‘No Deal’ nonsense

Does anyone really believe that the ‘no deal’ Brexit option is viable? Even the No Dealers don’t actually believe it. The Institute of Economic Affairs released another of its amusing Brexit reports this week. Entitled Let’s get ready for ‘no deal‘”.

A no deal option “does not have to be the ‘catastrophe’ that many fear” says the IEA. Indeed, it might turn out to be a Good Thing:

With Brexit talks proceeding at a snail’s pace, the mantra that ‘no deal is better than a bad deal’ may soon be put to the test. The UK needs to be prepared to walk away if the EU is unwilling to show more urgency and flexibility. Indeed, a clean break in 2019 could still be a good outcome, even if not necessarily the best.

But what about the aeroplanes?

There are many other agreements that would also need to be renegotiated, including access to EU aviation markets…

And the drugs?

..mutual recognition of pharmaceuticals..

And the nuclear stuff?

…and cooperation with EU-led organisations such as Euratom.

What about financial services?

Firms in the financial services sector, for example, would presumably have to request access to EU markets on the basis that the UK regulatory regime is ‘equivalent’.

Sure, but isn’t an ‘agreement’ or an ‘arrangement’ the same as a ‘deal’?  So it’s not really ‘no deal’ is it?

Yes but apart from the aeroplanes, the drugs, the nuclear stuff and financial services, the UK will walk away with no deal.

OK, I made that last one up but there is something a bit Pythonesque about all this.

As things stand at the moment, everything stops on 30 March 2019. All our agreements with the EU and those via the EU with the rest of the world cease. This is something that, for many people, still seems not to have sunk in. The failure of negotiation doesn’t mean that nothing changes. It means that lots of things change, mostly for the worse. To stop that happening, UK and EU politicians need to come up with something and they haven’t got long to do so.

Perversely, there has been much more detailed discussion of what might happen after Brexit since the referendum than there was before it. There has been significantly more since we triggered Article 50. Each time we take a step further, we decide that it might be a good idea to find out what we have done. It’s like that manoeuvre-signal-mirror approach that you often see on the motorway.

Consequently, we now know that the much vaunted option of trading under WTO rules is more complicated than it first appeared. For a start, the USA doesn’t trade with the EU under WTO rules alone. It has a series of treaties with the EU as do most other large economies. These facilitate trade in specific areas. As the Institute for Government pointed out, most of the EU’s trading partners have some bilateral agreements in place.

It gets better, though, because it appears that very few countries actually trade under WTO rule alone. Most have some agreements with other countries to facilitate trade. James Hardy ran a query on the WTO database and found only a handful of countries trading without trade agreements, most of which are outside the WTO. Of the members, only Mauritania trades under WTO rules alone. Even this is not the full story as Mauritania trades with the EU under its Generalised Scheme of Preferences which enables developing countries to trade with lower tariffs.

In fact, it’s difficult to find any country which doesn’t have some sort of trading agreement with another country, even if only its near neighbours. Yet this is the position the UK would find itself in if it left the EU without any agreements in place. All of our trade arrangements with other countries have been negotiated through the EU and all will cease to apply once we leave.

Perhaps it’s not surprising, then, that a lot of people don’t take the ‘no deal’ option seriously. Germany’s Zeit described it as an empty threat. Robert Peston doesn’t believe it either because, as he quite rightly says, as soon as the government starts putting serious money into preparing for a no deal Brexit, companies will take fright and start moving their investments and their people out of the UK.

Talk of game theory is nonsense. There is no point trying to convince the EU that we are serious about walking away from the negotiating table because it is quite clear how damaging that would be. This is not like a poker game. Everyone knows what’s in everyone else’s hand. They have the internet in continental Europe too. They know that our customs and immigration systems are unlikely to be ready by 2019 and that even our modest attempt to increase lorry parking capacity has run into the sand. They know the British state just doesn’t have the capacity to do Brexit 18 months from now.

That said, the implied threat of the EU running the clock down on the negotiations seems implausible too. It is true that the EU overall is likely to suffer less economic damage as a proportion of its total trade and its GDP. Nevertheless, EU countries are no better prepared for a no deal Brexit than the UK. France, Belgium and the Netherlands would all need extra customs infrastructure and would face disruption at their ports. Ireland’s position is even worse. It might suffer more damage to its economy than the UK.

No-one wins from a chaotic Brexit. If I am about to fall off a cliff and I know I will break my arm it’s little comfort to know that the person who caused the fall will break both his legs. I’d really rather neither of us broke anything.

If the UK leaves the EU without a trade agreement, either by walking away, being timed out or the negotiations failing, it will be a triumph of pig-headed stupidity over reason. It will be studied for centuries in the universities of future world powers. Which, at the rate things are going, will be a long way from here.

 

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63 Responses to ‘No Deal’ nonsense

  1. P Hearn says:

    So there it is.

    Proof positive that we simply can’t exist outside the EU, other than on bread and water as a mud-dwelling tribe of barbarians (just as we were before 1973).

    Nobody will consider novating any existing trade deals because the only people who benefit from trade are from the UK. Robbing gits. Everyone hates us and only sells us things with the utmost reluctance. They are all dying to stop supplying us with anything and to make trade as difficult as possible. Bloody Brits with their liking for cars, wines, foods and holidays. Let them eat [Victoria sponge] cake!

    Meanwhile Britain will become a fizzing radioactive wasteland as we cretins fumble and stumble our way towards managing the nuclear activities of a power industry that we… er… pioneered. Now, where did I put that Uranium 235…?

    Suggest we immediately close parliament and just have our county councils report direct to the EU functionary responsible for running the Britannia region of the EU. Once budgets are approved by Berlin, said councils can concentrate on the big stuff – bin collections, recycling, the community centre and meals-on-wheels. The Palace of Westminster can be turned into an additional EU debating chamber, and they can all move in once a month to talk about important things that we’re all far too stupid or bigoted to decide for ourselves.

