Brexit: Warmed Over Chicken

On the one hand, we Americans are hardly ones to talk about empty posturing, usually accompanied with moral indignation and finger-wagging. On the other hand, it isn’t just that the Government’s approach to Brexit has been heavy on theatrics and thin on substance. It’s also that the UK is in Groundhog Day mode, subjecting the rest of us to tired tropes yet another time.

The latest iteration of this far-too-familiar play is Boris Johnson acting as if he can threaten the EU with a no deal at the end of the transition period. Specifically, Johnson has made a big show of poking the EU in the eye by setting forth his tough guy negotiating demands over this past weekend. Admittedly, the Prime Minister isn’t setting out his position formally until Monday, but there’s no mystery as to what it will be: a rejection of accepting EU rules yet saying it wants a Canada-style free trade agreement. From the BBC:

Britain will “not be aligning with EU rules” in any post-Brexit trade deal, the foreign secretary has said….

But Irish PM Leo Varadkar said the UK needed to commit to a level playing field to get a free trade deal…

Reports in recent days have suggested EU chiefs want the UK to continue to follow EU rules on standards and state subsidies – while accepting the jurisdiction of the European Court of Justice in any trade disputes.

The PM is expected to say that he will accept no alignment and no jurisdiction of the European courts when talks start in March.

And wags believe the reason for the rollout was to create the impression that the UK was driving the agenda by virtue of preceding Michel Barnier’s remarks this week.

The Financial Times’ version was entertaining:

Boris Johnson is on course for a significant clash with the EU in trade talks on the future relationship with the bloc, with both sides setting out opposing stances on whether a deal will include alignment on rules.

The British prime minister will set out his approach to the negotiations on Monday in a speech outlining his vision for the UK after Brexit. He will state that Britain will maintain high standards “without the compulsion of a treaty”.

But Michel Barnier, the EU’s chief Brexit negotiator, will say the opposite when he unveils the bloc’s proposal for its future relationship with the UK. He is expected to insist that Britain’s future market access be directly linked to its willingness to align with EU rules.

Aside from the fact that trade does not operate on a “trust me” basis, Johnson himself doesn’t have a great reputation in that category and is proving to be true to form. Assuming his speech Monday lives up to the previews, Johnson will repudiate parts of the Political Declaration, the statement of intent about the so-called future relationship with the EU, that his Government just agreed to. Specifically:

In that spirit, this declaration establishes the parameters of an ambitious, broad, deep and flexible partnership across trade and economic cooperation with a comprehensive and balanced Free Trade Agreement at its core, law enforcement and criminal justice, foreign policy, security and defence and wider areas of cooperation…..

This balance must ensure the autonomy of the Union’s decisionmaking and be consistent with the Union’s principles, in particular with respect to the integrity of the Single Market and the Customs Union and the indivisibility of the four freedoms…

This partnership will be comprehensive, encompassing a Free Trade Agreement, as well as wider sectoral cooperation where it is in the mutual interest of both Parties.It will be underpinned by provisions ensuringa level playing field for open and fair competition… To that end, the Parties should uphold the common high standards applicable in the Union and the United Kingdom at the end of the transition period in the areas of state aid, competition, social and employment standards, environment, climate change, and relevant tax matters.

Alert readers may point out that the Political Declaration was not legally binding. True, but that is also the case for letters of intent in business negotiations. It’s one thing for parties to work through deal points that have a lot of wriggle room in them and where the two sides need to haggle about what they mean in practice. It’s quite another thing for one side to renege on a point in a letter of intent without offering a corresponding concession (unless it was abandoning an issue that worked to its advantage). At a bare minimum, it’s a demonstration of bad faith and will taint the talks.

The expected EU draft would reiterate the Political Declaration. Again from the pink paper:

Brussels’ draft mandate for the negotiations will call for a “level-playing field” that would require the UK to stay in line with EU environmental and labour market rules as they stand at the end of Britain’s post-Brexit transition period, according to three people briefed on the contents of the mandate.

Johnson is expected to insist on a Canada-style deal with no/minimal alignment requirements, but Irish PM Leo Varadkar has already pre-debunked that on the Andrew Maar show:

Canada isn’t the UK; you’re geographically part of the European continent, we share seas and airspace and our economies are very integrated.

And one thing we feel very strongly in the EU is that if we are going to have tariff-free, quota-free trade with the UK, which is essentially what we have with Canada on almost everything, then that needs to come with a level playing field.

We, for example would have very strong views on fair competition and state aid.

