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EU Dings Yet Another Brexit Fantasy: “Equivalence” Deal for the City

The Financial Times obtained access to a European Commission document that puts paid to a pet proposal for how the City could have its cake and eat it too in a Brexit, that of the implementation of an “equivalence” regime. We had been skeptical that this arrangement would be approved by the European side. Our view appears to be correct.

While this had not been fleshed out in any detail, the UK proponents argued that London could be permitted to service customers on the Continent more or less as before if UK regulations were deemed to be “equivalent,” since the EU had already allowed for that with some financial services.

The idea had been bandied about before, with a recent sighting in January. Then, an “influential” banking industry lobbying group, TheCityUK, published its demands for Brexit talks. We wrote at the time that they showed how the British side was in a bubble, and that the document pressed for several ideas that had already been rejected by the EU.

The only good thing that could be said about equivalence was that it at least had not been previously nixed. The equivalence proposal resulted from the fact that the industry did recognize that one of its pet asks, “passporting,” was a non-starter. Passporting would have allowed UK-based employees of UK firms to sell services to customers in the EU. It’s not hard to imagine why the EU would not be keen about that in a post-Brexit world.

Some detail from the Financial Times in January:

The City of London has retreated from demanding continued access to the single market in any post-Brexit deal with the EU, according to its principal lobbying group.

In a list setting out its priorities for the forthcoming EU negotiations that was published on Thursday, TheCityUK abandoned the idea of fighting to retain the financial “passport”, which allows companies to sell their services throughout the single market from a single location.

Previously its desired outcome was for the UK either to remain in the EU’s single market, or to strike a special agreement preserving existing passporting rights. But Theresa May’s administration has shown little interest in pursuing such a deal.

TheCityUK is now pinning its hopes on building a deal around “equivalence”, a relatively new legal concept embedded in some but not all EU financial regulation.

This allows companies from markets that are deemed to have “equivalent” regulatory standards to trade freely across borders with each others’ customers under their home country’s laws and regulations.

Miles Celic, the group’s new chief executive, said that a “bespoke deal” tailored to the needs of the UK should be achievable. “It would protect London as a market and those European customers using it,” he said. “That’s an advantage not only for the UK, but for the EU too.”

And as we remarked in our post then:

Yves here. Recall we had said passporting would never happen because the EU would not grant it.

There are two astonishing assumptions in this little spiel, one explicit, one implicit.

The first is the idea that the EU is on board with preserving the City of London. Huh? All advanced economies regard promoting their banks as a strategic priority. The Continent would love nothing better than to take a piece out of the City. It means more jobs, not just banking but new office construction, and relocation of the related support professionals, like lawyers and accountants…

The implicit assumption in the banking lobbyist thinking is that the EU and UK could agree on an equivalence deal when the EU doesn’t have all its financial service regs on that basis. The Financial Times article mentions that commercial lending and insurance are not covered, for instance. Moreover, this would be tantamount to the UK giving up sovereignity, since the EU retains the upper hand. The EU can withdraw the right to operate under equivalence rules with a mere month’s notice if they deem the other country’s regs to be not equivalent. Bank of England governor Mark Carney is making less than happy noises about the idea because it could result in, per the Financial Times, “Britain losing influence and even control over its own markets.”

So what is the lobbyist” proposal? Again from the pink paper:

TheCityUK argues that issue can be dealt with by the UK negotiating a long term deal that would establish the principles on which equivalence was founded and also creating a mechanism to resolve disputes.

This is tantamount to asking the EU to overturn its legal system to accommodate British bankers. Na ga happen.

The EU is a civil law system. Rules and regulations are set forth in great detail. Judges will interpret them but in theory, their rulings don’t have precedential value (in practice they do but not remotely to the degree they do in the Anglo common law system). The idea of having only some rough and ready guidelines and winging it is not even remotely how the EU does things. We’ve commented repeatedly that Eurocrats are rigid, literal-minded, and procedural. That’s actually served as a plus for them since it produces the predictability they’ve needed to keep a now 27 member nation group functioning at all.

