill.

For a while I have has the impression that we are in a period of stagnation. For all the government's boasting of boosted numbers in jobs, there is an air of unreality to it all as people are shunted into insecure work and increasingly pushed into "self-employment". The fundamentals are not sound. The middle class is being propped up by massive government spending on defence and energy and soon HS2.

It seems to me that our woes are snowballing and that Brexit might just be the thing that tips us over the edge. It doesn't seem like it will take much. Given the government's approach to Brexit, it will be more through luck than by judgement that we avoid a recession. I think when the shit does hit the fan, all of it will hit all at once.

I take the view that successive governments have failed to take the necessary radical action to revive UK dynamism and in part I think the EU has stood in the way of that kind of economic realignment. Too much policy is set in stone without the possibility of reform. That is why we are so vulnerable.

I am also a believer in the virtues of capitalism. Capitalism reinvents and replenishes by killing off zombie businesses and making room for new innovation. It runs like a forest fire, clearing away the deadwood so new growth can occur. In fear of the short term consequences, no government has been in any rush to let capitalism do its thing so we have been on a knife edge for some time, throwing everything including the kitchen sink at preserving the status quo. The status quo, it seems, has become too big to fail so we keep bailing it out.

Remainers would have it that the Brexit voting majority are slobbering simpletons who read a lie on the side of a bus and voted accordingly. This is a slander. What we see in the actual result is pretty much the whole country turning on London and demanding change. Some argue that Brexit is a little drastic but when you have places like Huddersfield and Newport which remain similarly depressed regardless of the economic weather, radical is perhaps what it takes.

Had we voted to remain in the EU, the referendum would now be a distant memory. Ukip would still be grunting away in the background and the same old issues would continue to fester. We would not though see any change of course. Our political class would have taken a remain vote as permission to resume business as usual. That is insufficient. For sure there are plenty of other things we could do to other than leave the EU, but the bottom line is that nothing was going to change unless we forced our political class to do something they don't want to do.

And what choice did we have? A Labour party with nothing to offer but for the same old unfunded spending and a Tory party entirely bereft of any real ideas. The best we can expect from them is semi-competent managed decline. It may well be the case that the British public are more willing to look the facts in the face than the politicians.

We were told that the EU underpins our prosperity but that is a weak message for those in the north watching the vitality drain from their towns. With so little to lose, why not take a gamble on something radical? We know that there is short term chaos from Brexit and we know there is a price to pay but a reordering of the economy could well open up avenues nobody predicted. A healthy economy is one where money is on the move. Presently we are seeing stagnation with asset hoarding and very little dynamism. Brexit blows it all wide open.

In the meantime, as established systems and trade patterns break down it is more than likely we will see new movements in politics, sweeping away the incompetents who brought us to this pretty pass. There is no longer any place for the Labour party and the Tories are about to be exposed as monumentally inept. If Brexit clears out the rot in that regard then we really do have little to lose - and much to gain.

Rust belt rebellion


I was up in Yorkshire yesterday for a funeral. Huddersfield to be precise. I'm always stuck by two things whenever I go up north. I really notice the architecture. Huddersfield is home to some amazing late Victorian era buildings each with their own intricate stone carvings. It shares much in common with Halifax and other Pennine mill towns. Quite clearly these were once prosperous places.

I don't remember Huddersfield ever being especially prosperous though. In fairness, it's a bit of a dump. Don't get me wrong, it has a certain charm to it and I always enjoy a trip down memory lane but it's still the land that time forgot. Whether in boom or in recession these mill towns just plod on and nothing changes very much. This might explain why 55 per cent of people in Kirklees voted to leave the European Union.

For all that we are told there is a housing crisis, Huddersfield is not short of empty properties. There are any number of commercial properties which could very easily be re-purposed and would make excellent town centre dwellings. More to the point, they'd be affordable. There's no shortage of potential. The problem is that that the potential is never unlocked. For all that everywhere else has seen skyrocketing house prices, things in West Yorkshire stay pretty much the same. It has its own economy which isn't really influenced by the outside world.

In that respect, one might venture that EU membership for my home county is neither here nor there. What progress we saw was on the back of a debt bubble, the effects of which have quickly evaporated. Politically, West Yorkshire is not a priority for London government. Scotland can at least threaten independence to have a bone thrown their way but on the whole Westminster is not interested in affairs beyond the M25.

This goes some way toward explaining why promises of being stronger, safer and better off in the EU fall on deaf ears. Elections don't change things. Brexit might. What's to lose?

Remainers would point out, as indeed I have, that there is a substantial amount of trade to lose, but insofar as it affects West Yorkshire, such a threat is not enough to maintain the status quo. We are told that Brexit is a UK variant of Trumpism, and in a very British way I suppose it is. A rust belt rebellion against an indifferent and condescending political class with no real solutions. 