EU negotiators have probably noticed that the UK didn’t have any problems agreeing to accept US rules. We have pointed out that the US dictates terms in its bilateral trade deals, so this should come as no surprise. From FT reader Iron Knee:

Yet the Brexiteers rushed to submit to US regulations

https://ustr.gov/sites/default/files/US-UK-Framework-MRA-signed.pdf

Agreement on Mutual Recognition

The United Kingdom shall, as specified in the Sectoral Annexes, accept or recognize results of specific procedures, used in assessing conformity to specified legislative, regulatory and administrative provisions of the United Kingdom, produced by designated conformity bodies and/or authorities in the United States

There was a lot of rah-rahing on Twitter over a Financial Times story that Nissan had a contingency plan for a hard Brexit of largely abandon EU operations and invest more in the UK with an eye to stealing share from other automakers there. However, this isn’t inconsistent with our predictions. We had stated that non-tariff trade barrier would wreak havoc with automotive supply chains, which operate on “just in time” principles. Thus UK part-making for EU end customers would get shifted out of the UK or displaced by other countries. Automakers would still supply the UK market…via some reconfiguring UK operations to be more self-sufficient. Others might instead only ship in completed vehicles. The Financial Times “doubling down” headline also exaggerates the magnitude of the possible production increase:

But the Japanese carmaker has invested more than £4bn in the [Sunderland] site, the largest in the UK with 6,000 workers, and is determined to keep the facility operational even at the expense of abandoning its exports-based model….

The site is equipped to make up to 600,000 cars a year, but last year output fell by a fifth to 350,000, with 80 per cent of the vehicles exported. Under the scenario of selling only to the UK and growing sales, the plant could reach 400,000….

The idea of abandoning the business in mainland Europe underscores how far Nissan’s fortunes have declined in the region, where sales fell 17 per cent to 567,000 vehicles last year and most operations are lossmaking due to a sharp decline in diesel demand.

In case you missed the math, 350,000/.8 = 437,500. So its “focus on the UK” plan would not get production back to the level of a year prior. There might some short-term additional employment due to the need to reconfigure the plant, but the ongoing labor requirements would presumably simply be in line with the recent past.

The BBC said Johnson also intends to threaten the EU with customs checks at UK point of entry. As Richard North pointed out, the EU is not impressed:

If the strategy is to pressurise the EU into giving the UK a better trade deal though, it is unlikely to be treated as a credible threat. In the short to medium term, the UK is in no position to set up inspection systems which could handle the volume of goods coming in from EU Member States….

Needless to say, a “senior EU source” has rejected the idea of reacting to Johnson’s plan to impose import controls. “We saw similar threats from Theresa May” he says, “but frankly we never believed them. And if the UK is actually ready for border checks – which are indeed coming – then so much the better for both sides”.

Even the normally sober Economist concludes that Johnson is aiming for “the hardest possible Brexit.” He does have a fallback:

Some dry humor from the Financial Times:

This new stance has prompted bafflement in Brussels, given that Canberra is still in the process of negotiating a wide-ranging trade deal with the EU.

Oh, and the press has largely skipped over the fact that the EU and UK are not on the same page as far as the “shape of the table,” as in negotiating process is concerned. From Politico:

EU countries have now mapped out their priorities for Brussels’ position in the upcoming talks with the U.K. on future relations. A summary compiled by the Council secretariat, and seen by POLITICO, shows that countries want, among other things, a “single negotiating channel” with “no separate negotiations” between London and individual EU countries. They also demand that the EU pursue a “comprehensive approach with the possibility of trade offs between chapters.”

The structure of that agreement looks like a house with the roof being governance/general principles, sitting atop two pillars covering economic components and security.

Needless to say, this does not look pretty. As I said to our Brexit mavens by e-mail yesterday:

Johnson is playing a game of chicken. He’s already lashed himself to the mast of 11 months.

Sir Ivan Rogers basically warned that the early months would amount to shape of the table talks and he thought negotiations could break down then. I would not see that as lasting but with time so tight any delay increases the risk of bad outcomes. And Sir Ivan warned that there had never been a trade deal between countries trying to get further apart. He’s stressed that point so often that I think he is saying at least that the human dynamics of that make getting to a deal more difficult.

Again, if the time weren’t so rigid, the odds would look completely different.

And the EU would almost certainly give an extension if the UK asked….but at a price….and would Johnson ever ask? The most I can see him being able to finesse might be say a 2 -3 month “technical” extension, which won’t buy meaningful negotiating runway given the complexity of deals like this.