    What ever would we do without the towering intellect, charisma and leadership of Juncker, Tusk and Verhofstadt? Leaders that dwarf Churchill, Thatcher or JFK. How did anyone ever think there was a world beyond the boundary?

    • 33250p says:

      Good luck with that – when we import 40% of our food (on which WTO rules are rather unfavourable) and economics has few provable rules but double the distance and halve the trade is one of them. So good luck too with breaking off from those within swimming distance.

      • Blissex says:

        «economics has few provable rules but double the distance and halve the trade is one of them»

        In optimal conditions… But while being a 70% “Remainer” like J Corbyn, I disagree with our blogger’s “Project Fear” and the disaster-mongers.

        While the first few months of “walk away” exit would be quite annoying, like certain strike-filled periods of the 1970s, matters would eventually be settled, and non-tariff-barriers and tariffs are economic problems, that is they just raise costs.

        If english wages fall by another 10-30% in euro terms the extra costs of trading outside the EU will be compensated for, and that could be achieved fast by opening up even more than it is already open the immigration of very low cost workers from asian and african countries.
        Overall after the first grinding period the effect of “walk away” will be roughly equivalent to that of the 2008 recession, surely a big hit, but survivable.

        • Florence says:

          Annoying for you is someone else’s ruined business, job loss, or increasing food shortages and deprivation through high import costs.

  2. Dipper says:

    “All of our trade arrangements with other countries have been negotiated through the EU and all will cease to apply once we leave.”

    Our Trade minister has been doing his job (https://twitter.com/uktrademinister?lang=en)
    and I believe 60 nations have agreed to roll over the EU trade deals into UK trade deals.

    “and cooperation with EU-led organisations such as Euratom” to be honest I don’t know why we’re pulling out of this other than ministers keep saying it is inevitable given we are leaving the EU. however without an agreement France cannot process its nuclear waste. Which will be a bit of a problem for them.

    <Ireland’s position is even worse. It might suffer more damage to its economy than the UK. indeed. The last time I checked, Ireland was in the EU so failure to reach an agreement would be a significant failure of the EU.

    Eminent economists and journalists such as Gerard Lyons, Liam Halligan and Julian Jessop all say the UK can thrive outside the EU.

    It would be best to get a deal with the EU, but leaving without one is not a disaster.

  3. IEA writes “There would be some new barriers to trade with the EU, but these should be manageable. On the upside, the UK would be able to crack on with its own trade deals with the rest of the world”.

    New barriers to trade with our principal market are not something which should be taken lightly. Tariffs on UK “exports” to EU would be somewhere in the region of £5-6bn pa, tariffs on imports from the EU about twice that, while NTBs would be equivalent to a further of 6.5% (CBI).

    As to financial services, some would lose their legal base to operate elsewhere in the EU. Without a deal, we would not even be able to rely on the Commission to use their discretion to grant “equivalence” status.

    It would be perfectly possible to retain full membership of the single market through EEA after we leave the EU, and still be able to proceed with trade deals with third countries. Better yet, as EFTA members we could join onto their existing trade deals with countries all over the world. Without that, on the day that UK leaves the EU we will be just about the only country in the world to have trade deals with no other country.

    The trouble with threatening to get up and walk away from the table is that it doesn’t work very well in negotiations about how you get up and walk away from the table.

    • Dipper says:

      Without that, on the day that UK leaves the EU we will be just about the only country in the world to have trade deals with no other country.

      except that the other countries are rolling over the EU trade deals to UK trade deals according to our Trade Minister.

      • Florence says:

        According to our Trade Minister – exactly why there is so much scepticism, actually.

        • Clev says:

          I smell a rat.

          Dipper says “I believe 60 nations have agreed to roll over the EU trade deals into UK trade deals.”

          This is puzzling. Why would they?

          For the past year we have been lectured, God help us, by David Davis about the knife-edge realpolitik of trade negotiations.

          These 60 nations will have negotiated their deals with the EU as a single, massively powerful 28-nation trade block, and so will have had to cut their cloth accordingly. They will have been obliged to make numerous, often painful, concessions to gain access to the lucrative EU market. That’s how power plays out, agreed?

          Now you are telling us that these same countries are prepared to agree exactly the same deal, without renegotiating all those concessions, to a lone nation, somewhat desperate, nation that is no longer part of that huge, powerful, trading block.

          Do you believe that?

          • Dipper says:

            Do I believe what the trade minister says? I have no reason not to.

            And no Clev not agreed. The most lucrative motor market in Europe is the UK, affectionately know as Treasure Island in that international car trade. Are you expecting the EU to make numerous, often painful concessions to keep access to our market?

  4. Blissex says:

    «If the UK leaves the EU without a trade agreement, either by walking away, being timed out or the negotiations failing,»

    Our blogger is still being quite optimistic: that there won’t be a post-exit trade deal for years is pretty obvious,as the negotiations cannot begin until after exit, as they are “ultra vires” for the EU.
    M Barnier has pretty much said that several times, and Juncker too. The only question is whether there will be an extension of the notice period, either as such or disguised as an “implementation period”.

    The question is whether there will be an exit agreement that enables the transition period, and here the positions of EU27 and kipper government are incompatible: the EU27 won’t agree to a notice period extension unless payment of past dues is agreed, and the kipper government won’t pay a penny unless a new “have your cake and eat it” trade treaty is agreed.
    It would be electoral suicide for the Conservatives to pay a penny without a famous “have your cake and eat it” victory over the EU to compensate for that, and to pay up in exchange of a couple years more membership without voting rights would be even more suicidal.

