This blog contains substantial fact based analysis of the current economic and political situation worldwide. I use published official sources and wish to be accurate. It also provides my views and forecasts, which are distinguished from the factual analysis. I often compare what governing institutions say they are planning to do with their outturns as captured by official figures and reports.

In a recent blog I said that the government has delayed the vote on the Withdrawal Agreement until January 14th. I had not read this in an official source, but relied on press and media reports which I assumed were based on official briefings. I need to correct my piece, as there is still no official statement of when the Withdrawal Agreement will be voted on. All we know is the Parliamentary debate on it starts again on Wednesday 8th January and continues on the following two days. I will keep you posted as to when the debate will conclude and when there might be votes.

Secretary of State for Defence, General Mattis, has resigned over a dispute with the President. The President wishes to keep his campaign promises to pull US troops out of Syria and Afghanistan. The General thinks the US should stay in these countries to be close to its allies.
It is true that the world’s leading power will have more influence and be more likely to succeed if its builds and maintains alliances. The US can depend on NATO, whilst understandably objecting that many NATO members fail to meet the minimum financial contribution which the US and the UK manage. The US will also have more influence in the Middle Eastern war torn region if it maintains local alliances and keeps troops there. This does not mean, however, that the President was wrong to campaign to reduce US military commitment to the Middle East, nor does it prove he is wrong to insist on keeping his word.
When the President asks his staff what US military intervention in Syria has achieved so far, there is no easy answer. The US and her allies did not want the Assad regime to continue, but had to assist the Assad regime in getting rid of ISIS, seen as an even bigger threat. Vacillation by the West over who the true enemy was – Assad or Isis – led to indecision and to growing Russian influence, based on strong backing for Assad. The roots of President Trump’s wish to exit can be found in the unwillingness of the Obama regime to commit fully to helping Assad against Isis, or the failure of President Obama to come up with another strategy to rid Syria of both, which would have required huge force from the US and her allies to have any chance of success.
When the President asks what good can current low levels of troops do in modern Syria, where Assad is close to controlling the country again and where Russia is well dug in as a substantial external influence, there again is no great answer. If the USA and her allies are not prepared to commit many more forces, and if they have no clear alternative to the Assad tyranny backed by Russia, there is not a lot of point in staying.
In Afghanistan things are a bit different. The USA and her allies does have a government to co-operate with, and the western coalition in the past has spent much blood and treasure on resisting extremists in that country. There, too, however, defenders of western involvement have to answer how much longer do we have to stay? How much more training do the Afghan security and defence forces need? Are we happy with the political results of the long war?
On both sides of the Atlantic there is war weariness over the Middle East, and some disappointment with the results of substantial past intervention. The military have done a brave and good job in difficult circumstances, but the politicians have found it difficult to translate that into successful political action to form war free states following democratic principles. President Obama help create a power gap in Syria which Russia exploited, and began the long withdrawal from Afghanistan. It is difficult to see what military options remain for NATO, or how military intervention would make benign democratic government more likely.

Some in government wrongly worry that Brexit could damage our car industry. Latest sales figures show there is plenty of damage being done by EU regulations, UK taxes and a credit squeeze before we leave. Why doesn’t any of this worry them? Why don’t they do something to stop it?

Yesterday the government published its draft Immigration and Social Security Bill.

There were some good bits to it. The intention is to treat the rest of the world fairly and equally, with no special treatment for EU citizens. The aim is to encourage tourism and visitors. There will be no visas required for EU tourists coming here, and all tourists can stay for up to six months without the need for additional paperwork. Anyone gaining a place at a UK HE institution will be eligible for a permit. All those graduating from a UK university can stay for an additional six months to look for a job or to enjoy their time with us.  These are important principles to assist our HE sector and tourist industry and show that the new global UK is outward looking and engaged with the wider world. Citizens of Australia, New Zealand, Japan, South Korea, the USA and Canada will be able to use the egates and faster entry system at our airports as EU people can today.

The proposals also include lifting the current quantitative controls on visas for people coming to undertake higher paid and skilled jobs in the UK currently applying to non EU citizens. The government  argues that the UK is good at generating jobs and business activities and needs to be able to attract talent from all round the world to take up these opportunities. The provisional proposal is that such jobs would need to pay more than £30,000 a year to be free of controls.