Now we’ve seen these games of chicken resolve without a crash before, but Johnson is making it difficult as hell, and the UK is further hampered by a Foreign Office which is short staffed and has effectively no experience negotiating trade deals.

David’s response:

The fundamental problem is that the most brilliant team of negotiators in the world can’t do anything unless they have a clear negotiating mandate. (This was the case in 1972 and 1991 by the way). There comes a point in negotiations where you have to decide whether to stick, twist or bust, and you can only do that if you have a clear idea of the overall political objectives of your masters. There’s nothing worse (it’s happened to me) than to be sent out to die in a ditch on some issue only to find out half way through that your principals have had a rethink and changed their position. It doesn’t do your credibility any good, but it also makes it practically impossible to negotiate, because nobody believes you afterwards when you say “no.”

Not only do I not think Johnson has no real negotiating objectives, I also believe that he’s uninterested in even fairly high-level detail, and sees the negotiations as one more jolly game that he wants to win. My fear is that he’s out to deliberately sabotage progress in order to create drama and tension, only to fly to the rescue at the very last minute. This is more than dangerous. “Insane” is perhaps the word for it.

Some other takes. Will Hutton in the Guardian contends that Johnson has become a prisoner of the allegiances he made to become Prime Minister (and Hutton is very complimentary of the moves Johnson has made so far ex Brexit). I’m not sure I agree, since before his ascent, Johnson was famed for shamelessly reversing himself and getting away with it. But Johnson sure looks like someone who is choosing to throw away the steering wheel. From the Guardian:

However, Johnson has one fatal weakness – the Faustian bargain he struck to deliver a hard Brexit to win the prime ministership. Any economic bounce this year will be short-lived: the Bank of England’s forecast of 1.1% growth for the next three years could even be optimistic, as both inward direct investment and UK business investment dry up when access to the EU single market and customs union ceases. The Canada-style trade deal Johnson advocates is as close to self-immolation as economics provides. Britain already has a vast trade deficit in goods that will widen alarmingly as competitive overseas exporters take advantage of zero tariffs, while services – where Britain has great competitive strengths – will be crippled by being denied their former EU markets. It is insane and risks an unstoppable run on the pound, as a former cabinet minister privately agreed. Renewed austerity and recession will follow.

Johnson and his Brexit cabinet, backed by our Europhobic rightwing press, will blame dastardly Europeans for the crisis – and the anti-foreigner mood will grow ugly. But even if the worst is avoided, Britain is plainly not going to grow at “new dawn” rates of up to 2.8%, as our curiously naive chancellor wants. Rather, the years ahead are going to be a drip of disappointments, as the reality of a hard Brexit bites. And on this Johnson cannot be breezily opportunistic and convert to a soft Brexit, tempted though he may be. He will be imprisoned by his know-nothing right – the European Research Group in full battle cry.

Richard North argues, “What this looks like, therefore, is Johnson setting up his alibi for the failure of the talks, getting his blame game cranked into gear before the EU can react.”

And Richard Murphy contends Johnson knows what he is doing, which it to put in place Singapore on the Thames:

Nothing I have yet seen so starkly states what Brexit is all about.

For Johnson the first objective of Brexit is to place greater controls on labour. The intention is to ensure that by controlling free movement labour itself can be controlled, and so too can its price be kept at rates the government would desire. And that is low, of course.

And his second objective is to create freeports. He will claim that these are all about creating regulation free hubs for enterprise. This is completely untrue. There is no evidence that regulation free ports have ever generated work, wealth, much employment, or free market enterprise, come to that. This is unsurprising. That is not what freeports are about, at all. Freeports are instead about permitting the free movement of capital beyond the control of the state and without the imposition of any taxes.

Quite bizarrely, given that freeports are effectively declared to be outside the country that creates them, one of the major objectives Johnson has for Brexit is to carve whole chunks of the UK out of the control he claims to have just taken back, and to pass it over to the free loaders who frequent freeports.

To understand how freeports really work I suggest watching this video. I know it’s not in English, but it’s good, and explains how the Geneva freeport works to handle diamonds, gold, armaments, fine art and rare wines, all beyond the control of authorities and all beyond the reach of tax:

The aim of freeports is to undermine the state.

It achieves this by suspending the law.

Freeports permit illicit activity.

They permit wealth to be accumulated in secret.

That wealth is beyond the reach of tax.