I don't know for a fact that Brexit will change anything in this dynamic or even prompt a change of policy that will revive the fortunes of our forgotten towns. What I feel confident in saying though is that continued EU membership definitely won't. Brexit though creates a window of political opportunity for Northern politicians to assert themselves. At the very least, Brexit will cause a significant re-ordering of the economy from which West Yorkshire may benefit. 

One of the obvious problems is the growing gulf between the north and south. But then it isn't even a north-south divide. It's London and everywhere else. London continues to divorce itself economically from the UK while continuing to sap the vitality from the regions. A serious economic shock to London might very well even things out. It's time we had a serious debate about the things that sharply divide this country. Thanks to Brexit, that is finally going to happen. 

Monday, 6 March 2017

Brexit: trouble with trade


For years we Brexiteers have been saying the EU is an iron curtain where trade is concerned and that the single market is a protectionist racket. It is. Remainers are confirming this by the day by showing us all the different ways it will be harder to trade with the EU once we have left. 

In this, we find we are not alone. Canada’s free trade accord with the European Union has failed to remove many of the barriers to shipping red meat to Europe. “We do not have what we would call commercially viable access to the European market,” said Ron Davidson, head of international trade for the Canadian Meat Council.
Under the Comprehensive Economic and Trade Agreement (CETA), Canada is allowed duty-free exports of 81,011 tonnes of pork, but three obstacles stand in the way. The EU wants trichinella-free product and Canada is not officially recognized as free of the worms, which can be transferred from pork to people in raw or undercooked meat. (It is hoped a trichinella-free standard could be developed according to guidelines set out by the World Organization for Animal Health.)
The EU also requires its own health mark on boxes of meat over a tamper proof belt at the time of manufacture in the processing plant. The boxes go into a cooler and the serial numbers on the health mark must be in sequence. That would create a lot of additional handling logistics for Canadian companies who ship to many other markets outside of Europe. Canadian meat processors also express problems with equivalency inspection requirements with the EU. “We supposedly do have equivalence in the meat inspection systems. If it is a real equivalence, the Canadian Food Inspection Agency stamp should be sufficient,” Davidson said.
Meanwhile, European meat suppliers have wide open access to Canadian markets. The day that CETA goes into effect, the 26.5 percent tariff comes off so the European Union is going to have a huge opening of the Canadian market for beef and veal,” he said. “The agreement is not balanced. We would just like to be able to take advantage of the quota we’ve got.”
As the article notes, on a more technical matter, a stumbling block is the use of antimicrobial treatments to remove pathogens like E. coli. Because Europe would not be buying entire carcasses, Canada would be left with items like trim used for grinding meat. Those are exported to the United States, where there is a zero tolerance policy for E. coli. That means the entire carcass is treated with antimicrobials in Canadian packing plants to avoid the risk of losing the U.S. market. “If we turn off interventions, the risk of having an incident at the U.S. border goes up,” Davidson said.

There are a few issues to note here, notably the absence of a global standard on trichinella and e-coli, which means different cultural paranoias lead to different controls. The US is fearful of e-coli whereas the EU, despite having a notification rate of 0.07 cases per 100,000 population (at peak), unfairly keeps barriers intact. This was mainly due to an increased number of trichinellosis cases reported by Romania and Bulgaria that had, as in previous years, the highest notification rates (1.11 and 0.83 cases per 100 000, respectively) and accounted for 88% of confirmed cases reported in the EU/EEA.

This means that Canada is forced to choose between markets or run two separate production lines which can prove prohibitive. This is why, when our main market for exports is the EU, we are not going to be able to diverge from EU standards. If we deviate or relax our standards on imports in any way then the EU will view our own exports as a higher risk, leading to more frequent inspections and more delays at the ports.

Here we can extrapolate some broader points. We are told by the likes of John Redwood and Peter Lilley that we can trade on the same basis with the EU even if we leave the EU unilaterally - when we can see that even with a comprehensive trade deal, there are still considerable non-tariff barriers and regulatory obstacles.

It also means that if we have to choose between regulatory superpowers it will necessarily be the one with which we trade the most - and being that the USA is notoriously protectionist and presently highly unpredictable, we're going to want to stick to EU standards.

Given that standards are central to any trade deal we are going to have to ensure that any further deals we make do not compromise the integrity off those we already have. Consequently, sweeping gesture deals must be viewed with extreme caution.

All this kinda shafts both sides of the Brexit debate. On the one hand we have Brexiteers telling us that we are free to trade with the rest of the world, when clearly it is not so simple, and on the other hand we have the remainers telling us that we have all these free trade deals via the EU which are entirely beneficial, when in fact they are hugely asymmetrical, they cause a number of social problems (in Africa especially) and lock us into buying European produce at inflated prices.