The government is also suggesting a transitional system of allowing people to come in to work for up to a year at lower pay levels. They would not be eligible for benefits and would have to return home at the end of the year. The longer term aim is to stop inward migration to take low paid jobs, to seek to drive up productivity and pay and to give UK based individuals more chance of getting employment. Having access to fewer people from abroad willing to accept low pay should increase investment in machine power to do some of the tasks, and to make the remaining workforce more productive.

The Common Travel area with the Republic of Ireland is maintained, as before we joined the EEC/EU.

We read that the Chancellor and the Business Secretary are unhappy about any policy which reduces the flow of migrants from the EU into low paid employment. The Home Secretary himself seems unhappy about continuing the policy aim of reducing inward migration substantially in line with the Prime Minister’s often stated wish and with the Conservative Manifesto.

No deal has always been a misnomer of leaving the EU without signing the Withdrawal Agreement. Proponents have called it leaving on WTO terms, or a Clean break exit with global trading or some such. More recently others have called it a managed exit, drawing attention to the various areas of collaboration and agreement there will be on a so called No Deal exit.

So let me have another go at explaining the WTO option. It is if you like the “multi deal option” or deals on wheels, as the UK and the EU agree a series of measures to smooth transport and trade across the Channel and across the Irish border.

We now know there will  be the following Agreements

The Common Transit Convention

The facilitation of trade Convention

WTO trading rules

Air Services Agreement

Continued arrangements for London based derivatives to trade and settle

Phyto-sanitary arrangements

Possible continuing membership of the Government Procurement Agreement

In other words a WTO Brexit will also include a number of important agreements to ensure the planes will fly, the trucks will move and the trade will flow after March 29

There will be the added bonus that we can stop all these groundhog day debates and show how absurd so many of these scare stories are.

The government announced this means “simplified cross border trade for UK businesses exporting their goods”. “It will provide cashflow benefits to traders and aid trade flow at key points of entry …….. traders will only have to make customs declarations and pay import duties when they arrive at their final destination.” How about some apologies from all those who said border friction would b e very damaging?

Apparently the Treasury think we are going to be creating so many new jobs in the next few years we need to ensure we can invite in a large number of new workers without restriction. That must be a revised forecast,  based on a new optimism about Brexit.

The government has now decided to delay voting on the draft Withdrawal Agreement until 14 January. It looks likely that it will still lose that vote.  The government hopes that it will extract from the EU better language about a  timetable for negotiating a trade and future partnership agreement, which is the way to avoid the Irish backstop.  They want  stronger language about avoiding use of the Irish backstop in any way that might be available. It may also play up some of the fears of No deal in the hope of persuading more MPs to vote for the Agreement. Given the 100 or so Conservative MP public pledges to vote against it is difficult to see how the government can win the vote, even allowing for a substantial number of MPs changing their minds. The DUP have said they cannot vote for the Agreement unless the text concerning the Irish backstop is amended. The EU so far has refused all attempts to re open the legal text. Instead it offers clarifications and reassurances that are not legally binding.  The DUP and others say if it is the intention of both sides to avoid the backstop, then delete it from the text as an earnest of good will on this matter.

Meanwhile the government is intensifying work on a Clean WTO Brexit. It has announced resolution of the aviation issues so it can assure us the planes will fly, and is well advanced with fixes to ensure reasonable transit times for goods  through channel ports. The EU and its member states too are busy working on this, as they now sense it is a possible outcome even though the UK government says it intends to pilot the Withdrawal Agreement through Parliament. The government has announced the UK will remain in the Common Transit Convention after departure which ensures simplified cross border trade as today.

The House of Commons has a large Remain majority, with a set of Opposition parties keen to use the issue to destabilise the government. There are several other options in play amongst Remain factions. Some favour a second referendum. Some want to cancel Brexit altogether and just tell the people they cannot negotiate a satisfactory exit. Some believe it would be possible to negotiate a better or different deal and favour a delay to attempt a different approach.