Research suggests that much of that wealth is also shielded by anonymous offshore shell companies that disguise the ownership of an asset even if it can be located.

The object is to ensure wealth can accumulate without constraint.

This is the paradox that Johnson revealed in his video. He wants to control and constrain people. He will use that power to oppress, not just those who want to come to the UK but also, of course, those who wish to leave the UK as well. The market in labour will be  constrained. People will suffer as a result.

At the same time the market in illicit wealth will be liberated to traffic at will. The cost will be to us all, in lost tax revenue, increased inequality and the undermining of the rule of law. Additional jobs will be few and far between.

And let’s not for a moment pretend that any freeport activity supports markets: creating ring fences always creates unlevel playing fields that will always, by definition and in practice, undermine effective markets. So there is nothing in this policy that is about wealth creation: it is all about wealth expropriation and extraction.

This is what Brexit was for. And Johnson admitted it last night. One day people will realise.

If Murphy is correct, that would explain Johnson’s recent conversion to fixity of purpose, at least with Brexit. We’ll have more clues in due course whether the hard core Brexit faction is mad like a fox or simply a different variant of the madness we’ve seen all along.

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48 comments

  1. notabanktoadie

    but it’s good, and explains how the Geneva freeport works to handle diamonds, gold, armaments, fine art and rare wines, all beyond the control of authorities and all beyond the reach of tax: [bold added]

    Gold obviously has value in industry but its use as or to back fiat is inherently corrupt* and obsolete** too.

    So let’s please quit idolizing a corrupt and obsolete money form, i.e. Central Banks, along with other reforms, should be required, in a manner to promote the general welfare, to sell all private asset forms, including precious metals such as gold.

    *Fiat is backed by the authority and power of the State to tax and needs no other backing; hence to “back” fiat with gold is to do no such thing but is to back gold with the authority and power of the State to tax, a violation of equal protection under the law.

    **Historically, precious metals had some use as an anti-counterfeiting measure but modern payment systems have no need for such.

    Reply
  2. PlutoniumKun

    Yup, the Freeports thing is clearly the Big Idea that lots of Brexit backers are hoping to cash in on. Of course, what will happen is that lots of manufacturers will simply move into the Freeports to save on taxes and regulations and close down their existing premises.

    The UK has been there before – Thatcher was a huge fan of Development Corporations which were low tax low regulation zones in crumbling industrial areas of the North and Midlands. They became a byword for outright corruption. And of course huge areas which were supposed to be redeveloped for industry became distribution hubs or frequently just massive shopping malls (such as Merry Hill in the West Midlands, owned by two major Tory financial contributors). Various studies after the event intended to demonstrate their success were quietly buried when the results were not as expected. In reality, they were a costly failure.

    Reply
      1. Colonel Smithers

        Thank you, Gentlemen.

        Further to Vlade’s quip, or socialism for the rich. I hope you feel better. I will write privately.

        Further to PK’s call out of freeports, the likes of Legal & General have been buying land in what they term “strategic areas” like the M1 and M4 corridors in anticipation of such and housing developments. Thousands of acres are “banked”.

        The area earmarked for the HS2 terminus in the north west is owned by a Tory donor and friend of George “northern power house” Osborne. A shopping mall and upscale housing are planned if HS2 gets up there, which explains the furious lobbying to keep HS2 alive. The family, who sold flooring in Manchester, bought the Cheshire estate off the Egerton family, relatives of the “canal Duke” of Bridgwater and developer of Manchester.

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        1. PlutoniumKun

          When HS1 (the high speed link to the Channel Tunnel) was being planned the appropriately monikered Chairman of the railway land investment company (and father of a very famous novelist) was forced out of his position – with a huge payoff of course – when it was revealed that his wife was indulging in property speculation along the route.

          Its amazing how much money you can make in a short timeframe with a little knowledge of changing route and station options.

          Reply
            1. larry

              Col, does DDG refer to DuckDuckGo? Others I can think of don’t fit the context. Thanks.

              And PK, vlade, thanks also for the info. Why am I not surprised?

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            2. Lambert Strether

              Colonel Smithers:

              The same is true for rail in all of Southeast Asia: On the city scale, from urban transport (malls; condos), on the national scale, from building new lines (entire towns).

              Reply
              1. PlutoniumKun

                In Asia they are usually much better at using property to at least partly finance infrastructure. In China they ensure land is in public ownership as they extend metros and High Speed Rail links outwards (this isn’t to say there isn’t massive amounts of corruption, but at least most of the new land value goes to the public). They’ve extended this model to many other Asian countries, except that the country that owns the land tends to be still China, as opposed to the host.