Back to the present post. Here is the Financial Times’ sneak update on equivalence:

The City of London’s hopes of maximising access to the EU are set to be dealt a blow by European Commission plans to take a tough stance on rules that could provide a post-Brexit lifeline for the UK financial sector…..

Instead, many are looking to take advantage of the EU’s equivalence provisions, which make it simpler for foreign institutions to do business with Europe, as long as Brussels trusts their home countries have similar standards of oversight….

But the commission’s “staff working document” emphasises Brussels’ determination to carry out “continuous follow-up monitoring” to make sure countries deemed equivalent still meet the criteria. It also stresses the commission’s power to withdraw the status at any time in light of “contrary developments”.

Brexit supporters argue that the UK could disentangle itself from the EU’s financial rules while still benefiting from market access. But the document makes clear that one of the commission’s prime concerns is to make sure that no country can get or keep equivalence if it conducts a regulatory bonfire or retreats to light-touch supervision….

The document argues that the EU should set “sufficiently robust prerequisites”, or conditions, before it grants equivalence, including the “on-site” inspections of overseas firms operating in Europe and “effective access to data”…

The EU official cautioned that equivalence remained “very much case-by-case. One sector doesn’t set a precedent for another, one country doesn’t set a precedent for another”.

What the UK seems unwilling to understand is that the EU has no reason to be nice. Its politicians are responsible to its people. The Brits harbor the fantasy that a vigorous City of London is somehow good for the Continent when more and more studies have ascertained that advanced economies have financial sectors that are overly large and are hindering rather than helping growth.

So to the extent that Europeans are going to be subject to the unduly costly ministrations of bankers, it might as well be their bankers in their countries, since they get the ancillary benefit of having them rent office space, pay local taxes, dine in local restaurants, and support the jobs of other service professionals like lawyers and accountants.

Yet if you read the comments on this article, you’ll see a large cohort lecturing the EU that they are making a big mistake in dissing the UK and they will come to regret having to deal with pricier and inferior financial services. Really? Even if the Eurobanks wind up offering pricier wares, that means clients will consume them less….which is a desirable outcome, given the desirability of shrining an oversized and too often predatory financial services industry.

But the hubris of the Brits who believe they have a policy say in Brexit continues unabated. They are in store for a rude awakening.

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38 comments

  1. PlutoniumKun

    Just yesterday a Chinese friend told me there was a joke circulating on local social media about Brexit. I’m sure there are mandarin subtleties lost in translation, but it goes: Britain is like the man who goes to his wife and says. ‘I demand a divorce! By the way, I still want to f**k you every night forever!’

    As they say, ‘good luck with that’.

    If the Chinese know this, then the UK is stuffed in any negotiations for alternative trade agreements. Everyone knows how vulnerable they are.

    1. Pavel

      Ha ha, I was just going to post a joke I read yesterday–I believe in Le Figaro— along slightly more family-friendly lines. My translation from the French:

      Man calls up Sky TV [cable channel in UK]: Hello, Sky TV?
      Sky: Yes, hello?
      Man: I wish to cancel my subscription.
      Sky: OK
      Man: But I want to continue receiving all the content.
      Sky: Click

      It is clear that Theresa May is way out of her league and nobody in government knows how to handle Brexit. In addition there is a huge opportunity cost as other more pressing matters (collapse of the NHS for example) aren’t being dealt with. The civil service (part of the UK’s deep state) must be in chaos.

      There was presumably some way for the UK and EU to reach an amicable divorce. Now the Brits are on the verge of becoming laughing stocks. Not a good negotiating position.

      1. gonzomarx

        according to Private Eye the Department for Exiting the EU is having a hard time recruiting talent. Lots of dead enders and people to junior to avoid secondment. I guess it’ll mean a good time for consultants….from the City of course….who will no doubt make sure the whole countries interests are represented.

        1. PlutoniumKun

          As Yves reported here a few weeks ago here, and I personally know this to be true, there are examples of highly qualified and experienced UK citizens who worked in the EU who sent out feelers to London that they could be useful and were available, but were rebuffed or ignored. In at least one case, one of these people is now on a lucrative contract to work on the other side of the table to the UK. I’m inclined to think that the failure of the UK to put together a professional team is down to a mix of arrogance and incompetence, which will cost the country very dear. Several countries have put together very experienced and high calibre teams to deal with it.

