Syria in perspective

Many people in the country agreed with the Prime Minister when she said she had no plans to involve the UK in the Syrian civil war. We also agreed with her achieved aim of  not adding to the death toll by the limited and targeted military intervention she authorised.

It would be wrong for us to seek to engage in the civil war at this late stage when Assad supported by Russia is close to victory. No clear Opposition force has emerged that could displace the current regime by force and then go on to establish a decent democratic government in its place. Arming rebels and offering them military support against Assad would pitch us against Russia as well, add to the length and violence of the war and offer little prospect of a good result.

The truth is President Obama decided to leave the Syrian crisis to Assad and Russia. If the West had wanted regime change in Syria as they tried elsewhere then it should have been done years ago.   Russia has occupied the space the West left, and now has a strong military presence there in its own right and as advisers and supporters of the substantial conventional forces of the Syrian government.  The West’s more recent interventions  have been air based engagements against the forces of ISIS, which Assad is also  fighting intensely on the ground along with Russian help. The West makes sure Russia knows what they are doing to avoid a clash.

The West wishes to enforce the world ban on the use of chemical weapons. Mr Trump has led  short targeted strikes against chemical weapons use on two occasions following particularly bad atrocities with their use, but otherwise has confined US action to a supportive role against ISIS. It is true he has also worked with the Kurds, which is a difficult complication in the north of Syria. The Kurds want an independent state.  Neither Turkey nor Assad’s Syria wishes to give them independent territory and self government, and both see them as enemies.

The recent strikes were against just three installations connected with chemical weapon production and use. There are more such facilities which were not attacked. The UK government argues that it has helped “degrade” the chemical weapons ability of Assad, without ending it. It also argues that the use of “appropriate” levels of force against some of these chemical weapons facilities should act as a deterrent against their future use, as of course the Western Coalition could target other chemical facilities should the regime use them again. Clearly the Western coalition did what it set out to do, destroying three facilities and avoiding any civilian or Russian casualties.

The West has intervened extensively in Iraq, Libya and Afghanistan. It has mainly been there to  fight extremist groups like Al Qaeda and Isis and has wished to help establish democratic regimes to replace the dictators it has helped pull down. It has not sought to be taking sides in the Sunni-Shia religious war, though it has often been closer to Sunni Saudi Arabia and her allies than to  Shia Iran and Syria. The USA has a network of allies including the Gulf States, Qatar, Saudi Arabia and now Afghanistan and Iraq. Russia has strong links with Iran and Syria.

It is not easy to see any negotiated peace in the violence ravaged country of Syria, but it is to diplomacy, negotiation and to talking that the allies should now turn. If killing more people solved Syria’s problems they would be solved by now. There have been all too many deaths. The future of Syria is not in the West’s control. That decision was taken some years ago.

 

 

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UK inflation tumbles, real incomes rise

On the government’s preferred measure of inflation, CPI(H),  March brought the figure down to 2.3%. On the CPI measure excluding housing it fell to 2.5%. This means real wages and incomes are rising faster than many commentators realised.

It is a reminder how competitive conditions are in retail, with continuing downward pressure on prices from excess conventional shop capacity and fierce discounter and internet competition.

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More good news on jobs, whilst sterling rises

The pound drew level with the rate it reached prior to the referendum, hitting $1.43 again. The only negative forecast of the Remain campaign that they kept repeating after the event because they thought it had more chance of success  has now joined the others as wrong.

During the Referendum campaign I was frequently asked by interviewers to defend why I thought jobs would go up, housing would be unaffected and the economy would continue to grow, as the Remain camp with all the official forecasters behind them said the opposite. They told us with all the authority of establishment error and malfunctioning models  that in the first year or so after the vote we would have a recession, jobs would fall, unemployment would rise, the pound would fall and house prices would fall. I said the opposite of all of those save for the pound. There I said after we vote to leave the pound will go up and down depending on our policies compared to other countries policies, as it has done for many years all the time we have been in the EU.  The Bank decided on loose money in 2016 so the pound fell, and has decided to tighten money this year so it is rising.