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            3. PlutoniumKun

              Col., I don’t believe you’ll find the details on DDG or elsewhere – it was very much kept quiet and a matter of internal gossip. The obituaries for said railway man are conspicuously quiet on the matter of when and why he left the company.

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            4. Susan the other

              Col. S. – I’m still confused about the concept of “equivalence” which was granted to Switzerland and recently withdrawn by the EU. The UK is now asking for this concession for its financial services. Can you explain? Also freeports look like storage units for the kleptocrats – just a place to store all yer stuff, but in total secrecy. Is it true that state authorities cannot violate this privacy?

              Reply
              1. Clive

                This is a vast subject and to treat it too casually can lead to misunderstanding — and often deliberate misinformation. But, accepting space limitations, I’ll try to give an overview. There are two broad concepts.

                “Passporting” is where the EU accepts another country’s regulatory regime (and this could be an EU Member State where acceptance is automatic or a third country like Switzerland which used to have such rights) as if it was EU law. This allows very wide and deep placing on the EU’s Single Market financial services because what’s accepted by the “passported” country’s regulators is accepted by the EU.

                “Equivalence” is where some aspects of a third county’s regulatory regime are regarded as meeting EU law. This is much more piecemeal.

                This is a good explanation of the various moving parts: https://thesuite.pwc.com/media/9663/pwc_insight_equivalence_vs_passporting.pdf

                The UK hoped for a “Swiss model” style passporting arrangement, but this was almost certainly terminally dashed when the EU closed off the actual “Swiss model” last year and refused to extend the passporting.

                This left Equivalence, but the EU is attaching strict conditions to any such ideas (from the Commission document David links to a little way below):

                The envisaged partnership should reaffirm the Parties’ commitment to preserving financial stability, market integrity, investor and consumer protection and fair competition, while respecting the Parties’ regulatory and decision-making autonomy, and their ability to take equivalence decisions in their own interest. This is without prejudice to the Parties’ ability to adopt or maintain any measure for prudential reasons. The key instrument the Parties will use to regulate interactions between their financial systems will be their respective unilateral equivalence frameworks.

                The cooperation on financial services should establish close and appropriately structured voluntary cooperation on regulatory and supervisory matters, including in international bodies. This cooperation should preserve the Union’s regulatory and supervisory autonomy. It should allow for informal exchange of information and bilateral discussions on regulatory initiatives and other issues of interest, for instance on equivalence. It should ensure, where possible, appropriate transparency and stability of the cooperation.

                Which doesn’t sound too bad, but then you get to:

                Should a dispute raise a question of interpretation of Union law, which may also be indicated by either Party, the arbitration panel should refer the question to the CJEU as the sole arbiter of Union law, for a binding ruling. The arbitration panel should decide the dispute in accordance with the ruling given by the CJEU.

                … which means that the European Court of Justice (CJEU) is the superior arbitrating authority. What’s wrong with that? Let’s just say that the CJEU is seen as having more EU-friendly judges than an internationally constituted dispute resolution body like the WTO.

                And, crucially, for the FTA, there’s no cherry picking. Accept the EU’s Financial Services clauses, you have to accept the ones on fisheries, state aid, SOEs etc. etc. etc.

                Returning to the Swiss model, what may have stiffened the UK’s resolve in rejecting the EU’s FTA proposals was that, in a similar game of chicken between the EU and Switzerland, the Swiss toughed it out. So we’ve had getting on for a year to observe what actually happens in such a situation, rather than the speculating (which tends to result in extremes of rha-rha’ing or catastrophocising, depending on the preconceived stances of the onlooker) on what might happen.

                The impact on Switzerland of loss of passporting seems minimal, if there was indeed anything material. Better informed sources than I (I only deal with UK retail matters in my TBTF so what I hear from the Treasury, Trading and Corporate teams is second hand) will be required to offer anything definitive, though. If anything, loss of liquidity (a real bugbear of EU financial services outside of the UK and Switzerland) has hurt the EU more than anything impacting Switzerland. It is arguable that the CJEU’s perception by investors — whether that perception is accurate or not, I won’t dwell on here — is a limiting factor in attracting international capital to the EU’s markets. But generally, the UK (London) is a very different animal from Switzerland, so read-acrosses to what happened with the Swiss degradation from passported Single Market access rights to third-country rights are not conclusive.