The second referendum idea cannot now be legislated in time to hold the vote before the UK  leaves on 29 March 2019. Proponents therefore have to support delay to the UK exit, which requires agreement with the EU and repeal or amendment of the EU Withdrawal Act. The EU is reluctant to allow much slippage as they have European Parliamentary elections to consider next May which could change the political direction of the EU itself. The current plan is the UK will not be contesting them.  Advocates disagree about the question to be put in a referendum. Some want a three way question, offering WTO exit, staying in or the Mrs May Withdrawal Agreement.  Were staying in to win with say 35% of the vote the other 65% would say they had been cheated of Brexit by a minority of voters. Some want a two way skewed to staying in, running Remain against Mrs May’s Withdrawal Agreement. Leave voters would say this did not offer them their choice. Some want a Leave oriented vote, running the Withdrawal Agreement against just leaving, on the grounds that Leave/Remain has been settled by the original People’s Vote. Remain of course does not like this approach. The government so far has ruled all these out comprehensively. It would require a government with a majority to draft the legislation and make the time available to try to pass it through Parliament. This all looks unlikely. Conservative MPs are mainly opponents of a second vote and would not even wish to vote for a timetable motion to help get a second Referendum Bill through, so it would require full Labour backing from the outset which Mr Corbyn would  be reluctant to offer.

It is difficult to believe this Parliament would vote to simply remain and argue the people were wrong to vote for Leave. It would need the full repeal of the EU Withdrawal Act and supporting measures. Both main parties in the Commons stood for election in 2017 on a Manifesto to implement the result of the referendum. It would require the two front benches of Labour and Conservative to join together to force it through against a major revolt on the Conservative side and a smaller revolt on the Labour side, with considerable public anger.

So that leaves us with some form of delay as the other option to the WTO Clean Brexit. The EU may well say they have set out the terms for delay. They are in the Withdrawal Agreement. The UK would just have to swallow those if it wants another 21 months or up to 45 months more to negotiate a future relationship. In the meantime the Withdrawal Agreement sets out the terms for the UK continuing in the single market and customs union. If the EU were to back down on this stance, they could presumably agree to the UK continuing with current arrangements for  a bit longer to see if anything different could emerge from new  talks. This would be quite a loss of face for the EU, but would not guarantee they would go on to concede on all the issues over the future partnership to make it palatable to the UK. It is difficult to see what new would emerge from the talks, given the lack of any progress on the future partnership in the 30 months used up so far.

There could be an agreement to delay for a few months  to tidy up remaining issues for a managed No Deal Brexit between the EU and the UK, but this would also require legislation in the UK and the consent of both the UK and EU Parliaments.

We are told today the Cabinet meets to review and progress preparations for the UK to leave the EU next March without signing a Withdrawal Agreement. Many Ministers and officials have been working on this contingency plan ever since we voted to leave the EU. Preparations should by now be well advanced. Today the Cabinet needs to set out a programme for telling us all of their success in ensuring things work smoothly on March 30th next year, and in giving helpful guidance about how trade will be progressed and transport will continue to move.

Ministers should be  confident that the arrangements they are putting in place will work, and sensibly reassuring that in many cases things will continue just as they are the day before we leave. The Transport Secretary has set out in detail that the planes will continue to fly after March 29th, and that everyone who wishes can book their business trip or their holiday with confidence for next year after exit. Air Services Agreements are being put in place.

Work is well advanced at Calais to handle customs and any additional checks required without undue delays for trucks. Calais wishes to keep the  business and is well aware of the competitive threat from Belgian and Dutch ports if they were not capable of handling lorries with good transit times. The Republic of Ireland is  very keen Calais gets its act together, as substantial volumes of Irish goods use the roads of the UK as a land bridge to get things to and from the continent more quickly than going by a longer sea ferry route. They wish to see rapid transit times at Calais as well as us. French exporters to the UK also have a strong interest in Calais working smoothly and efficiently. We need to  be told of the various Ro Ro and container options and arrangements so trade continues to flow.

The NHS needs to continue importing pharmaceuticals from the continent under existing contracts. These drugs are all licenced and approved, and already need to come to the UK with proper reporting of how and where they were made, what the tests results were and how they conform with the standards required.  The Health Secretary needs to confirm he has ensured this will continue in good time. There should not  be a need for additional stockpiles if he has done his job properly for the NHS.