Yesterday we learned that another 55,000 jobs were added to the total in the three months to February. Employment is up by 427,000 compared to a year ago, with most of the new jobs being full time. This takes unemployment down again to 4.2%, way below the average  levels in the Eurozone.  Pay went up by 2.8%, so we are back with real increases in pay now inflation is subsiding.  There has been no fall in real incomes since the vote. Unemployment is well below the levels prior to  the vote and pay in money terms is rising faster now than in 2016.

The UK economy is good at generating extra jobs. Now we need to encourage businesses to put more capital into boosting productivity, so we need fewer new people to come in to the UK to  take low paid jobs, and so we can boost pay more for people already working and living here.

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The relentless drive to political union

The EU rests on the four freedoms – the free movement of goods, people, capital and ideas. It central political driver is now the Euro. The UK has never been willing to join the Euro, with around 80% of the public opposed and both major political parties against in practice. Many UK voters also have reservations about freedom of movement, which has meant successive UK governments have kept us out of the Schengen common border arrangements and have sought derogations or opt outs on other features like access to  benefits.

The UK is therefore being a good European by withdrawing from the EU, because it is unable and unwilling to join two of the crucial founding policies of this Union.  Our position has become extremely difficult, seeking to hold up or dilute policies designed to promote greater union. We have also been consistently unwilling to pay more into the budget to help the development of the Euro area.

A single currency needs a sovereign state with its taxpayers to support it. It needs large transfer payments from the richer parts of the zone to the poorer parts. It usually needs a common benefits system, large transfers through such a system, and further large transfers through local and regional government financing from the centre.  The Eurozone has not yet been able to develop all of these mechanisms or to route sufficient cash through the mechanisms it does have to transfer money from rich to poor. The UK leaving will allow the Eurozone members to have a better debate over how far they need to go and have a wish to go to buttress their currency with proper arrangements to transfer cash and to even out minimum income  levels around the zone.

Currently the Eurozone manages to live with a huge surplus run up by Germany, and large deficits incurred by Greece, Italy, Spain and  Portugal through financings via the European central Bank. This Bank accepts an interest free deposit from Germany and lends it on to the countries and their banks  that need the extra money. It would be wise for the zone to consider longer term and more usual ways to handle the need for large transfers within a currency zone. Free of UK membership there can now  be a much closer identity between the EU and the single currency it sponsors.

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Good retail sales in March 2018

The British Retail Consortium reported a few days ago that March retail sales overall rose by 2.3% year on year.  They said “This is above the 3 months and 12 months moving averages of 1.8% and 1.9% respectively but is positively distorted by the timing of Easter.”

 

Today’s more detailed news is that sales on the High Street fell by 8.6%, with a much smaller decline in shopping centres and good rises on line. None of this has anything to do with Brexit. There is a strong trend for people to buy more on line and less in shops, probably speeded up in March by the dreadful weather.  Food sales were particularly strong In March , with a rise of 5.3%.

Some people like to report part of the retail sales story, usually quoting so called like for like in shops, to give a gloomy answer.

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Lecture at Middlesex

On Thursday evening I gave a lecture at Middlesex University about the long period of the UK’s membership of what became the European Union, and why it led so many UK voters to conclude we will be better off out.

Two  things  were most  neglected in the Referendum thanks to the dominance of the Remain campaign and the Establishment behind it in driving the media agenda. These  were the economic damage that membership did  to the UK, and the plans of the EU to move onto political as well as full monetary and economic union. I will consider these today and in later posts.

We need to examine  the EU’s love of austerity policies. They are embedded in the Maastricht Treaty, and apply to the UK as well as to Euro members, though without the same enforcement mechanisms for us as for a  Euro member. Maastricht says that  no state should borrow more than 3% of GDP in any year, and all states should  bring their state debts down to 60% of GDP. This latter requirement forces a country like Greece to try to run a budget surplus, and lies behind Chancellor Osborne’s wish to repay debt in the UK. Each year the Treasury reports on our public finances against the Maastricht requirements, and each year we have a Parliamentary debate about our progress or lack of it in hitting these targets.