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                1. Susan the other

                  Thank you Clive. Still leaves me puzzled as to what the actual effect/benefit of “equivalence” is for both sides.

                  Reply
                  1. Clive

                    That is actually a quite profound and little-asked (so plainly and simply!) question.

                    For the EU, the Member States get access to whatever services are provided for by the “equivalent” third country. These, such as probably the best known example LCH https://www.lch.com/about-us/open-acces might not be easily replicable in legal, regulatory and large scale capital formation restrictions which may exist in EU Member States. It’s worth keeping in mind, supporting a large-scale finace sector is a huge risk for a country because in a crisis, the woes of the finance players will come a callin’ on the soverign’s debt issuance capacity. Some countries, like Germany, are almost psychologically averse to this whole concept.

                    For the third country getting equivalence, obviously they hope to offer frictionless supply of the services into the EU.

                    That’s about as simple as I can explain it, but it does justify a longer form description.

                    Reply
          1. Caleb

            The same thing is happening in California. Transit Oriented Development means the sky is the limit for building within half a mile of a new rail transit station. With the loud collaboration of “housing activists hoping to house people who cannot afford rent”, big money is cashing in on property and throws a few crumbs off the high table to people chosen by lottery for low income units.
            Here’s an example:
            “Lowe’s plans call for a massive development that would see about 1.6 million square feet of office and 175,000 square feet of retail space built while only accommodating about 440 rental housing units in and adjacent to the outdated Sequoia Station shopping center. The project proposal — which council members fear will worsen the city’s jobs-housing imbalance — includes a 17-story office building which would be the tallest in the city at 239 feet high along with three 10 story buildings, two eight-story buildings and a seven-story building.”
            https://www.mercurynews.com/redwood-city-sequoia-station-re-design-could-stall-developers-plans

            The ‘smart train’ in the North Bay of Sonoma and Marin Counties is a sterling example of this. Basically a land development scheme with a courtesy train thrown in, like a few pretzels in a pub.
            https://www.sfchronicle.com/bayarea/article/Battle-heats-up-in-North-Bay-over-proposed-tax-14982247.php

            Reply
      2. PlutoniumKun

        A friend of mine worked in one of the Development Corporations. She said she was present in meeting to distribute development grants where one by one the members of the DC board (all representatives of local business) would leave the room while the remaining members would vote through grants for that individuals company. One by one they would play musical chairs while millions was distributed to no doubt very deserving local investors.

        To add to this, in the name of ‘removing red tape’, the same Board would vote for planning permission for new developments, which often consisted of replacing viable industrial buildings with shopping malls and drive thru McD’s. All were trumpeted as ‘new investments’ and job creation schemes.

        Reply
    1. ObjectiveFunction

      [Throws head back and laughs insanely]

      The Association of Indonesian Real Estate Companies, which has more than 5,000 member companies, wants President Joko Widodo to take steps to rein in those seeking to profiteer from the soaring demand in East Kalimantan…. Speculators don’t develop anything as they just wait until land prices increase, and then sell. Developers expect the government to secure the land, which can be developed by them.

      And on the board of Indonesia’s new capital project (wait for it): Tony Blair!

      Well done, England, your korupsi is rapidly approaching global(ized) best practice. Next stop: ‘Mister Ten Percent’?

      What now must we do?

      Reply
  3. vlade

    The headline should be “warmed over chlorinated chicken” :)

    Col. Smithers over the weekend mentioned how African delegations were already promised looser regulation and fewer import controls on food. And if it was already taken in front of them, I’d guess the US has the doco ready to sign already (if not signed).

    Because being a larger Porto Rico is so much better than being an EU colony.. At least it doesn’t look like it will he Hong Kong in North Sea yet.

    Reply
    1. Colonel Smithers

      Thank you, Vlade.

      According to my friend the attendee, apart from Ghana and South Africa, there’s little interest in little ol’ Blighty, apart from such freebies. Ghana wants funding for airports and universities. SA scents an opportunity for its agriculture and, as it becomes drought prone, will prioritise hard currency export earnings over feeding itself. The Francophone and Lusophone delegations privately prefer furthering trade with the EU27. According to my friend, only SA came prepared for the side discussions. It was a stunt for Johnson.