          As you say, there will no doubt be a panic to recruit people with some experience, all of whom will be private consultants with their own personal and narrow interests to protect.

  2. Biologist

    On another of May’s Brexit fantasies–or shall we say lies: the idea that if UK simply walks away from EU without a deal they can easily fall back on “standard” WTO rules.

    http://www.politico.eu/article/theresa-may-brexit-trade-bluff-uk-economy-negotiation-eu/

    “If Britain wants to chart its own course as an independent WTO member — and agree deals across the globe — the U.K. will need to secure a sort of trading passport called “WTO schedules.” These schedules are the basis for any trade deal and would determine the terms on which any country can engage with the U.K. Without agreed schedules, London will be in trade limbo.”
    (…)
    “People in Geneva said Braithwaite had indeed launched a diplomatic charm offensive to persuade the 160-plus members of the WTO that it would be easy to avoid a trade shock after Brexit by simply allowing the U.K. to roll over the EU’s schedules. “Every member will have an opportunity to raise any issues or concerns with us before we proceed,” Braithwaite said.”

    In other words: UK actually needs the consent of WTO members (I assume some kind of majority) in order to “fall back” on WTO rules, who may use this leverage to get additional concessions from UK.

    As Yves has pointed out extensively in these pages, and contrary to the echo chamber of UK press and politicians, the UK will play the negotiations with Brussels (and the rest of the world) with a very weak hand.

    1. Sally

      How an earth do countries outside the EU like China and the U.S. or Japan or South Korea ever mange to trade with the all powerful, mighty EU?

      Do they all have weak hands? And if so how come the EU share of international trade has now fallen to about only 17%?

      1. d

        well for starters that werent members of the EU who decided to leave. course it might help that some of the countries you mentioned have rather large economies them selves, so they and the EU have an incentive to co-operate. course now that we are in Trumplandia, we may wont be much in the way of trade deals. well isnt trade falling for almost all countries?

      2. Yves Smith Post author

        Straw manning (no one here ever said or implied that the EU is “all powerful, mighty”) is yet another form of bad faith argumentation and another violation of our written site Policies, which you continue to refuse to consult and adhere to. Our Policies state that commenting here is a privilege, not a right.

        Needless to say, operating in bad faith is no substitute for sound argument.

        Those cases are not even remotely comparable. None of these countries has the EU as far and away its biggest trading partner. Nor are any of these countries proposing as the UK is to recklessly tear apart existing trade deals with no realistic prospect whatsoever in negotiating new trade deals in the time parameter set by the Article 50 process (exit by default in 24 months).

        Your remark is yet another illustration of willful Brexiteer blindness. The strength of the EU’s position comes about via the abject failure of the Brexit camp to understand the most basic procedural issues, all of which happen to operate to improve the EU’s already advantaged position. And the UK has made its own bad situation worse by having made itself completely unliked in the EU and having done nothing to remedy that since the referendum.

        And who cares if the EU is not trading much externally? The US has an even smaller import and export sector than the EU. Mercantilism is destructive to the global trade system, as Keynes pointed out. He tried in the Bretton Woods negotiations to create disincentives against running persistent surpluses and failed. Having the EU operate as more of an autarky would be a plus for the stability of the international trade order.

        The big reason for the decline in the EU share is that Germany is now exporting way more to the rest of the EU and less to external partners. However, the absolute size of the German export sector relative to its economy is not desirable, particularly given its nutty incomprehension that running persistent trade surpluses means you finance your trade partners but they refuse to do that.

    2. Yves Smith Post author

      We pointed out before the Brexit vote that the Director General of the WTO had said repeatedly that there was no such thing as a fallback to the WTO rules. Interesting to see that the UK is trying to push it and is encountering the expected procedural obstacles. It may not even be a majority approval, BTW.

  3. vlade

    “But the document makes clear that one of the commission’s prime concerns is to make sure that no country can get or keep equivalence if it conducts a regulatory bonfire or retreats to light-touch supervision….”