Our membership of the EC began badly with a deep recession in the middle 1970s. Whilst this was not directly caused by our EEC membership, it did lead some  people in the 1975 referendum to doubt there would be economic gains from membership. Our presence in the EC did not begin with a surge of new business from joining the Customs Union.  In the first decade the removal of all tariffs from manufactures where we were relatively weak allowed continental countries led by Germany  to boost their exports to us greatly, helping destroy jobs and factories here at home. Conversely a lack of market opening in services where we were stronger meant we ran perpetual large balance of payments deficits.

The worst impact of the EU on us came from their requirement that we join the Exchange Rate Mechanism. This gave us a boom/bust nightmare – entirely predictable as I wrote  in a pamphlet prior to the event. We lost 5% of National Income and Output from the slump it caused. The 2016 referendum was our first chance to vote on the EU’s role in that disaster. The UK government that was the agent of it had long since perished at the ballot box as electors removed the EU’s agent of recession in the 1997 election.

The austerity policies in Greece, Ireland, Spain and elsewhere have been of altogether much greater magnitude than in the UK where we have broken the rules by more and for longer on debt and deficit. In Greece there have been endless rounds of cuts including large cash cuts in pay and pensions which we in the UK have rightly never considered. These policies have been deeply damaging to their economies, resulting in  high unemployment and excessively high youth unemployment.

 

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Moderating posts

I have deleted a number of posts today, as I am short of time. I have deleted some without reading because they were very  long, and some which are  very repetitious in nature, as well as deleting many with attached links to sites I have not read.

 

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We need a Statement on Syria

I trust tomorrow when Parliament meets the government will update us on its thinking on Syria and give MPs every opportunity to examine the position now reached.

I assume the limited action the UK  took with allies early on Saturday morning is the end of the military intervention  planned following the use of chemical weapons in Syria. I stressed before the event that we should not fly our jets into Syrian airspace, run the risk of killing Russian personnel and damaging Russian equipment, and risking  killing civilians. It appears we have avoided all of those dangers. It is now important we show we do not intend to escalate from here. I am glad the PM did tell us she has no plan to intervene in the civil war or seek regime change as those options would require considerable and sustained force and be full of risk.

Labour will doubtless wish to explore the legal base for the action.

Many MPs will want to know how successful it was in destroying chemical weapons production facilities and chemical weapons stocks, the stated targets. We await the full Intelligence evaluation and assume Russian claims to have shot down most of the missiles are false. We will also wish to be reassured that attacking chemical weapons stocks did not lead to damaging release of any of the chemicals, or to the death or injury of people on the ground.

It will also be interesting to hear the governments evaluation of whether this will either prevent or deter future use of these munitions by the Syrian regime. Has the attack crippled their capacity to make and use these weapons? Or did it do such damage that they will conclude it is not a good idea to do it again?

There should  be no escalation of this action and a careful consideration of the results of this mission.

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The international order, Russia and the rules based system

We constantly hear these days that there is a rules based international order which all decent states follow. Russia is condemned for not following these same rules.

Those who think like this usually divide the world up into a majority of states who follow these rules, and a minority of rogue states like North Korea who pose problems for the rest. When it is one of the world’s larger military powers who has greater diplomatic reach, some world support and a seat on the UN Security Council that does not follow the world order this analysis has its limitations.

I am no apologist for Russia, and understand the ruthless pursuit of Russian interests by that state can lead to unacceptable conduct. I condemn atrocities and illegal acts whichever state carries them out when they are reported and proved.

The truth is there is no one set of rules, no single world order that is codified in many areas of government activity which  every state should obey.  Within NATO and the advanced west there are varying rules of law.  The USA has its own set of laws and legal constraints on the actions of its President and senior officials. The EU has another set of laws and legal requirements on its member states. The EU will not accept all the US rules, and will certainly not accept US jurisdiction, nor will the USA of course accept EU rules and control.