    The kipper government want the EU27 to give them a deal that allows them to win the 2022 elections, and the only deal that does that would disintegrate the EU, because that would be one better than membership; the second best thing the kipper government can do is “walk away” without paying a penny until they are sued at the ICJ, that is well after 2022.

    The only thing that could stop that is a crash in south-east and London house prices in 2018: that would guarantee a Conservative defeat in 2022, and then the lame-duck Conservative government would be free of the absolute need they have now to chase every last kipper vote.

  5. Blissex says:

    «as soon as the government starts putting serious money into preparing for a no deal Brexit, companies will take fright and start moving their investments and their people out of the UK.»

    That will happen regardless, look at it this way:

    * The EU27 will continue to exist and have its internal market and international trade treaties, regardless of the outcome of the negotiations; it is England where there is all the uncertainty.
    * If the business stays in England, it will be fine only if there is a trade treaty with the EU and all the other countries, and if the UK government fixes all other logistic and legal issues.
    * If the business moves to the EU27, it will be fine if there is a trade treaty, but also it will be fine, being located in the much bigger market, if there is no trade treaty.
    * Therefore the choice that minimizes risk is to move to the EU27 regardless of the outcome of the negotiations.
    * As to cost, moving from England to the EU27 does not minimize cost, even if it minimizes risk.

    As to cost, a lot of businesses are very concerned about risk and don’t mind slightly higher costs; and the EU27 haver countries where wages are 1/2 to 1/6 the level in England.
    Many CEOs and CFOs, especially of USA and Japanese subsidiaries, will ponder the above points, and also that at this late point there should be agreements of principles, but the negotiatiors cannot even agree whether there has been sufficient progress towards having agreements of principles.

    • Blissex says:

      That’s BTW the thing that I don’t quite get: as our blogger said, exit is big change project, and usually stakeholders want to hear that the big change project is low risk; but T May and B Johnson and D Davis have been trying really hard to make it look like very risky, piling a lot of uncertainty on top of uncertainty, with huge changes of declared policy.
      It only makes sense if they are driven solely by domestic electoral goals, and have already given up on the negotiations with the EU27.

  6. Keith says:

    Flip Chart Fairy Tales was never a better title. The brexit mess is right wing crank delusion elevated to national policy. A mess caused by the far right with no rational justification. This tale will not have a happy ever after…

  7. Gary Taylor says:

    Overwhelmingly nice theory.

    Except I cant square it off with my own experience. Let me explain – I was until last xmas PwC Consulting Director in London. Exporting services globally. Sold/traded/exported consulting services from Stockholm to South Africa, from Dallas to Doha.

    And it was never clear to me what made it so very much easier to sell/trade/export in the EU versus outside. Would you be so kind as to remind me? What with how pivotal Services are to the UK economy, I’m sure the examples are legion, but I seem to have clean forgot in the last 6 months since I left PwC.

    • Blissex says:

      «what made it so very much easier to sell/trade/export in the EU versus outside. Would you be so kind as to remind me? What with how pivotal Services are to the UK economy,»

      As to this, after exit, even with “walk away” or “no deal”, some categories of service exports from the UK will clearly not be that impacted or benefit:

      * IT especially games and web-based services: they will benefit from a large influx of very low-cost asian (and african) techies, and will have no trouble exporting software and web-based services to the EU27 (at most they will have to rent some servers in EU data centers to hold personal data).
      * Universities: the number of EU27 students is small, and anyhow only worth the same £9,000 as home students. But the government will greatly sweeten rules for non-EU students, and there will be a much bigger influx of anglosphere and asian rich students able to pay a lot more.

      For IT the advantage is that software and services don’t involve physical exports, and immigration of non-EU27 techies remains under UK government control, and for universities that exports are done by non-|EU people coming to the UK, which also remains under UK government control.

      As to consultancies I can see problems: consultancy exports usually involve UK people going to the EU27 rather than viceversa.
      Lawyers export around £4b a year, but fortunately for them most is foreigners buying access to the UK legal system; unfortunately a lot of that is related to finance, and exports of finance from the UK to the EU27 will be a lot harder after exit, as EU27 regulators will certainly not give operating licenses to postbox arrangements, and trading desks etc. will have to move to EU27 countries to get licensed.

      • Gary says:

        hmmm…I’m just not seeing specifics here. I sold services to Sweden. That was easy enough. I also sold to Qatar. It wasn’t any more complicated. What was it the EU gave me that made it easier? ie what is it I will forgo post Brexit that will hamper my business so?

        I understand the theory, I just can’t translate it into the specifics. And my industry is big.Why do I always get tumbleweeds to this question?

        • P Hearn says:

          Spot on, Gary.

          People/companies buy goods and services because the items have value for the buyer which exceeds cost. In that case they’ll negotiate the hurdles strewn in their way by politicians.

          Governments of all types labour under the misapprehension that they create jobs and trade with their webs of regulations and bureaucracy. The EU is the prime believer in this fallacy – indeed the whole show is predicated on that belief.

          The best they can ever do is not destroy jobs, and their time should be spent getting out of the way. The EU celebrates having zero tariffs like they won the FA Cup, when all they’ve succeeded in doing is removing the very political barriers they themselves created. Nice work if you can get it: create a mess then get paid handsomely to clear it up.

          Firms that produce things people want need have no fear. Apple sold MP3 players for £100s when comparable products sold for a tenner in petrol stations. The difference? Branding and innovation. Tariffs and NTBs were irrelevant for these Chinese-made tech marvels.

          Sir James Dyson recently commented that he sells tons of product to the EU from his Far Eatern factories without problems. Ditto his sales (much bigger) to the rest of the world which were also straightforward. He also commented that for a single market, there were a lot of different plug types and voltages to deal with in the EU, but Dyson could cope with that.