    Or the UK can have equivalence, for the price of having EU write the rules.

    Which was pretty much always the case, for most of the UK’s trade (i.e. you can have access, if you let the EU to write the rules). I admit it’s more efficient from the UK’s purpose, as they pretty much never (well, with the exception of finance) bothered to negotiate/input into any of the EU rules

    1. PlutoniumKun

      I admit it’s more efficient from the UK’s purpose, as they pretty much never (well, with the exception of finance) bothered to negotiate/input into any of the EU rules

      Not just in finance – the UK has had a major role in destroying attempts to strenghten regulation on food and agriculture in the EU. An example was the attempt to bring in a Directive protecting soils through Europe – part of the Soil Thematic Policy. The UK, acting as a puppet of the National Farmers Union, was central in preventing this Directive being adopted.

      1. Anonymous2

        @Biologist

        I could be wrong but I think the WTO works by consensus. So that would be 160 or so countries whose assent probably needs to be obtained. Could be very expensive for the UK.

  4. Sally

    Once again you elevate more anti Brexit propaganda. ( which you have done continually since the Greek crises two years ago)

    How about pointing out that the Financial times has been a constant critic of BREXIT, and urged Brits to vote remain, and loves seeing nation states stripped of their sovereignty. You had a piece the other day about how Martin Wolf of the FT loves the idea of getting rid of cash. The FT is a globalist, pro central bank, pro cashless society rag that hates national sovereignty, and would like all nations to be corralled by Undemocratic trade deals like TPP. This only benefits a small global elite of financiers and monopolists. The very people the FT shrills for.

    Poland and Hungry are now openinly in revolt against the EU and its policies, and other states are increasingly against the EU and its immigration policies. More and more EU countries are against the sanctions on Russia which have cost EU farmers €5-6 billion euros. Printing more paper subsidies for EU farmers is the last thing that is needed to cover up the EU elites folly.

    The pro EU politicians only new idea is to press on with even deeper itergration, and the creation of a federal state. The very ideas that have failed so badly. High unemployment is caused by a combination of high regulation, and the imposition of an EU currency, with one size fits all interest rate policy.

    There are some 200 odd countries at the United Nations. Only 28 of them are in the EU. You don’t need to have to pay a large membership fee to trade with other nations and set your own immigration policies and interest rates. No doubt the EU fanatics will talk endlessly about “punishing the UK” for daring to leave their Undemocratic orgainsation, but they are only punishing their own people if they try to erect barriers to trade. German car makers, French wine workers, British insurance companies workers will be hurt just to deter other people from seeking the same exit. Once again the EU elites show their contempt for the people they pretend they care about.

    1. ChrisPacific

      The EU being bad and the EU being difficult to exit from are not mutually exclusive concepts. There has been plenty of discussion at NC of the problems of the Eurozone. Many of them are the same problems that are going to make life difficult for the UK.

      Yes, the EU will likely harm their own people to some degree if they punish the UK for Brexit. Does anything in their history suggest to you that they will hesitate to do that? You’ve presented plenty of examples where that is happening already.

      I don’t think anyone is arguing that the UK can’t exist independently outside the EU in the long term (as you say, plenty of other countries do it). The question is how you get there from here. NC criticism is largely focused on the fact that the UK is approaching the transition without a proper understanding of what’s involved.

      If I have a friend that is planning to climb a mountain wearing shorts and a T-shirt with no climbing gear, and I tell him that he is an idiot and he’s going to kill himself, that does not make me guilty of spreading anti-climbing propaganda. Nor does it mean that think my friend should never climb the mountain at all. I just think he should train and equip himself properly for the task first.

    2. Yves Smith Post author

      Wowsers. This is the best you can do? This is yet another demonstration of Brexit loyalists difficulty in dealing with unpleasant realities. Shooting messengers does not change the outcome.

      First, attacking the FT is an ad hominem attack, intellectually invalid and a violation of our site policies. You are in moderation because you have repeatedly broken our rules, yet you continue to do so.

