Trade wars

There is a new misleading Remain argument around at last. They have seized on Mr Trump’s push back against China and are claiming this means the UK will become dependent on the WTO just at the point where the USA is undermining the world trading system.

This is another spectacular misunderstanding. Mr Trump is pushing hard bilaterally, and has already secured some relaxations of trade from China as a result of his actions. The USA and China remain members of the WTO and have to put their actions into a WTO legal framework. Mr Trump has so far bypassed WTO just over steel and aluminium, by claiming national security, but is pushing other changes through the usual WTO processes. There is no question of the USA leaving the WTO. B0th the EU and the UK will continue to be governed by WTO rules after we have left the EU. The aim of Mr Trump is to end up with more access to China’s markets, as he draws attention to the lack of symmetry between China’s access to the USA and US access to China. It is highly likely he will secure more access, and thanks to WTO rules that will help us as well as the USA. Whatever China offers the USA she will have to offer the other WTO members.

The EU is now trying to exploit this argument  as well. They are telling us that the UK with just 2.5% of world trade will not be as influential in the WTO as the EU with  13% of world trade after the departure of the UK. This too is a misunderstanding of how the WTO works. Small countries as well as large countries are looked after and helped by the WTO as long as they are pushing for freer trade. The WTO looks forward to the UK getting its vote and voice back in the WTO as the UK will be an important voice for freer trade worldwide, and will be seeking bilateral free trade agreements with countries that do not have them with the EU.

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Why do so many former senior civil servants want to stay in the EU?

The uniform voting of former senior civil servants in the Lords against Brexit mirrors the work of many  interest groups and Remain supporters  to seek to recreate our membership of the EU as we leave. The former  civil service sees every change or withdrawal from an EU body or system as a problem, and they seek as an answer keeping it by proxy or opting back into it. This is not what we voted for. Ministers supervising work on Brexit need to push back harder on any advice they are getting which reflects the Lords critique of Brexit. The civil service of course has a duty to tell Ministers of any pressing problems, but also a duty to help Ministers push through good answers to those issues that result in implementing the agreed policy of Brexit. Neither side in the referendum will be happy if we recreate an EU membership by proxy from outside.

I have spent many years wondering why so many officials have been so keen on this institution. I concluded that they like its unique combination for them of unaccountable power and dispersal of responsibility. Officials do much of the detailed work with their opposite numbers in 27 other countries on the agenda, laws and programmes of the EU. UK Ministers have to work hard to have any influence on the process, and many don’t bother, just accepting what the EU throws up as something they cannot control.  EU laws and policies can be used by officials to block things elected Ministers want to do.

Even better the EU system means no-one is to blame. If you dont like one of their laws its origins are lost amongst the government of 28 states and the Commission. Try pushing for amendment or repeal and see how undemocratic it us. The legislative process is formally  conducted around the Council of Ministers table without outside observers or press present, and the detailed and often effective  legislative process is undertaken by Commission officials often in conjunction with big business and powerful lobby groups also without proper transparency.

We voted to leave this system because people cannot sack those responsible for its actions as you can the Ministers of a national government. A leave deal which doesnt understand this is a bad deal and  should not be accepted.

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Globalists versus little Europeans

How many more times do we have to debate staying in the Customs union? The Commons has twice had important lively debates, and has twice voted decisively to leave the Customs Union in accordance with the views of both the Remain  and Leave campaigns in the referendum that we would have to or want to. The amendment to the EU Withdrawal Bill in the Commons to keep us in the customs union was defeated by 322 votes to 99. The proposed amendment to the Queen’s speech debate along similar lines was rejected by a similar margin.   The whole Bill without customs union membership was approved by 324 to 295.

Remain always wanted to make the referendum a debate just about trade. Leave countered that it was a debate about something  much bigger. It was a debate about democracy itself, and who is in charge. We voted leave to take back control of our money, our borders, our laws, and yes also our trade policy. In the referendum debates I always stressed both that it was in  the EU’s interest to accept the UKs likely offer of a free trade deal, and that  they might nonetheless decide to self harm. Given the imbalance in trade and the fact that tariffs are only high on agriculture, the UK could do just fine on WTO terms.