          Britain has lots of brands, many foreign-owned. Our poor productivity (outside London and the SE) is of far more concern than Brexit. Addressing that will do more for our fortunes than any number of EU summits.

          Being in the EU is like being stuck in a class with the village idiot. Everything progresses at a snail’s pace, and half the class still don’t ‘get it’ year after year. The smallest gain is heralded like a Nobel Prize.

          You’ll get no answer to your killer question because there is none. If you have something of value, people will buy it. As you know from experience.

          Will you tell the bureaucrats, or shall I?

        • Blissex says:

          «I sold services to Sweden. That was easy enough. I also sold to Qatar. It wasn’t any more complicated. What was it the EU gave me that made it easier? ie what is it I will forgo post Brexit that will hamper my business so?»

          Well, you will need a work permit to do services in Sweden post-exit, and if they are professionally licensed services they won’t be sellable in Sweden at all.
          When you will compile the immigration card to enter Sweden you will have to declare the purpose of your visit, and if it is “work”, you will be turned back, no matter how much you wave your blue passport. Same as for a romanian trying to travel to England. The EU will “take back control” of their borders too.

          • Gary Taylor says:

            So why wasn’t this a noticeable problem in South Africa? Or South America? Or South Korea?

          • Dipper says:

            I managed to work in Canada quite easily on a temporary basis. Visiting to sell services temporarily was no problem. And Romanians will be free to visit in the same way lots of people currently visit here from all over the world.

            Coming here to work permanently in permanent jobs will be much more difficult. That is pretty much the point of the whole exercise.

          • Blissex says:

            «So why wasn’t this a noticeable problem in South Africa? Or South America? Or South Korea?»

            Regardless, it will be a pretty noticeable problem in the EU and EEA post-Independence Day; whether temporary or permanent, any work activity by UK citizens in the EEA will require a work visa, usually with proof that no EEA citizen could be found to do the same work. The sale of any licensed financial or professional service will also become illegal, with pretty much zero chances of this changing in the future. The EU is often described by extra-EU countries as “Fortress Europe” for some reason.

            As to why it has worked also outside the EU so far, it depends exactly on what the business was; as I pointed out above, services done in the UK and invoiced to foreign business count as service exports, even if there is no physical movement of goods or people. Other than that the top possibilities are:

            * The services were covered by an EU treaty with reciprocal right for services and visa free travel. The UK will be exiting all these treaties on Independence Day as they reduce the sovereignty of the UK.
            * The travel to the other countries was done for “business meetings”, e.g. for pitching and negotiating work to be done in the UK. Most countries allow visitors to attend business meetings without a work permit.
            * The purpose of the visit was described inaccurately as “business meetings” when instead it was actually “work”. This happens very often with contractors working in the USA.

    • Rick says:

      Gary – Surely the fact that PwC has legal entities in most countries helps. When I was with them I worked all over the place but usually billing was either through the PwC firm in that country or PwC UK to UK branch of whichever multinational I was working for overseas. I can only remember one case of direct PwC UK billing to a foreign company and that was within the EU.

      • Gary Taylor says:

        @Rick if the local firm had relevant skills then yes, we would contract through them. Maybe they didn’t and we contract directly. For either within or outwith EU.
        It doesn’t matter in terms of whether we do business together or not ie whether we trade.
        I’m just not getting to see where I do less trade with someone and specifically how that happens.
        I’m starting to think that there is a real problem in maybe 3 or 4 industries, and too many people are over generalising to conclude that we are all screwed.

      • Blissex says:

        Invoicing is one aspect, but the critical aspect is where the work is actually done and whether it involves recognition of foreign professional qualifications.
        If the work is actually done not in England but the other country, it really needs getting a work visa or being covered by a treaty (so far usually an EU treaty) provision. Lots of people abuse the “business meetings” excuse to do actually on-site work, e.g. UK contractors working up to 6 months a year in customer offices in the USA, but if they get caught it is potentially a criminal fraud of immigration law resulting at a minimum in a permanent ban from that country. Any dispute with the client or similar issue can mean getting shopped to the immigration authorities.
        Just like currently the Home Office is creating a hostile environment to EU citizens in the UK, there is no doubt that the same could happen to UK citizens in the EU, with particularly strict enforcement of work permit rules.

        • Gary says:

          Not at PwC we weren’t. Despite what you might read in the press, they don’t actually play fast and loose with that kind of stuff.

          And the UK is trying to make it hard to *live* here, not trying to make it hard for Rolls Royce to contract for the services it needs to grow the business and create more employment. I’d be surprised if the Brexit deal meant that Mercedes was suddenly unable to contract for the services it needs. I’d be astonished if Merkel allowed that to happen. Or if Mercedes allowed Merkel to let than happen.

          See there is a whole line of very powerful people who will not allow themselves to be restricted from the UK services that they value and appreciate, and when we get to the business end of the Brexit talks, the Mercedes/Shell/Total of this world just will not stand for all this preposterous, precocious and capricious nonsense coming from Brussels right now.

          • Blissex says:

            «Mercedes was suddenly unable to contract for the services it needs.»

            I am quite sure that Mercedes can find among 450 million EU27 citizens and 27 national branches of PwC the expertise it needs, and even if I am wrong about that, the supposedly uniquely valuable specialists in London can always apply for a temporary or permanent resident visa in the EU27 to serve that much bigger market; the visa is likely to be granted under the usual “highly skilled migrant” category in that case.

            «the Mercedes/Shell/Total of this world just will not stand for all this preposterous, precocious and capricious nonsense coming from Brussels right now.»