On balance it is better to remain part of the single market and choose deals on a national basis to augment EU trade rather that substitute it. By leaving the single market we are putting ourselves in the same tier as Canada as a third country where even a comprehensive deal is nowhere close to adequate.

Where we can criticise the EU is that fortress Europe is so difficult to gain entry to that we are now seeing trade diverted away from Europe and many of the agreements we see on tariffs are simply not worth the paper they are written on. Fortress Europe is becoming impregnable to its own detriment. The EU may look like the trade hegemon for the moment, but could well be digging its own grave.

While there are many laudable ambitions such as the circular economy, which are probably worth it in the long run, they require a tranche of new regulations, adding to the tiers of regulations which most struggle to see the immediate benefits of. Idealistic regulatory initiatives during a global trade crunch are not really what industry is crying out for.

The question though is whether Britain outside of the EU can act fast enough to replace the trade it loses in the interim. That is an open question and given the time limits we have placed on ourselves it seems unlikely. There are a number of radical policy adjustments we could make (probably with agricultural subsidy) but this is likely to have unpopular consequences on the domestic front and may even lead to retaliatory legislative action from the EU. Some justifiably fear a race to the bottom.

We could have done ourselves a big favour by staying in the single market and bought ourselves the time to develop a more sophisticated trade policy and given ourselves the space to relearn the art of trade. Instead, the Tories are unwittingly about to put us through a course of shock therapy. It's going to hurt.

Over the long term though, (and Brexit is for the long haul), we may very well see a fundamental shift in attitudes to the EU around the globe, not least from Canada as producers realise how badly they're being screwed by CETA. For sure, they have a wet lettuce PM for the moment but when the pendulum swings back, we could well see Canada pulling the plug. Similarly, we could see some pushback from Africa.

It seems to me that the pushme-pullyou politics of trade are best resolved by way of seeking global standards and multilateral solutions, using the Trade Facilitation Agreement to help Africa overcome EU barriers. We can do that from outside the single market since we will still be broadly working inside the EU regulatory regime but have put ourselves in a weaker position by leaving the single market. We could have surreptitiously extended the single market and weakened EU control over it.

That though is an opportunity squandered by the Tories and now we are faced with making the best of a bad job. We had better hope that whatever the Tories cook up for a free trade agreement is manifestly better than CETA. I do not have high hopes.

What we can say is that the UK will have to speak to all of those nations where we currently have trade agreements via the EU. There is at least a framework where there is scope to enhance those agreements. It's not all doom and gloom. Some of the EUs regulatory barriers are at the behest of one or two Member States and EU agreements have restrictions that we ordinarily we would not seek. There is scope to liberalise those agreements in exchange for greater access for UK services. We are going to have to get a move on though. Again there are caveats about not compromising EU trade.

Ultimately though, the UK, with its considerable expertise in food safety would do well to focus efforts on Codex initiatives to bring about new standards in order to eliminate trade barriers with a view to making bilateral deals a thing of the past. In that respect it would be a mistake to throw our lot in with the USA which is notorious for sabotaging multilateral efforts.

In more ways that one Brexit is going to hurt more than it ever needed to due to a woefully simplistic understanding of trade but that is to be expected when the UK has effectively given up its domestic capacity. I view that as a consequence of EU membership. EU trade exclusivity was a bridge too far.

The damage done will be from pulling further out than we ever needed to for advantages which don't really exist. It just means it will take longer to establish new trade and we will have to re-order the economy to compensate for the trade we will never regain. In that there are opportunities where we just have to trust that a first world economy like the UK can step up to the plate. It won't be easy but I think we can.

Whichever way this goes we must be cautious of anyone offering up simplistic solutions and making big promises. Nothing is clear cut - especially not those assertions that EU membership is necessarily good for trade. Certainty in the EU is a myth and EU trade deals are not always what they appear. We still have the city of London in our favour and since India is in the market for a multilateral agreement on services, there is a whole universe of other avenues to explore.

India made proposals for a Trade Facilitation Agreement for Services that it submitted to the WTO on February 23. The text has provisions relating to facilitating trade in services and development as well as institutional provisions. This could be more pertinent to the UK than any deal with the USA and it would benefit from having the UK as a champion.

So long as the UK does not walk away from a deal with the EU then we can make Brexit work. We will just have to think about trade in a different way and move beyond the quasi-colonial fantasies of the Tory right. If, however, Mrs May gives in to the idea that "no deal is better than a bad deal" then Britain stands to be substantially poorer for a very long time. Walking away from the EU without a deal is simply not an option.