The trade debate itself is one between Little Europeans and Globalists. The Remain case was always contradictory.  They say that WTO terms on UK/ EU trade would be deeply damaging to the UK, but our bigger  trade with the faster growing rest of the world on WTO terms was just fine! Remain decided to grossly exaggerate possible adverse effects of agricultural tariffs on the UK, a net importer, and ignore them on the rest of the EU, the net exporter! During our membership of the CAP and CFP we have lost market share and ended up as heavy importers. Meanwhile we are banned from buying cheaper imports from non EU sources, where they make us impose large tariffs.

We globalists constantly pointed out in the referendum that the EU Customs Union was a nasty set of restrictions on our trade with the rest of the world. They are especially damaging to poorer countries who would like to sell us their food at good prices but face large tariff walls. The Leave side had its own debate between those  who think like me we should bargain away some of these tariffs for free trade deals with many  countries, and those who wished unilaterally to sweep away many of the food tariffs and go for cheaper food straight away.

I find it difficult to  accept another Groundhog day where the Remain politicians and media wish to relaunch their incoherent Little European approach to trade, and wish to reinforce the EU s aggressive stance against food producing poor countries. Giving a bit more aid is  no substitute for trade which could help lift the incomes of poorer countries  more quickly.

I am a globalist in this debate. It is better for the emerging countries. It is also better for UK farms and fishermen, who will recapture market share from the continent when we leave properly.

 

 

 

 

 

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Shopping and parking

There seems to be virtual unanimity on this site that high charges for parking, and difficulty in parking in or near Town Centres is an important contributory cause to the decline in use of High Street shops. It is true that out of town centres and retail parks with plenty of free parking near to the shops have a distinct advantage, as does the internet. I will have another go at making this case as part of the debate on how to revive or improve town centres.

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Solving the Irish border

The EU has long decided to use the Irish border issue as one to try to force the UK to stay  in the Customs Union, keep all EU rules and make the exit payment they want which is not a legal requirement on the UK. It is most important that the UK civil service negotiators understand this is a silly ruse, and robustly put the alternatve case. Let me remind them what it is.

The border between the Republic of Ireland and Northern Ireland, part of the UK, is already a complex one. It is a currency, VAT, Excise and criminal law jurisdiction border. This means there are already so called hard border arrangements to ensure any goods moving across the border pay the right amount of VAT to the right authorities, and pay the relevant Excise duties. There are anti smuggling systems in place as there is obviously current scope to exploit differences of VAT and Excise by criminals. There are ways of handling movement of criminals across the frontier, and electronic systems for trade through TIR, registered economic operators and the rest.

If we also need to levy customs duties when we leave because the EU refuses the UK offer of tariff free trade, so be it. The same methods used for Vat and Excise can be used for the customs levies. It can be done electronically away from the border as it is today.

Before we entered the EU we had a free travel area with the Republic and all involved in the neotiations wish this to continue, so it is difficult to see new problems concerning movement of people. When the Uk legislates its new borders system for movement of people it is likely to seek to reduce migrant numbers into the UK by changing benefit rules and requiring work permits, not by imposing new controls at the frontier. We already have external border checks on illegals and on criminals seeking to cross. We will continue to welcome as many tourists, visitors and people who pay their own bills who wish to come.

I trust  the UK will give a robust defence of this approach and demonstrate that the Irish border is a put up job by the EU to push us back into conformity.

 

 

 

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Retail growth and shop distress

In the USA and in the UK there has been great growth in internet retailing, overall growth in retail sales, and some hard knocks for some traditional retailers. In the US levels of distressed debt for retail companies, and the rate of bankruptcies is high  against a background of an expanding economy and growing disposable incomes. In the UK too there have been some recent casualties, traditional High Street shop  sales overall are disappointing, and internet sales are growing well.

Some say the playing field is not level. The traditional retailers of course need shop property and plenty of in store staff which the web retailers do not need. That is their choice, and they are trying to persuade shoppers that works for them as well.  It also means they have to pay more tax, incurring substantial property taxes on top of their additional cost base. Critics of the success stories of the digital age often allege the main companies do not pay a high enough tax charge.

The EU is saying it wants to make internet shopping dearer by imposing a turnover tax on digital companies on top of other taxes. Some say the internet companies need to pay some additional levy to allow for the property taxes they do not have to pay because they are on a different business model. Some traditional shop groups would just like some rate relief, to  make it a bit easier for them.

I am inviting contributors to say what they think should  be done, if anything? Is it just a case that the internet model has many attractions which will continue to win market share? Why do some large shopping centres attract more footfall than High Streets? What is the role of parking charges, access and the attitude of local government in settling which types of shops and shopping are popular, and which are in retreat?

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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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  • 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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