            But it was the unilateral decision of the sovereign and independent english and welsh voters, and their democratically elected government, to “proscribe” all free trade in goods and services, and free movement of capital and labour, from the UK to the EU. As I wrote below, “Brussels” have simply repeatedly promised to respect that democratic vote to the fullest extent possible.
            “Brussels” played no part in that unilateral and sovereign decision; unless perhaps they were so fed up with UK membership that they secretly funded UKIP and the “Leave” campaign, which would be quite understandable :-).

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  9. Dipper says:

    The thing is, Remainers, we’ve had the warning about the imminent recession if we voted to Leave; that didn’t happen. Then there was the recession that would happen after we triggered Article 50. That didn’t happen. Then there’s being unable to get anyone to work in the NHS; Jeremy Hunt confirmed today that although applications are down they are still getting enough applicants. It is always disaster just around the corner with you lot.

    Amongst the list of things that will go with clearing is apparently Euro-Derivatives Clearing. It is clear from comments many have made about this (in the Guardian naturally) most people have no idea of the difference between cash clearing and derivatives clearing and hence have no idea if it is actually possible for the Euro-zone to have regulations on euro derivatives clearing.

    So you may have a point, but honestly there is no way of telling. The most credible Remainer on here is Blissex because he appears to approach the subject with some credibility, picking between things that aren’t affected and those that might be rather than just running round shouting that the sky is going to fall on us because we had the temerity to disagree.

    People like to do business. In particular, countries really like to export. So if there are gaps in UK trade then there will be a rush to fill them. Some of the details may take a while to get sorted and the government may be a bit useless and disruptive, but after a short while we should get things moving. And as I have pointed out above, the UK has rolled the EU trade deals over with a lot of countries so we are going to have a lot of trade deals in place day 1.

  10. Gary says:

    @Blissex.
    “The sale of any licensed financial or professional service will also become illegal, with pretty much zero chances of this changing in the future.”

    Oh mate. This is exactly the sort of catastrophising that predicted last years recession.

    Here is but one example of why your scenario will not come to pass; if EU proscribed UK Wholesale Financial Markets, the Govts of FR, ITA, ESP, DE, etc would need rollover their existing debt. There is simply not enough capacity in European financial markets to process that volume of debt.

    Said countries would literally be staring down the barrel of the insolvency gun. Brexit brings us problems for sure, but we are not looking at insolvency like our continental friends are, and a mutually acceptable agreement starts to come into view…

    • Blissex says:

      «if EU proscribed UK Wholesale Financial Markets»

      That seems to be a stupid and delusional premise because:

      * The sovereign and independent voters of England and Wales have convincingly voted to “proscribe” all the oppressions of EU membership, including the imposition by the EU of free trade in goods and services and free movement of labour and capital from the UK to the EU. The kipper government by sending the article 50 notice have formally informed the EU that the government democratically endorsed the voter’s decision to “proscribe” all free trade in goods and services and free movement of labour and capital from the UK to the EU at the end of March 29, 2019.
      * The EU have taken no action for or against that, as it is an independent and sovereign decision of english and welsh voters reflected democratically by the kipper government in the fully unilateral article 50 notice. Various EU officials and members of the EU councils have also repeatedly said that they intend to fully and sincerely respect the sovereign and independent decision of english and welsh voters to end free trade in goods and services and free movement of labour and capital from the UK to the EU, and they are determined to implement it to the fullest extent possible starting at the end of March 29, 2019.

      For the financial (and other services) markets this will just mean that operations in the EU27 will need to be conducted by businesses substantially resident (both as to capital and number of employees) in the EU, and that operations in the UK will be conducted by UK businesses substantially resident in the UK. Nothing extraordinary or strange in that.
      That has always been the position of the EU governments with respect to extra-EU financial (and other services) trade, and the UK voters and government have emphatically and patriotically chosen to be in the extra-EU category.

      «the Govts of FR, ITA, ESP, DE, etc would need rollover their existing debt. There is simply not enough capacity in European financial markets to process that volume of debt. »

      That debt can always be traded in London via UK subsidiaries of EU27 banks, and it is not in the custom of the City to refuse business. Also the ECB has stated previously that they will do “whatever it takes” to ensure the stability and viability of the euro and EU financial markets. Also a very large chunk of EU27 sovereign debt is owed within the EU27 and traded within the EU27 with no difficulty.

      • Gary Taylor says:

        …aaaand… We’re back to theory again. Solid ground for you there.

        In theory there is no difference between theory and practice. In practice however, the EU does not help me trade.

  11. Blissex says:

    «the government democratically endorsed the voter’s decision to “proscribe” all free trade in goods and services and free movement of labour and capital from the UK to the EU at the end of March 29, 2019.»

    From a kipper point of view this makes perfect sense: voters decided to cut off a small federation of nations of little relevance some of which are still afflicted by grandiosity from their lost imperial past, and still try to puff themselves up and demand one-sided “deals” on their terms only; good riddance to them, and to their attempts to impose free trade in goods and services and free movement of labour and capital from the UK to the EU; the UK looks at the world for their service and goods exports, as D Davis said a year ago about the new english Trade Exchange Area:

    https://www.conservativehome.com/platform/2016/07/david-davis-trade-deals-tax-cuts-and-taking-time-before-triggering-article-50-a-brexit-economic-strategy-for-britain.html
    «So within two years, before the negotiation with the EU is likely to be complete, and therefore before anything material has changed, we can negotiate a free trade area massively larger than the EU. Trade deals with the US and China alone will give us a trade area almost twice the size of the EU, and of course we will also be seeking deals with Hong Kong, Canada, Australia, India, Japan, the UAE, Indonesia – and many others.»

    From a kipper point of view the EU27 have chosen to isolate themselves in their little bubble of navel gazing petty nationalism when they forced the England (and Wales) to vote to “Leave” because of the awkward unwillingness to cooperate of the EU27, while UK exports of high-quality traditional financial products like PPI and PFI are eagerly awaited in the huge countries that are very import oriented like China, India, Japan and soon to be members of the english Trade Exchange Area.

