What might happen next to Turkey’s relations with NATO, the USA and the EU?

There is no mechanism in NATO to evict a member and no sign that Turkey wishes to leave. The base case is Turkey stays in, with increasing tensions for the time being over policy and what can be shared and done together. The more Turkey cosies up to Russia, the less likely the US will share technology and secrets with Turkey. NATO is not about to turn against the Kurds that have helped it in Syria, though no-one seems to have a solution to the Kurdish problems.

Syria is likely to complete its brutal re conquest of the country with Russian help. There will be countless displaced people in Idlib seeking a new home. Turkey will have to decide how many and whom it might help, and look to its border defences if it wishes to say No to large numbers whose natural exit from Syria will be across the Turkish border. The EU will want to keep its arrangement with Turkey going that refugees stay in Turkey and do not travel on to EU members on the continent. This means the EU may well have to offer more financial and other assistance to Turkey to handle her border issues and look after refugees.

The EU has already provided substantial sums to help Turkey build a 911km wall with a height of 3m, with barbed wire at the top. The EU supplied some of the surveillance technology and military vehicles to enforce the border ban on people crossing from Syria. Presumably the EU and Turkey will use this tough border to make it difficult for refugees to flee Idlib into Turkey, with more deaths in Syria the likely result.

Turkey will continue to negotiate with Russia, who will generally wish to encourage Turkey  to destabilise the eastern end NATO. Russia, however, will not agree with Turkey’s wish to have a buffer zone in northern Syria. It will be easy for Russia to appear as a better friend to Turkey than the USA all the time President Trump is waging what President Erdogan calls economic war against him.

The USA will want to keep inner NATO secrets from their formal ally. The President seems determined to pursue his trade war with Turkey which will drive Turkey further from the Western alliance. It will be another case where the US pattern of alliances and interests will diverge from the EU’s.

The EU is in the  most vulnerable position. Their Association Agreement with Turkey makes Turkish policy of considerable interest to the EU. The current drift of Turkish policy is not the one the  EU intended, as they sought to bind Turkey more firmly into western ways. The EU’s Association Agreements are contentious items. The one with Ukraine lay behind the secession of Crimea, where Russia was able to exploit the tensions caused by the EU policy within the former Ukraine.The Turkish one is not going to lead to a splitting up of the country, but it could lead to an important rift between the West and Turkey. The EU in its March 2016 Agreement offered Euro 3bn to Turkey in return for her keeping the migrants and not allowing them passage to the EU. The EU helped finance and strengthen the border fences which will mark the limit of Assad’s reconquest of Syria by force.

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The dollar is surging against all currencies – this has nothing to do with Brexit

I see that the usual suspects in the pro Remain press and BBC are out and about arguing that the recent falls in sterling against the dollar are the result of Brexit speculations. What nonsense. The pound has been  very stable against the Euro in recent weeks, staying around 1.12 to 1.13 Euros to the pound. Sterling has risen against the vulnerable emerging market currencies. It bought 5.7 Turkish lira in May and now buys 7.4. It has been stable against currencies like the Australian dollar and the New Zealand dollar, not currencies which are experiencing any Brexit effects either!

The dollar is going through a period of great strength for a variety of economic reasons. It is proving very uncomfortable for many emerging market countries and companies that have borrowed in dollars. That is the story, not Brexit. Some of the journalists and commentators involved claim to be independent well informed people providing fact based  analysis, so can they begin by explaining these simple facts about recent currency movements?

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Turkey at the crossroads

Turkey is a member of NATO and has a comprehensive and complex Association Agreement with the EU. In some senses Turkey’s border is the EU’s border given the provisions on movement of people. Germany is friendly towards Mr Erdogan, not least because the EU welcomes Turkey’s willingness to provide a home for refugees from war torn parts of the Middle East. The EU offers Turkey financial assistance with the refugee programmes, and with strengthening the long Turkish border with Middle Eastern countries. All this implies Turkey remains an important part of the Western system.

Turkey also has a complex set of relationships with Arab countries to the south.  An opponent of Islamic State and similar terrorist groups, Turkey is also opposed to Kurdish independence movements and worried about the likely attack on Idlib by the Syrian state given the number of rebels and displaced persons in the last remaining rebel stronghold in Syria, close to Turkey. Turkey has allied herself with Qatar, a state which has fallen out with Saudi Arabia, the USA’s main ally in the region.

In recent months there has been a sharp deterioration in US/Turkish relations. President Erdogan felt the US did not offer sufficient support and sympathy when there was an attempted coup in Turkey. The USA thought Turkey over reacted and imprisoned too much of the opposition to the regime. Turkey does not like the way NATO works with Kurdish forces in its interventions in Syria, and is now locked in a trade war with the USA over steel and aluminium tariffs. Recently the USA  has renewed its demands for the release of Pastor Brunson, and Turkey has imposed a range of high tariffs on items like cars and rice from the USA.