      Second, you launch a second fact-free salvo at the FT by calling the story “propaganda”. It’s based on a leaked document. This is called “reporting”. The fact that you don’t like what it says does not make it untrue. In fact, you are engaging in a classic case of projection. Your response is the only “propaganda” in this thread. You fail to disprove anything in the story because you can’t and instead try diversionary denigration.

      Third, the other members of the UN don’t matter for the purposes of trade. The 27 other members of the EU do because they are the UK’s main trade partners and the UK is not finding adequate stand ins for them soon if ever.

      Fourth, Poland’s and Hungary’s unhappiness won’t change the direction of the EU and certainly won’t save the UK.

      Fifth, the high unemployment of the EU is the result of the financial crisis and the Eurozone (note Eurozone, not EU) not being sufficiently federalized. Unlike the UK, it didn’t have the means for taking over its sickest banks, while the UK put all of its large banks save Barclays in what amounted to receivership. That means it didn’t clean up the balance sheets of the sick banks and engaged in all sorts of budgetary machinations to work around that fact, to the detriment of the countries that had high levels of borrowings (aka the periphery).

      Sixth, you are also conflating problems of the Eurozone with the EU, when they are not the same. The Eurozone does have serious problems due to faulty design of the currency union.

  5. Jim A.

    …City of London is somehow god for the Continent….

    …I can’t figure out whether the typo is a missing “o” or the use of a lower case “g”. Works pretty well either way.

    1. Expat

      Whatever the conclusions, Europeans leaders are outdoing each other in prostituting their cities, people, morals, and law in an attempt to entice the banks to relocate to their country. I suppose the cocaine trade alone would boost Belgian GDP by 10%

  6. Expat

    I don’t think the Brexiteers bothered to speak to anyone on the Continent before making this dreadful decision. Nigel Farage was booed and insulted by the European Parliament after the vote with the President saying, “What are you even doing here!” The Continentals don’t really like the British. They see them as backward, drunk, and poodles of America. The Brits agree but word it differently!

    Europe is not thrilled that Britain is leaving but now that the vote has been made, they are perfectly content to tell Britain to “fuck off.”. And rightly so. If they don’t, then there goes France, Catalonia, Greece, etc.

    The insane British delusions about Brexit have been that they will have all their rights with no obligations and that it was good for the economy (“Look how great Britain is doing even after Brexit!”) despite the fact that THEY HAVE NOT LEFT YET.

    I love a nice pint. I lived in London for ten year and had a great time. But the country is backward, provincial, and hopelessly tied to the giant, corrupt money-laundering machine in the City. When that goes, the Brits will look back on the 70’s as a golden era of prosperity. Much like modern Russians wax lyrical about Stalin.

    1. Jim A.

      I would argue that the problem is that while “…the giant, corrupt money-laundering machine in the City.” was good for some people, it wasn’t visibly very useful for a large number of British. And THEY are are often the ones who voted for Brexit.

  7. EoH

    Financialization has been the ruin of many a country and many a citizen. The City has been a leading proponent of its priorities, including the notorious ones of putting shareholders’ interests above all others, of putting artificial entities’ interests above those of people. Why would the EU enable the City’s continued dominance, without the City being subject to Community rules, without reciprocity, without UK contributions to the EU budget. As Yves says, na ga happen. Schadenfreude is the best the City should expect. That and a sigh of relief..

  8. Eustache de Saint Pierre

    With all due respect, I do not think that the Brits are the only ones ” fucking it up “. Strikes me that pretty much everybody else is also doing a very good job of that – except perhaps the Icelanders.

    I also resent the generalisations, as they could also be applied in a different form to any given country.

    The equivalent of carving opinions in stone to where this will lead, also strikes me as foolish in such a period of constant change.

    As for the seventies…..it was the period before Neoliberalism & rose tinted glasses aside, I remember it as a not perfect, but a nevertheless pretty good time to be alive within the community of largely good people I hail from. I only have to return there for a visit to see how that life has been systematically dismantled.

  9. Appalled Briton

    So yet another Brexit myth (or should that be stupid downright lie?) dispelled. The arrogance and stupidity of many British politicians and voters really is depressing. Christ are we getting to get a rude awakening in the next few years. And what’s infuriating is that those of us who voted to remain in the EU are going to suffer along with the liars and fools driving this insane Brexit.