    🙂

  12. Pingback: Links, 31 October 2017 | illiquid ideas

  13. Clev says:

    “It is almost certain that the relative deterioration in the UK economy and the accompanying fall in living standards over the past year are a consequence of the vote by the British people to leave the European Union. Had sterling not depreciated and the economy continued to grow at its previous rate, as would have been likely with an improving global backdrop, real household disposable income per head might have been more than 2 per cent higher than now, worth over £600 per annum to the average household.” – NIESR

    http://journals.sagepub.com/doi/full/10.1177/002795011724200103

  14. Guano says:

    We have heard the slogan “No Deal is better than a Bad Deal” quite a lot from Leavers. I would be interested to hear from them their definition of :-

    1 a Bad Deal
    2 a Good Deal
    3 the dividing line between a Bad Deal and a Good Deal.

    For example, what proposed deal were Leavers expecting from the EU if the German car-makers had pressurised the EU into making one?

    • Blissex says:

      My interpretation:

      «1 a Bad Deal»: freedom of movement, ECJ surrender, no “passporting”, contributions.
      «2 a Good Deal»: “passporting” without freedom of movement, ECJ surrender, contributions.

      «expecting from the EU if the German car-makers had pressurised the EU into making one»

      CETA+, “Canada-plus”, which is what T May wanted immediately on exit in the Lancaster House speech, and after an EEA-, “Norway-minus” transition in the Florence speech.

      • Guano says:

        My question was addressed to Leavers. I want them to clarify what relations they actually want with the rest of Europe.

        Blissex’s definition of a Good Deal looks to me like a “Have-cake-and-eat it” Deal. Is this the Leavers’ definition of a Good Deal?

        Is everything that isn’t a Good Deal a Bad Deal, in the view of Leavers?

        Does this mean that, in the view of Leavers, everything that isn’t a “Have-cake-and-eat-it” Deal is a Bad Deal?

        Does this mean that, if they cannot have a “Have-cake-and-eat-it” Deal, Leavers want No Deal?

        • George Carty says:

          I don’t know about ordinary Leave voters, but the Tories would certainly prefer No Deal if a “Have-cake-and-eat-it” deal is unavailable, for reasons of electoral politics.

          The 2017 General Election result (in which the Tories just barely scraped back into power in spite of poaching over 2 million votes from UKIP) means that the Tories are keenly aware that the ex-Ukippers have them by the balls. If a Brexit deal is reached which cannot be spun as a “victory” over the EU, these voters will abstain or switch back to UKIP (or a UKIP replacement), allowing Corbyn to sweep into No. 10.

          Turning the UK into a pariah state by crashing out of the EU and refusing to pay any exit bill could be spun to the Leave voters as a “victory”, and even if it fails to re-elect the Tories in 2022 it would make it impossible for Corbyn to do anything for his supporters (as the UK would be forced to cut taxes — and therefore the welfare state — to the bone in order to stop vital employers fleeing to the Continent).

          • Guano says:

            I have left my question in a number of places and it is only Remainers who have answered it. I would really like to know where Leavers think the dividing line is between a Bad Deal and a Good Deal – and If No Deal is better than a Bad Deal, they really ought to know.

        • Dipper says:

          Fair question with quite a long answer. The headlines are I’d like my government to be responsible for all major aspects of policy in the UK – laws, who gets to come here. Also I’d like the Brexit process to be transformational and drive valuing UK citizens more, forcing higher productivity and better training.

          My bargaining position is i’d like to have my cake and eat it. It isn’t the job of the UK to do the EU’s bargaining for it, so they can come back with their demands and we can negotiate.

          I’m not over bothered about the money, but I do want what we pay to count for something in the negotiations. At the moment we are being told we will inevitably be a third country afterwards and we owe them lots of money. If whatever we do we are going to be a third country, why would I write them a cheque? Surely you would just only hand over the money when you get a good deal?

          • Guano says:

            Phase One deals with EU citizens, the Irish border and settling of accounts. The UK Government has agreed with that sequencing but hasn’t made much progress with those three issues. The UK Government has already agreed, therefore, that settling up the accounts is separate from, and comes before, the main negotiations about what kind of relationship the UK has with the EU. “Surely you would just only hand over the money when you get a good deal?” is no longer relevant, as far as I can see because the UK Government has already agreed to deal with settling up accounts before starting to talk about the main deal.

            Then comes Phase Two which, as far as I can see, is the main negotiation about “the deal” (how the UK trades and cooperates with Europe in future). I’m not interested in what the initial bargaining position should be; I am interested in what the limiting case of a Bad Deal is – the minimum conditions that have to be achieved in A Deal that would make it better than No Deal.

          • P Hearn says:

            The negotiation structure is simply wrong. It may sense to break it into two phases, but the phases are the wrong way round.

            We should first discuss trade, product standards, mutual recognition – all that good stuff. This should be done on the strict understanding that in the second phase, the issues of the final settlement, Ireland and EU citizens will also need to be agreed before anything is agreed. In short, the trade negotiations will depend on a successful outcome to the other three issues in phase two.

            That would shape the trade talks which may well result in the UK agreeing to mirror EU product standards and having a mechanism to discuss situations where we may not wish to (e.g their ill-informed limits on the power of certain domestic appliances or the transportation of live animals for slaughter, to name two).

            Let’s assume a deal is agreed on product standards and even zero tariffs between us. The Irish issue simply melts away. That would be a strong incentive for both sides to negotiate in good faith, knowing they could solve one of the more sensitive phase two issues before they even started discussing it.

            Instead, we have the farcical situation of the UK trying to work out a settlement number that the EU constantly rejects without any counter offer. The EU is playing the role of the David Walliams “Computer says no” character.