The West does come together in some world bodies and helps shape a global approach. There are world trade rules supervised by the WTO which all members accept, though the USA currently feels those rules are not fairly administered with regards to China and Germany. There are important conventions on nuclear and chemical weapons which most countries have signed. North Korea  becoming a nuclear power and alleged use of chemical weapons in Syria causes problems under these global rules. As the current disputes reveal, the countries accused of breaking world rules often argue they have not. China and Germany pose as supporters of a world free trade order, whilst the USA cites evidence that they are not. The West rightly condemns chemical attacks in Syria, only to be told by Russia that no such attack has happened.

The main countries and blocs appeal to world rules when it suits them, and seek to interpret them in directions which fit with their national interests. Russia clearly plays by different rules to the West in several respects. In Syria it will accept more deaths as the regime seeks to  restore its control over the country, as Russia judges an Assad government to be the least bad outcome. The West is against both ISIS and Assad,  but lacks the power and commitment to enforce a different government on that country, whilst  condemning  the many deaths the current civil war is causing.

Those who protest most about the need to create and follow a rules based system need to be punctilious themselves to obey it. Any Western military intervention in Syria today will need a legal base, made more difficult by Russia’s veto of any UN Resolution which could directly support action. The UN is a world body which comes closest to providing a rules based system for the conduct of diplomacy and where unavoidable to regulate  the use of force between states. That body cannot have a clear single view or straightforward rule where the Security Council is divided and where a veto has been wielded.

 

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German views of the EU and Brexit

On Wednesday morning the Today programme had the good idea of going to Germany to find out what they are thinking about the EU and Brexit. A few patsy interviews later we were little the wiser. There was no cross examination of how Germany is changing, with the Eurosceptic AFD now the official Opposition and the CSU moving sharply in an anti migrant direction. There was no proper examination of what the German government will now do post Brexit in response to Macron’s wish to push ahead with political Union and a common budget. There was no discussion at all about the 900 billion Euros Germany is lending the weaker members of the zone at zero interest through the ECB. I would like to have heard what Germany thinks about the pace and style of more integration, how they wish to change the budget after our departure and above all how they will tackle the need for more transfers around the Euro area to help the struggling members with high unemployment.

Instead the BBC was keen to get a few German interviewees to tell the UK what we should expect from Brexit, and keen to play up the latest approach of some senior Germans that it is such a pity the UK is leaving so they should now respond more positively to Mr Cameron’s requests for renegotiation! I find it bizarre that some intelligent Germans seem to think that maybe a concession or two on freedom of movement, and some opt out or emergency brake on benefit rules will mean the UK then changes its mind and stays in. They had their chance to keep us in by being positive about the Cameron renegotiation. Many of us thought Mr Cameron asked for too little, and clearly got a lot less even than he dared ask for. Offering more of the too little he wanted is not going to change anything. The BBC seemed pleased that maybe there will be an offer of tariff free trade after all, as if that was some surprise. Of course Germany wants tariff free trade in goods, given her huge surplus. Whether the EU as a whole can make a sensible offer on trade remains to be seen. Germany should work on the Commission. The BBC was also keen to highlight  those Germans who say that the Transition period cannot be taken for granted as they sought to help Germany squeeze more concessions from the UK to secure a Transition many of us do not want.

It was predictable to hear the Germans say that in the case of us leaving the customs union and single market, as we have said we will do, there was scope to keep us in after all despite early EU rhetoric that of course you cannot be in them if you are out of the EU. Again that boat has sailed. Leave voters voted in the knowledge we would be leaving the single market and customs union, and the EU confirmed the logic of that in all their comments. It was also amusing to learn that maybe passports should be available for financial services, as of course German companies would like them into London, when the UK had ruled them out! It just goes to show that if the UK says No firmly on items Germany is quite keen to make an offer we might still refuse.

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  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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