I know of no supermarket that thinks it will  be short of food in April. Ministers should spell out what if any additional checks are needed and how they have put in capacity to ensure these take place without delaying imports.

Ministers are employed by us to  make these things work. Instead of fuelling fears that things might go wrong, as some seem to do, we want to hear well based reassurance from them that they are doing their jobs properly and have plans in place to make things work. I have still not heard a scare story I believe, and do not think the EU will be able to mount some kind of self harming blockade of their trade with us after we leave. I find myself in the position of having more confidence in our Ministers’ abilities to make it work than they sometimes express in themselves. I have this confidence because most of what happens to ensure imports and exports work is nothing whatsoever to do with governments. It rests on a willing buyer and a willing seller, who will still  be there in abundance the day  we leave the EU. The day after we have left the same rules and regulations apply in the UK as the day  before we leave. There can be a gentle transition on that day as a result.

It is apparently a shock to some in government that the UK can once again run her own affairs. That is what we pay the government salaries to do, so let’s hear how they are doing it .I repeated my request yesterday to the Prime Minister that we should publish our tariff schedule now, and should remove all tariffs form imported components to be used by UK  based manufacturers. That would  be a good boost to UK manufacturing.

 

 

Jeremy Hunt has said on behalf of the government that we can handle a WTO exit next March. The whole government needs to spend the next three motnhs preparing well, sorting out the remaining issues quickly. It needs to provide an upbeat commentary about all the things it has  done to ensure a smooth transition when we leave. The government assures us it has been preparing for 2.5 years so far, and must by now have done most of the work. We know that the ports will operate well and that the planes will fly.

Still the lies flow from those who want to reverse the decision of the referendum on the media. They are now arguing all over again that we will not be able to export food once we leave the EU. If the EU does impose high tariffs on UK food exports – one of the few areas they could do so as there are some high tariffs on non EU food at the moment – the UK will clearly switch some production from export to the EU to domestic consumption. Our own  market would be better protected from EU imports by our also imposing similar tariffs. We should at the same time lower the average tariff we impose on food to encourage non EU countries to buy more of our food by encouraging  mutual reduction of tariff barriers and to make imported food from the non EU which we cannot produce for ourselves cheaper.  The scare stories usually fail to understand two crucial things. We will decide how high a  tariff if any to place on imports. The EU cannot impose a higher tariff on our exports to them than it imposes on any other WTO country. The EU currently has low average tariffs of around 3%, with no tariffs at all on half the trade. The pound has fallen by more than 3% against the Euro so overall there is no loss of competitiveness if they do impose some tariffs.

The government is over reacting to stories of friction at our borders once we leave. It is busy encouraging stockpiles of medicines for no good reason. It has confirmed there are  no continental companies cancelling contracts to supply after March 29. There are no UK plans to delay the drugs for longer at the ports. Were there to be any extra delays then the supplying companies would just have to send them a bit earlier, as they have to today if there are strikes or crashes affecting continental roads .  There is plenty of container capacity should there be Ro Ro problems ,but Calais is busy fitting out its port to handle customs to ensure it keeps the business after we leave.

The so called non tariff barriers to trade include VAT, Excise and company tax. These frictions we already handle at our borders with the rest of the EU as we have different rates and incidence of these taxes. They include inspections of food and goods quality and safety. Most of these checks are done away from the border. The exporting company tests the product at the factory and supplies the test details on the electronic record of the consignment. The importing company may check again on delivery. Customs and national safety authorities can spot check consignments to ensure it is as recorded, usually on suspicion from investigation or tip off. None of this need cause new extra delays at ports. If we can handle the complexities of VAT and Excise today why is a tariff tax more difficult?

What is so depressing is how remorselessly negative the media and many of their chosen interviewees are. It as if we were never able today to import or export anything outside the EU, and as if governments were incapable of finding an easy way of lifting more money off companies in the form of extra customs dues if we leave and some tariffs are imposed. There are strict limits to how much power the EU has over trading companies, and there are international and EU Treaty obligations on the EU itself to promote and encourage a good trade with non EU neighbouring states. Some Remain supporters seem to think that the EU is evil in intent and will be a lawbreaker just to be difficult.