      Reply
      1. Mareko

        On South Africa I think you are spot on, sir. Here in desperately under powered Botswana our lights twinkle merrily while our southern overlords ironically suffer rolling load shedding, their bankrupt public utility selling us power for a tidy profit.
        Regarding South African agriculture I can claim familiarity because they supply almost all our fresh produce. One thing that might give the British a nasty surprise in any arrangement that involves reducing barriers to South African produce is the prevalence of genetically modified crops there. I wouldn’t be surprised if they chlorinate their chicken too.
        If they get an agreement with SACU though, the UK should also get easier access to Botswana beef, which is still basically 100% organic and free range and amazingly good. I refuse to eat beef when I visit family in the UK.
        SACU btw is fascinating. It can’t be a coincidence that the only member state with a solid industrial and manufacturing base is South Africa.

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        1. John A

          Chlorinated chicken here we come. Johnson is already adopting the US ambassador to Britain (ask court of st james) argument by claiming UK will be ‘governed by science, not mumbo-jumbo’ on food imports. Cue paid-for GMO and chlorinated chicken scientist lobbyists claiming fears are simply mumbo jumbo.
          The US ambassador came out with the same stuff about ‘science’ a week or two ago.

          Reply
  4. Colonel Smithers

    Thank you, Yves.

    There were big races at Leopardstown, Ireland, and Pau, France, over the week-end. Some of the races in France were won by British raiders. When interviewed, the British owners said that they were investing in France and Brexit was one factor. These are not oligarchs or royals who often have their horsepower deployed across borders, but the mainstays of the less glamorous races that keep the day to day industry going. These horses are often trained outside the likes of Newmarket or Lambourn and help keep rural communities, usually Tory strongholds, going.

    BTW, if any of the NC community find themselves in south west France, Pau is well worth a visit. The snow capped Pyrenees are a beautiful backdrop to the races and Henry IV’s castle.

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    1. larry

      And this malfeasance is not all. Cummings has set up a spy unit within No 10 designed to stop leaks. Surely, everyone knows of Deep Throat. Cummings can’t really think he can ‘watch’ every multi-story car park in London. So far, he has only targeted lunches. But that is the easy part. Either he is delusional or this is nothing more than soap opera.

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      1. paul

        He is clearly delusional, or he doesn’t have a mirror by the door.
        Anyone who thinks his unique synthesis of geriatric skateboarder and everyone’s last choice as a babysitter is a good look, needs someone to have a word with them.
        Hardly matters in these heady moments.
        He figures the enforcer/eminence gris role will protect him.
        Which it will (given his extraordinarily indolent ‘boss’) for now.

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    1. paul

      I cannot see them being allowed that opportunity.

      This is what you voted for

      As us Scots are reminded:

      It was a once in generation event

      Though those that swung it, the old and comfortable, will have gone to,at worst, a better place.

      Reply
  5. Mikel

    Many people believe differently, but I’ve seen interviews with hard-core Brexiteers where it appears they sincerely believe the EU’s days are numbered. I’m only pointing that out as a theory as to why the British govt think “no-deal” is a bargaining position.
    As for “Singapore on the Thames,” it’s been consistently pointed out how much the top global 1% – 5% in wealth have more in common with one another than the average citizen within borders of a country. There are plenty of EU oligarchs (with political pull) that would welcome such a secrecy haven.

    Reply
  6. paul

    There are plenty of EU oligarchs (with political pull) that would welcome such a secrecy haven.

    Why would they bother, they’ve got lichtensein/monaco/andorra,have they not?

    Maybe their paranoia requires extra backups such as Jersey and all points outward.

    I think they’ll bump along fine.

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      1. paul

        I think that’s the way it works, if you are careful of having too much money.

        At that point, it’s a marginal-cost no brainer.

        Thanks to the overwhelming influx of low skilled political representatives and functionaries in every (former) jurisdiction, these troubling thoughts will not disturb their nights.

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  7. Caleb

    Non economist here: How exactly does Switzerland become rich from free ports?
    They don’t tax anything and they don’t get any benefits except the construction activity, the hotel stays and a few knock-ons?

    Is it the cash stashed in their banks that they get to loan out? How would it work in England?

    Reply
    1. paul

      I think that is because SW takes autarky seriously.
      They have retained an effective industrial sector, as joon chang was delighted to point out,
      From what I have heard, there are tensions regarding metropolitan vs agrarian,(not unknown elsewhere)
      …but switz is zwitw.
      Their service sector is (exluding their banks/accountants*) highly regulated, and despite their potential diffucultties, neither ‘europe’ or ‘switzerland’ are in tears over their current relationship

      *accountants: there is 5 great british pounds waiting is one member of our great community can propose an honest set of accounts for a company not connected .