President Erdogan timed his re election well. The economy was growing at a rapid 7%. Public spending shot up just before the polls, and the government urged the Central Bank to keep interest rates down despite the obvious build up of inflationary pressures. Shortly after the election win markets turned against the Turkish lira and demanded action to raise rates, slow the economy, rein in debts and curb price rises. The President has no wish to do these things, and has appointed his son in law as Finance Minister to help him see off unruly markets.

So far markets have been getting the better of him. A massive slide in the lira is posing problems for the Turkish companies that took out substantial dollar borrowings in the good days. The Central Bank has raised rates to 17.75 % despite Presidential reluctance, but markets want more. Now Qatar has provided some much needed relief for the banking system by offering loans of $15bn to ease shortages of foreign exchange. The Central Bank has imposed controls on commercial bank dealings  in foreign exchange, and the government may turn to a wider range of controls on the movement of money to stem the run against the lira.

Russia sees all this as an opportunity. Turkey has already bought some anti aircraft missile defences from Russia despite being a NATO member. The USA is now blocking the sale of F35s to Turkey and is concerned about what technology and intelligence it shares with a member state that is developing closer relations with Russia. Tomorrow I will look at the options facing the main participants and discuss what might happen next.

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How modern borders work

The people who churn out the latest absurd version of Project Fear are stuck in a time warp. They think that if we leave and go to the WTO model our borders will immediately  be congested with lorry drivers in queues waiting for a staff member at the border to carry out an inspection and calculate the tax there.

In the modern world most of the work is done away from the border by computer exchanges. Our border with the rest of the EU is already in their terms a complex border. Goods passing need to be charged to VAT, Excise needs to be levied on various items, the currency changes, and various UK domestic rules on health, safety and migrants have to imposed . In the case of the majority of imports coming in from outside the EU there are also tariffs to levy.

Most coming across our border comes  on big trucks organised by approved traders. The tax is sorted out from the electronic manifest away from the frontier. Any checks on products are carried out at the originating factory, and subject to inspection and  spot checks there. Any additional requirements as we switch from EU to WTO can be done in the same way.

So what exactly is the problem? All imports will be under our control to deal with at our borders. We have no need to put in queues and special border checks. Those who say the EU will impose some  version of the Napoleonic blockade on us when we leave also live in an imaginary  world. It is strange the people who most love the EU  expect it to try to  start an economic war. They do not understand that even in the unlikely event they wanted to under international law and WTO rules that would not be possible. How would the EU seek to prevent a French cheese maker or a German car maker sending product to the UK? And how would that be legal?

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The reasons the PM gives to surrender our powers of self government again over the supply of goods

In her letter the PM says “the rules of goods are long established – the last substantial change was in 1987”. This is untrue. The EU is regularly updating and extending its rules over business. Once we have left we lose the little influence we did have whilst still a member with a vote to prevent or delay the most damaging proposals.

“Many of the rules are based on international standards set by bodies that we will have a seat on”. Fine, then there is no need to  bind us into the EU version anyway

“British businesses which export to the EU have been clear they will continue to follow the rules in order to continue selling into the European market”. Of  course if a customer wants a given specification the supplier will meet it. That does not mean we have to adopt those same standards for everything we do at home, or be bound by them if selling to third countries with their own different requirements. Exports to the EU are only 12% of our economic output. The ability to improve and change our own rules is important in a democracy, and important to be able where we wish to do trade deals.

“any changes to our rules will be subject to a Parliamentary lock” – but each time Parliament objects to EU rules or changes to EU rules we will be told we are not allowed to alter them as it would disrupt our relationship and trade with the EU.

She argues we could still do trade deals with non EU countries, though the EU control over our goods market would make this much more difficult.

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Ed Balls and the politics of jealousy

It has been amusing to watch Ed Balls trying to understand the support for Donald Trump in the USA. Quite a lot of the time Mr Balls seems thrilled to be part of the car loving outdoors lifestyle of the typical Trump supporters. He seems very at home with  the not so rich that he rubs shoulders with, and wants to enjoy his time with the wealthy and glamorous. He leaves it to his individual private talks to the camera after his social events and interviews to confide in us that he still disapproves, with some large moral objection or other to this democratic phenomenon of a popular movement.