            It’s no wonder trade deals take the EU a decade to sign when this is how they structure their work.

          • Guano says:

            As far as I know the negotiation structure has been agreed by the UK Government. As far as I know the UK Government has not officially asked for the negotiation structure to be reviewed. So I don’t see how the negotiation structure is relevant at this point in time.

            I can see various Brexity people are tweeting that the EU is insisting on this negotiating structure, and that the UK Government should walk away without a deal because the EU is insisting on this; this doesn’t make much sense if the UK Government has agreed to that negotiating structure. If the UK Government agreed to something that it subsequently has been unable to deliver on, we have a serious problem with the UK Government.

            The point of Phase One is not to reach final agreements, it is to make progress on those three issues. That probably means setting out clearly what the options are and the implications of those options. In the case of the Irish border, it means saying whether there is a 100% commitment to an absence of a Hard Border and what would have to be done to achieve that; or alternatively, if there is some possibility that there will be a Hard Border, what will be done to mitigate the effects of that.

            I haven’t seen that yet. I have only seen a series of Red Line statements that are (at first sight) contradictory. And I haven’t yet seen a clear statement of what is a Bad Deal.

          • Dipper says:

            Firstly, I believe David Davies said that the final deal is an all-inclusive deal, so although we agree the amount first, the deal is signed off in one go. No deal, no money.

            Red lines: no FOM as currently configured. No jurisdiction of ECJ in internal matters. So the current situation where EU citizens can have superior rights to UK citizens within the UK ends. And some wiggle room on jurisdiction on exports into the EU. And that’s about it. On the Irish border I’d be fairly lax – non-intrusive monitoring to ensure no mass smuggling of goods over the border and otherwise leave it to the two Irish authorities. If that doesn’t suit Rep of Ireland or the EU that is their problem. I’d like a decent trade deal and would pay a fee for one, but no ongoing payments unless there was clear basis for calculation of the payments and a clear statement of benefits.

            A bad deal is one that means we continue to have no control over migration, continue to pay out large amounts of money with no clear benefit or accountability, continue to have laws over internal UK matters overseen by the ECJ, and prevents us from agreeing trade deals with countries outside the EU.

          • eurinco says:

            So on your definition would continued EEA membership giving us full membership of single market be a bad deal?
            Article 112 safeguard clause would give U.K. the emergency brake on free movement which David Cameron sought but was unable to secure as continuing EU member, though in practice it would need to be negotiated with Commission rather than used unilaterally as Liechtenstein did.
            Subject to EFTA Court not to ECJ jurisdiction.
            Free to negotiate free trade deals with third countries around the world, as EFTA has done – whereas otherwise on 30th March ‘19, U.K. will be almost the only country in the world which has no trade deal with any other country.
            After all, we ourselves formed EFTA in 1960 as an alternative to the EEC, as it was then. EFTA thrives today, all four members have significantly higher GDP aped head than does U.K.
            Since we no longer want to be members of the EU, why would we not rejoin EFTA and remain in the EEA so as to retain membership of the single market?

          • Dipper says:

            eurinco – I don’t know enough about the detail of what is possible and what isn’t under EFTA. I believe other countries have to have FOM in effect, so that would be a no. Personally I could live with ECJ jurisdiction on trade with the EU, but I think in the long run it isn’t a solution for the ECJ to have jurisdiction on trade and jurisdiction will ultimately pass to non-national bodies in much the same way as regulation is passing to non-national bodies. I don’t know what freedoms there are under EFTA for other trade deals outside the EU but restrictions on new trade deals would be a no as well.

          • Guano says:

            The ECJ is part of the institutional arrangements that facilitate trade and cooperation across Europe.

            I presume that Brexiteers want the UK to continue to trade and cooperate with Europe because:-
            – that is what Vote Leave said before the referendum
            – the UK economy is configured around trade and cooperation with Europe and as yet there is no coherent plan for reconfiguring the UK economy.

            But the ECJ annoys Brexiteers (suddenly, after the referendum; it was only mentioned once before the referendum in a speech by Johnson).

            So can we have more information about what institutional arrangements the Brexiteers want? It is their responsibility to point towards institutional arrangements that would permit continued trade and cooperation with Europe without whatever it is that annoys them about the ECJ. It isn’t the responsibility of the EU to come up with a solution, nor is it the responsibility of the rest of us?

        • Dipper says:

          and whilst we are on the matter of the Irish border, my Leaver position is firstly I’d like a free trade agreement so there would be no need to inspect goods coming across the border and secondly if the EU insist on a deal that does not allow goods to move across the border in an easy fashion then what the UK decide to do about that on the UK side of the border is a matter for the UK, and what the EU decide to do about that on the Irish side is a matter for the EU. I’d be fairly lax on that – articulated lorries would be waived through on number-plate recognition and prc-authorisation and optional random pulling in at any place in NI or the UK and anything smaller than an articulated lorry I’d leave to the NI government to worry about. If someone was obviously trying to evade the rules then they could be subject to separate investigation.

          • Guano says:

            It is Brexiteers who are insisting on a deal that does not allow good to move across the border in an easy fashion, by insisting on opting out of the existing institutional arrangements that permit that.

          • Dipper says:

            yes that’s right. I’d like to replace a free trade agreement that requires us to allow the ECJ have primary legal oversight in the UK and takes away control over our border with a free trade agreement that makes UK parliament the sovereign law-making body in the UK and allows us to decide who comes here and who doesn’t.