      Reply
    2. turtle

      I think that that was precisely the point being made: the country itself doesn’t benefit, but ultra-rich people can enrich themselves further while skipping taxes through activities in these free ports. Hence why they are not desirable to anyone but the ultra-rich.

      Reply
      1. paul

        But the strking difference is that switzerland just looks down from its mountains and says\ OK.

        Eveveryone I’ve met says they are most cold blooded to deal with,and the most joyless (though the dutch run them close).

        Maybe that the land and city tension is still alive there.

        You can’t have any internationalism if you don’t have nationalism.

        Reply
  8. Andrew Thomas

    Given the utterly pathetic EU response to the destruction of the Iran nuclear agreement and the thigh-slapping wonder if the Israel-Palestine “deal of the century” last week, I wouldn’t be too sanguine about the arrogance of Bojo and his minions. The EU destroyed Greece not only because it could, but also because it was allowed to do so. If the UK’s deal with the US, which will in any case be a catastrophe for the 99% in the U.K., has a clause in it that the US will punish the EU unless it agrees to Bojo’s absurd terms, what will the EU do? If it says no, it will be the first time it won’t have utterly capitulated to Washington. The U.K. may not become Singapore on the Thames, but maybe Israel on the Thames. Utterly lawless, and under protection from any inconvenience because of it by the good old US of A. Please tell me I’m crazy, and why. I truly would welcome being convinced.

    Reply
    1. Bert Schlitz

      Eh, I think you may be in for a surprise when capital markets to through their next correction. The UK government may be overthrown. All they are are globalist plutocrats that would make EUcrats blush.

      Reply
      1. Andrew Thomas

        I would welcome such a surprise with open arms. But what would replace it? A government that would offer more -or any- resistance to Trump and company? And which will negotiate with the EU as if it was on the same planet, thereby exposing that Brexit’s promise was a pack of lies?

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      1. Titus

        Sorry Vlade, with the doomsday clock at: ‘Closer than ever: It is 100 seconds to midnight’, you’d be surprised how having nuclear weapons in the time of climate chaos, will be. It’s been gamed out, actual it’s a continuously run simulation. The RoI aside from demanding boarders in the name of the EU has what exactly? As an aside it’s a very bad idea for anyone to underestimate Dominic – based on my own experience in dealing with him. I’d say the only one that predicted Brexit right and knew how to play it was Dominic- not that he lives in a vacuum because he doesn’t. He listens to many kinds of people and adapts. He also has a reflection as I’ve seen it.

        Reply
        1. vlade

          The EU has nukes. And, after the UK leaving the EU, you can bet that the EU will do nothing to ask French to get rid of them.

          So what do nukes have to do with it?

          The original Brexit vote was so close run thing that you could not _really_ predict it, exept saying “too close to call”. And that was IMO visible from at least March 2016 (and I said so at comments here, and repeatedly to anyone who asked).

          Cummings is skilled – but i thikn he’s also deluded in number of ways – i.e. believing that just because he’d get smarter people in civil service it would get better. I can’t say for sure, as I don’t really know whether it’s what he really believes or just says.

          But, crucially, so far he had opposition that wasn’t really there. See, this is one of those things where you have the “genius generals”, but often when you look at them, they were just facing pretty bad opposition to start with (Lee, for example, didn’t face a good general until Grant. When it came to fore that Lee was a briliant tactician, but bad strategist. Montgomery for the UK in WW2 was horrendous, and el Alamein was really planned and prepared by his predecessor). It’s easy to win when it’s almost the default option.

          Reply
          1. Anonymous2

            Thank you vlade. I think you are right.

            On the matter of incompetent opposition…….

            I have not tried to check it out because I don’t want to give Cameron money. However I did read a comment on the internet that in his book ‘For the record ‘ (?) Cameron says he purposefully ran a bad campaign because he didn’t want Remain’s margin of victory to be too big. Can anyone confirm if this report is accurate?

            Someday I may go to my public library, assuming it still exists. Or see if I can browse long enough in a bookshop to check it out but if anyone can save me the time I would be very grateful.

            Reply
    2. rosemerry

      What a marvellous comment! Certainly not crazy, just perceptive.
      This is replying to Andrew Thomas.

      Thanks to everyone for the great article and all the comments. I learnt a great deal from all of this, and the video of National Disintegration was stunning.

      Reply
    3. Anonymous2

      I regret to say I have a horrible sinking feeling, Andrew, that your fears may well be proved founded. I fear that the worst lies ahead of us. I wish I could be more reassuring.

      Reply

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