The main issue Mr Balls keeps coming back to is how can the low income Trump supporters back a billionaire? How can they vote for a man who gives the rich tax cuts? He seeks to stir up jealousy. So far he has had no success. The replies come back that they like the fact that Mr Trump is a businessman – he might help them make some money just as he has made some money for himself. They are very relaxed about the higher income people getting tax cuts, because they are getting tax cuts too. Some of the Trump supporters on lower income reckon they might be much richer one day anyway. As one said this Sunday, I am $100 a week better off with the Trump tax cuts which helps me so I don’t mind the rich getting tax cuts as well.

I am surprised Mr Balls finds this absence of jealousy surprising. The whole idea of the American dream is someone can go from Bell boy to hotel owner, from a kid in a deprived neighbourhood to a top paid lawyer or banker . It is at best a get up and do society, where many want their government to get out of their way, and to let them keep more of the money they earn.

In the UK where Mr Balls learned his politics maybe he hopes the politics of jealousy will be more successful. Here too there are many more people who are not jealous. They vote for parties and candidates that can improve their lifestyle, incomes and life chances, not for parties and people who will do down those who have succeeded. Labour wanted to get rid of grammar schools by giving the vote to decide their future mainly to the parents of children who did not get in. The first ballot failed to deliver the closure many in Labour craved, because the parents of children not at the grammar were not jealous of those who went to the grammar. They gave up and grammars survived.

Mr Balls as often on the left also argues from contradictory positions. He both thinks poorer Americans should shun Mr Trump because he is rich and privileged, then argues they should shun him because he has had business failures and was not the in past rich enough! So is he too successful to represent people, or too much of a failure to do so in Balls land? And does it matter, as enough US voters backed him whichever.

I will enjoy the remainder of this mini series. I like it when Mr Balls looks thrilled to be there and is visibly enjoying lifestyles he would normally condemn. I then like it even more when we get  the private musings to camera to shore him up with the left wing UK audience that will see the programme as he struggles to find things to complain about. He is going to have do better than the crusade for jealousy, which is an unbecoming political emotion.

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Change in the High Street

I am a man who likes going to the shops. It is good to see the merchandise, look at how the stores present and price their products, and be able to talk to the staff about the rival claims and characteristics of items on display. When buying fresh  vegetables and fruit it is good to choose the items in person. When buying clothes it helps to try them on before purchase. I am well aware I need to buy some things from my local convenience store on a regular basis if I want it to be there in future when I need an item in a hurry.   I am also busy, so I find the internet is a great way to buy things I already know about. I can buy them  quickly at any time of the day or evening, any day of the week, often at good prices.

Collectively we consumers are voting for more and more of our buying by internet. The market share of mail order never got much above 10%. Internet purchases are now fast approaching a quarter of all things bought from retailers, which is taking a large chunk out of the turnover of traditional High Street stores that rely on sales through their shops. As a result some High Street chains and individual shops are struggling to compete and survive. The big brand retailers that have developed a good internet offer alongside their stores, and have learned how to use internet and shop together to meet customer demands, work well and are still profitable.

The recent decision of Mr Ashley to re brand House of Fraser as the Harrods of the High Street, seeking to trade from most of the old House of Fraser units, will be a bold challenge. Can he find the right merchandise at the right prices for these stores? Can he train and maintain  the right expertise and customer friendliness in the staff so people come back to the stores? Will he be able to add an on line offer and approach that is complementary to the shops?

The Treasury  has done it bit to hasten the decline of the weaker shop groups by combining high business rates on retail premises with demands for  National Insurance on higher wages ( wage rises which are needed), and new  pensions and training levies that raise the staff costs more for the traditional retailer than for the internet competitor. I hear the Chancellor sounding off about imposing an extra tax on the internet competitors on the principle that if it is working and going well let’s tax it. I don’t understand why he thinks we need to tax business more when you can never  have enough successful business. He would be better employed working out how to get the tax burden down on the High Street, than on thinking up plans to tax the successful newer businesses in ways which may discourage their investment in the UK.

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What can a Leave voter do to expedite our departure from the EU?

Many who write into this site are keen to leave the EU. They often write in condemning  most of the current elected politicians, and either make no positive suggestions on what to do or ask Parliament or the Conservative party  to do things for which there is no majority. Today I would like to make a suggestion. In a Parliamentary democracy it is of course the prime duty of elected people to lead the debate and to make the  decisions only Parliament and Councils can make, but it is also crucial to a successful democracy that the public are engaged and public opinion is  an important part of the democratic process.

The first thing all Conservative supporters can do is to reply to the letter they have received from the Prime Minister. They could make clear to her that the draft Withdrawal Agreement and the Chequers style Future Partnership do not give us back control of our laws, our borders and our money as required by the majority in the referendum vote, as they tell me on this site. They should urge her to move on from the Chequers proposal, which the EU does not accept anyway. She should now table a comprehensive Free Trade Agreement and complete preparations for leaving on WTO terms with no Withdrawal Agreement. She should make this clear to the EU that that is now the UK’s intention.