          • Guano says:

            There is no equivalence between the UK Parliament and the ECJ. The UK Parliament cannot resolve disputes about European international agreements because it is national body and it isn’t a judiciary body. If the UK Parliament wants the UK to have trade and cooperation agreements it will need to give some power and responsibility to an international judiciary body as the end-point of a dispute-resolution mechanism. So can we have more information about what institutional arrangements the Brexiteers want that would permit continued trade and cooperation with Europe

          • Dipper says:

            Yes. Agreed. That’s why I said the UK parliament should be the sovereign law-making body in the UK. At the moment the ECJ pronounces on internal UK matters. For trade and international matters then UK parliament cannot be sovereign so for the moment I would accept the ECJ on UK-EU trade issues. In the long run and if the ECJ is excessively pro-EU then other nations outside the EU apart from the UK will require a different regulatory body.

          • eurinco says:

            What this misses, and was missed by a number of MPs in the debate tonight on the Withdrawal Bill, is that it is possible to remain a member of the single market on leaving the EU without being subject in most cases to the jurisdiction of the ECJ.
            U.K. would need to rejoin EFTA in principle in order to remain a member of the EEA from the day we leave the EU. As EFTA members, we would be subject to the jurisdiction not of the ECJ but of the separate EFTA court.
            Professor Baudenbacher, President of the EFTA Court, visited U.K. recently to raise understanding of how his court works and challenge the view it is simply a vehicle to implement decisions of the European court of justice. He challenged the UK position paper on future resolution of disputes between the UK and the EU post-Brexit as failing to understand the independence of Efta from the ECJ.

          • Guano says:

            I was waiting for a reaction from Dipper but there hasn’t been one.

            I see that we are being told again that we should get behind the UK Government’s negotiating strategy. It is still difficult to understand what the UK Government wants to achieve in negotiations, except a lot of unspecified favours that don’t usually come with the red lines that the UK government has announced. The strategy appears to be “bloody awkward” and then brief against the EU and EU members when they don’t offer favours. This won’t work. This is playing a poor hand very badly.

          • Dipper says:

            I didn’t reply because there didn’t seem to be anything to reply to. The fine detail of EFTA etc is beyond me and I have given some red lines above and didn’t see there was anything to add in this instance.

            The EU negotiating approach has not been one that encourages co-operation. A key prior event is Tony Blair giving up part of the rebate in return for the EU promising to review the CAP. They reviewed it and didn’t change anything. That means we cannot trust the EU to respond, so there is no way the UK can offer anything without a clear quid pro quo. We are being asked to agree an exit bill prior to any trade negotiations; we would be nuts to agree to that. We are being asked to agree rights on EU citizens that effectively grant diplomatic immunity to EU citizens and their offspring in perpetuity. For the EU to require UK citizens to be second class citizens in their own nation shows a complete lack of understanding. It is the EU that is playing their hand badly.

            My view was, on Referendum+1, that we should just walk out. Not because I want no agreement but because unless we walk away we will get a really bad deal.

          • Guano says:

            I fear that the Brexiteers learnt the wrong lesson from the episode of Thatcher’s rebate. They thought that it would be possible to get other favours by being awkward. Thatcher’s awkwardness was only part of the story – she was at the heart of Europe, helped turn the Common Market into the Single Market and passed the Single European Act and so had a lot of social capital with the other member states. And such a favour can only be a one-off: an association like the EU (or a golf club or an allotment society) cannot in general give one member a better membership deal than the other members. If one member gets a bespoke deal it will be, on balance, less advantageous than the standard membership deal (and there is no obligation to provide a bespoke deal because they involve a lot of work and tend to cause bad feelings).

            Vote Leave don’t know how to climb down from their false promise of the UK having access to the Single Market while opting out of some of its conditions. Thus the feigned surprise that leaving the Single Market and Customs’ Union means a hard border in Ireland and creating trade barriers around the UK or the financial sector leaving London for other European countries. These are all direct consequences of Theresa May deciding that the UK should leave the Single Market and Customs’ Union. Brexiteers need to decide what actually is a good deal (which may require rubbing out some of their red lines).

            (And the UK Government agreed to the phasing of negotiations – it is too late to complain about that)

          • P Hearn says:

            Explain how remaining in the internal market, customs union, and consequential requirement to be subject to the jurisdiction of the ECJ, to pay in ever-increasing budget contributions and to continue free movement of people equates in any way to leaving? That’s such a lie, it’s visible from outer space.
            It was made abundantly clear that we would leave the so-called Single Market if we voted Leave, just like the £350m on the bus was shredded for the entirely abstract argument it was.






            The Irish border could be a problem (for the EU), but if we have mutual recognition of product standards and a deal on zero tariffs either way, (to the EU’s advantage, given the balance of trade), that problem melts away. We won’t know until the trade talks have progressed whether that’s a possibility, but the trade talks can’t progress because the EU wants the answer before the question is posed. That’s how utterly stupid the EU is, and people want to remain in this organisation?
            The whole Irish border question is no reason not to vote to leave. Ireland is an independent country, and has been for close on 100 years. We rightly have no say in their affairs and can’t consider their interests when voting in anything other than Eurovision. What is the argument that we somehow should? It’s as specious as the one that says because it’s complicated to leave such a huge bureaucracy as the EU, we shouldn’t even attempt it.
            It was complicated to get men on the moon, but it was achieved, (admittedly mainly by Nazi rocket scientists – we’ll let that pass). Leaving a regional trade body with aspirations to become a federal state doesn’t compare to that. We start from a position of 100% compliance, so that should have made a trade deal a lot simpler, but it’s the EU we’re dealing with here.

          • Dipper says:

            I didn’t vote to leave the EU because I wanted a better deal with the EU. I voted to leave the EU because I wanted to leave the EU.

            And the finance sector isn’t leaving London. Organisations have been scaling back on their predictions of job losses and at least one bank has shut its continental dealing room and moved it to London. The main feature of internationally tradeable currencies and government debt is that they are internationally tradeable.

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