  10. susan the other

    It feels like the end of an era. What is interesting is that our big banks have all gone hat in hand to the EU to set up their operations directly with the EU (is this equivalence in actual practice?) because we were blamed for the GFC as much as the City was (by the EU’s strict standards – even tho’ their banks were as fast and loose as any…) Keep remembering when tshtf how stunned Hank Paulsen was when the UK refused to let Barclays buy out Lehman (I think that was the issue) and there was a clip of him hanging up the phone and saying “the Brits just screwed us.” Then we also let Lehman fall. And Schaeuble coming to NYC to a press conference that was not given much coverage wherein he said in a vast understatement “We are overbanked.” Then the shunning of both David Cameron for years and the complete disregard for Timmy. The EU was furious and disgusted. It hardly seems likely they would forgive the whole mess just to be “friends” with the UK. As Theresa puts it.

    1. JustAnObserver

      Re: The Barclays/Lehman thing.

      IIRC The issue was time. Under UK rules such a takeover would have to be subject to a shareholder vote at an extraordinary general meeting. Arranging such an EGM would take. I think, a min of 3 weeks to inform shareholders, get the proxies out etc. etc. The government could, possibly, have waived this requirement but Alistair Darling – then Chancellor of the Exchequer – and Gordon Brown point blank refused to do so (*). I believe its that refusal that led to the (in)famous Paulson outburst.

      Note that every Barclays exec from then on should have sent annual letters to AD & GB thanking them for saving the bank and, of course, their egregiously huge salaries & bonuses. Fat chance of that.

      (*) This quote from an interview in the Guardian on Aug 29 2008 probably explains why. He was, I think, one of the very few who `got it’ at the time.

      “The economic times we are facing “are arguably the worst they’ve been in 60 years,” he says bluntly. “And I think it’s going to be more profound and long-lasting than people thought.””

      1. Yves Smith Post author

        This is pretty close.

        1. The requirement was 30 days or a month under exchange rules.

        2. Since Lehman was toast, Barclays and the FSA wanted the Fed to guarantee Lehman’s positions. That was the only way to keep from shuttering Lehman during the 30 or whatever day period. Geithner refused.

        3. We reported on it…it was the FSA that was blamed for the nixing, but the Barclays board was never gonna approve the deal. They weren’t keen and Bob Diamond had overpromised to the US. Paulson, who had done tons of deals (unlike Geithner) read this correctly and never thought Barclays was serious.

        It was Geithner and not Paulson who blew up because it was Geithner who was trying to broker the deal from the US side and Geithner in his exhaustion who told Lehman to file for bankruptcy.

  11. Gman

    If the EU wants to expand its reliance on a poached banking sector, and sees this as a golden opportunity to do so, then good luck to it I say, given its own less than illustrious history in the sector, and finance’s ability to warp once healthy, if pedestrian, economies. One might even go so far to suggest that it might even help to hasten the EU’s welcome decline.

    On the subject of WTO rules this piece from the FT may be of interest to the various charming, barely disguised Anglophobes revelling in their usual schadenfreude above.

    https://www.ft.com/content/7bb991e4-fc38-11e6-96f8-3700c5664d30?desktop=true

      1. Anonymous2

        If you do not mind my asking, could you be more precise as to the point you are making?

        My immediate take was that there is a chance Trump will take the world trading system down. I cannot see that helping anyone much, especially not a country like the UK which cannot be self-sufficient.

        1. Gman

          Of course I don’t mind you asking. That’s what we’re here for after all isn’t it?

          Call me deluded, an idealist or Susan if you want, but I’m of the opinion that things are going to have to get a whole lot worse before they get better, and sh*t or bust catalysts like Trump, though hardly ideal, as opposed to status quo puppets like HRC or Obama, will more likely hasten the process rather than prolong the agony.