Anyone with a vote in the UK can also write to their own MP and stress to them they find the Chequers proposals and draft Withdrawal Agreement unacceptable, and urge them to oppose them. If the MP has already stated their opposition you could even write to them and offer  support for the stance they have taken.

Anyone can also let the media know by ringing phone ins, writing letters to papers and putting out messages on social media that they oppose Chequers and oppose the draft Withdrawal Agreement. The people made this wise decision to leave. The people now have to help deliver it in the face of opposition from some in  big business, Parliament and the civil service. The opponents of Brexit  need to be reminded the people meant their decision and intend it to happen in a timely and positive way.

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Reply to a letter from the Prime Minister

Along with the rest of the Conservative party I have received a letter from the Prime Minister about  her Chequers proposal for a  deal between  the UK with the EU.

I agree with much of the content of her letter. In it she assured me “We will take back control of our money, our laws, and  borders, and begin an exciting new chapter in our nation’s history”…”We will leave the EU on 29 March next year”  “I remain clear that no deal is  better than a bad deal – and we are stepping up our no deal preparation” “The two options on offer from the EU (for a future partnership) at the moment are  not acceptable to me, or to the UK”.

So far so good. Unfortunately the letter then seeks to persuade me that those fine principles and aims as stated often by the PM are reflected in the draft Chequers proposal and in the detailed clauses of the draft EU Withdrawal Agreement that the government has said it is happy with if all else is agreed. It appears the PM has been misled by her advisers, as the Withdrawal Agreement as so far drafted, the transitional period and the Chequers ideas for the future relationship do not in any way reflect those aims and principles.

The transitional period so called means we do not leave the EU on 29 March 2019 as promised. Instead she will ask Parliament to amend the Withdrawal Act we have just passed to give many powers back to the EU.

The proposed settlement on people means we live with a new version of freedom of movement.

It delays taking back control of our fishing grounds and agriculture.

It leaves us accepting large swathes of EU law in perpetuity, in return for the privilege of being able to import their goods and food!

It enslaves us to making  payments to the EU for many years distant, not just for the final two years of our departure, when there is no legal requirement for us to pay anything after March 29 next year when we leave.

The draft Agreement and the proposed future relationship does not achieve the PM’s aims as stated in the second paragraph of the  letter, aims I agree with wholeheartedly. She needs to press on with the WTO option so we can get all our money back from March 2019 onwards,

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The government should not sign the draft Withdrawal Agreement with the EU

I have advised the government not to sign a one sided Withdrawal Agreement. They have always confirmed they will not sign it unless and until it is balanced by a good Future Partnership Agreement, which is still nowhere to be seen. I need to remind them why the present draft Withdrawal Agreement is thoroughly unsuitable for the UK anyway.

The UK voted to leave the EU and its complex binding legal Treaty architecture. We will do so thanks to Parliament passing the Notification of Withdrawal Act and the EU Withdrawal Act. We did not vote to recreate much of the legal structure by immediately signing a new binding Treaty with some of the characteristics of the one we are quitting. The long and complex document is mainly written for the benefit of the EU, to lock the UK into continuing financial and legal obligations that are not appropriate to an independent country.

Several clauses assert the supremacy of European law and the ECJ. The EU side believes any such Agreement is ultimately a matter for the ECJ to interpret. Article 4 requires the UK and UK courts to follow ECJ decisions when taking cases under the Agreement. The Joint Committee to be established to police the Agreement can refer matters to the ECJ for adjudication where the two parties disagree, and the EU side thinks they should have the right to do this even where the UK does not want the ECJ involved!

Extensive rights are to be granted under the Agreement to EU nationals who come to the UK after we have left  but are still in transition, and family members qualify after we have left even though they have not come to the UK prior to departure. In other words the UK does not have the right to decide its own borders policy after departure for many EU citizens.

The draft Agreement also seeks to restrict the UK’s freedom to run its own benefits policy after March 2019.

The Agreement is wide ranging, seeking to bind us in to elements of the common Home and defence policies, trade and goods regulation, public contracts and various regulatory bodies.

It offers comprehensive immunities and exemption from UK taxes to a wide range of senior EU officials, and provides for secrecy over various EU matters.

The financial provisions are particularly detailed and onerous. Clauses 133-6 provide for continuing budget contributions and pension payments long after we have left, with prolonged exposure to the European Investment Bank risks without access to any new loans.

We voted to leave intimidating legal restrictions and Agreements like this one, not to volunteer for another.

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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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