          Among other examples, recently elected Trump’s attempts to bypass the WTO point to just such a sea change in hardening attitudes to global trade ‘rules’, marking a potential return to the primacy of sovereign states and mark the first difficult steps in starting to challenge and ultimately undermine globalisation (and I don’t mean the ability to trade globally per se) the iniquitous neoliberal economic orthodoxy that informs it, and the organisations like the WTO and EU that effectively enforce and sustain it. Secretive, democratically dubious bodies who purport to be fair, neutral or benign, but who act principally, though I accept not exclusively, in the interests of ever bigger, increasingly wealthy, disproportionately influential, environmentally destructive transnational corporations rather than in the wider, long-term interests of the populations of sovereign states as a whole .

          Now you might be of the persuasion that all or any trade at pretty much any social and/or environmental cost is always, on balance, a good thing, we shouldn’t throw the baby out with the bathwater and that the oft quoted, ‘rising tide raises all boats’ which is where, I suspect you and I would beg to differ and I would suggest, there’s considerable growing evidence to the contrary, not least the growing, persistent, unsustainable, destabilising wealth gaps.

          Maybe you could return the favour now of defining what a ‘self-sufficient country’ is, provide examples, how it is necessarily vital or advantageous to be one and if so how the UK, it any other country for that matter, should go about it?

          Not sure what

          1. Anonymous2

            @Gman

            Thanks. That is very helpful. I am now much clearer in my mind what point you were making.

            I do not think we are far apart in our general appraisal of the situation. Like you I am of the view that current inequality is hugely toxic and desperately needs addressing.

            What influences my comments is , I have no doubt, is that I am UK resident. I am therefore keenly aware that a country with 65 million inhabitants and only a small amount of arable land cannot feed itself satisfactorily. This is what I had in mind when I referred to self-sufficiency. The UK therefore is obliged to trade in order to earn the foreign exchange needed to finance it’s imports. You ask what countries can do to become self-sufficient. In the UK ‘s situation I suggest it can do only a limited amount without a drastic reduction in population. Ironically that could only be achieved by mass emigration.

            I guess the US is much closer to being able to survive without international trade simply because of its size and the climatic variety of its different regions.

            One of the problems for the UK in the present situation is that it has no choice but to continue as a trading nation. It’s counterparties know this and are in a position where they can take advantage of the UK ‘s vulnerability and almost certainly will. International relations, although they are normally presented as affable, are often very hard-nosed, as I know from my own career. Countries pursue their own self-interest, which is what their citizens expect, and often do so quite ruthlessly.

            The collapse of the world trading system would place an isolated UK, outside any trading bloc in a very hard place.

            1. Gman

              Thanks for the reply and sorry for delayed response..

              No country nowadays is self-sufficient and nor is any ever likely to be.

              Brexit will be an extremely tough gig. It is a leap in the dark, but it is a long-term aim which I believe will be good for this country and many others, particularly in the EU, and more importantly democracy itself.

              I have no doubt that we will find out who are fairweather friends are and who are our potential foes, but I am also hoping that Brexit is the first nail in the monolithic, neoliberal EU’s coffin.

              I also welcome the protracted thorny ‘nationalist’ issues it has bought into focus. Whilst I appreciate that the timing could not be worse in many ways, it is difficult to imagine any other circumstances in which they might be directly and fully addressed either.

              As to your last point, the collapse of the WTO is not the same thing as the collapse of the world trading system, in the same way that a disintegration of the fundamentally flawed, already teetering EU would not mark the end of European trade, simply a far healthier reimagining of it, and either circumstances would not necessarily be a bad thing for the UK, or many others for that matter.

  12. John

    The EU single market is increasingly structured in such a way that favors large multinationals which can lobby the Commission for the best carve out in terms of regulations and laws to keep out competition. Tailoring EU rules, for example, on how quickly Christmas candles can burn is no aberration. It is a deliberate lobbying effort by strong (Continental) groups to smash other candle makers from any chance of thriving in the single market.

    German industry are masters at this. Unfortunately for other EU members, Germany is the big enchilada and their voice carries the most weight behind the curtain in Brussels and Berlin.

    The UK has components. England and Wales voted primarily for Brexit. The Scots and N. Irish voted to stay. Like the Scottish Referendum, Brexit was poorly thought out. In typical conservative governance, the Tories never had a plan for Brexit, and for that matter, still lack a serious one.

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