It has become clear over the last twelve months how woefully unprepared the British government is to negotiate an exit from the
EU. As the play in the theatre of the absurd continues to unfold, we are faced
with the prospect of the British government having to take steps to secure food supplies in the event of a no-deal Brexit, which has lit up social media sites with
posts displaying a mix of trepidation and withering scorn. As more than one
person has commented, we appear to have gone from “Vote Brexit to save £350
million a week” to “Vote Brexit and we will ensure that the food doesn’t run
out.”
Against this backdrop the latest missive from the brains
behind the drive to sign new trade deals – none other than trade secretary Liam
Fox – arguing that ‘No deal’ is preferable to delaying the Brexit process is
beyond stupidity. You may recall a year ago, Fox claimed in a radio interview that “the free trade agreement that we
will have to do with the European Union should be one of the easiest in human
history.” This is the same Liam Fox who said two years ago that “we're going to replicate the 40 EU free
trade agreements that exist before we leave the European Union so we've got no
disruption of trade.” With seven months before the UK leaves the EU, let us
consider how many of those trade deals Fox has actually signed (clue: It’s an
integer less than one). So you will forgive me for not taking Fox’s latest assertion
at face value that “extending Article 50
is the definition of failure for the government.”
Fox went on to say that “The
public have told us, it wasn’t a consultation, to leave the European Union, and
the public already wonders why it’s going to take more than four years after
the referendum for us to fully remove ourselves from the EU. To attempt to
extend our membership even longer, many voters would regard as a complete
betrayal by the political class.” So where to start with this one? How
about the fact that the referendum was in effect a consultation – it certainly was
not legally binding. And why is it taking four years? Because it is a difficult
process and one which if rushed will lead to far worse outcomes than are
necessary. The biggest betrayal of all would be to sell out the public in order
to deliver a Brexit which leaves people worse off. And if he thinks people are
angry with the way politicians have handled Brexit so far, wait until it is
bungled.
Another of the Brexit-at-any-price brigade, Daniel Hannan, yesterday told readers of the Daily Telegraph “Let’s call the EU’s bluff and prepare
for a no-deal.” Hannan’s argument relies on the old nonsense that “they
need us more than we need them.” This is simply wrong. Around 47% of UK exports
are destined for the EU27 with only 16% of EU exports headed to the UK, and the
Telegraph is guilty of peddling fake news by suggesting otherwise. You can
argue, as Hannan does, that the EU is being unreasonable in its approach, and
we can look at that another day. But all sane commentators knew that the EU
held the whip hand in negotiations and expecting it to act in any other way
than to look after its members interests denotes irresponsible levels of
naivety.
There is nothing new in any of this, of course. I think the
Brexit ultras are wrong and they believe me to be a Remoaner, afraid of looking
to new horizons. So let’s have a look at some evidence. Over recent months I
have been looking at gravity trade models of the UK to assess the impact of a
hard Brexit (the final results are likely to be published in a few weeks’ time).
On my estimates, a no-deal Brexit will cost around 8% of UK export volumes and
impose a hit of 3% on imports. With exports falling more than imports, this implies
a one-off reduction of 1.5% in GDP. That may not sound like a lot but if we impose
these results on a structural model and run them over a 15 year horizon, we end
up reducing real GDP by 4% relative to baseline and real incomes by 3%. As a
result unemployment rises and public finances turn out significantly worse than
they would otherwise be. I can’t find the Brexit dividend to fund higher NHS
spending (neither can the OBR).
With support for a second referendum apparently mounting,
the whole Brexit debate is reaching a tipping point. I have to stress that I am
no great fan of this idea although I don’t buy the will of the people nonsense
(remember, only 37% of eligible voters opted for Leave). But the decision to
leave the Single Market and Customs Union is economically crazy and was certainly
not on the ballot paper. However, if Theresa May continues to believe that this
is what people voted for, then a second referendum may indeed be required to
check whether it really is “the will of the people.”
I do wish there were more important things to write about
but Brexit appears to have become an all-consuming part of this blog. However, it is
THE economic question of my lifetime – and it is being driven by ideological politics.
But as the journalist James O’Brien put it, “The one thing I still can’t quite get my head round: It’s optional. It’s
a choice. It’s voluntary.”
Showing posts with label Liam Fox. Show all posts
Showing posts with label Liam Fox. Show all posts
Sunday, 29 July 2018
Saturday, 4 February 2017
Not your father's world
This is a post which I considered very carefully before
deciding to publish. I certainly do not “do” conspiracy theories – they have often
struck me as the paranoid delusions of people who cannot accept that the world
works differently to how they would like. I struggle with the idea that the
world is run by a secret cabal of men (for that is how they are normally portrayed
in James Bond films) sitting in some glamorous location making decisions which
affect the lives of the little people. Nor do I buy the idea that the likes of
the Bilderberg Group are trying to subvert the democratic process in the
western world. But I was recently brought up short by a couple of articles by
people who I have long regarded as sane commentators.
The first was by George Monbiot, an environmentalist and political activist. I have to confess that I have not always been a fan of his work, believing for many years that he hugely exaggerated his stance on many positions. But I was impressed with his intellectual honesty in reversing his position on nuclear power and I now take him much more seriously, even if I don’t always agree with what he writes. However, the article, published in The Guardian (here) took a cogent look at how so-called "dark money" – used to fund organisations involved in political advocacy without disclosing where it comes from – has a huge impact on the way in which government policy is shaped.
In particular, he focused on the activities of one Dr Liam Fox MP, who is a prominent supporter of Brexit and currently Secretary of State for International Trade. In 1997, Fox founded Atlantic Bridge, described as an educational organisation designed "to bring people together who have common interests [and] ... defend these interests from European integrationists who would like to pull Britain away from its relationship with the United States.” In 2007, a sister organisation was set up in the US with affiliations to the American Legislative Exchange Council (ALEC), described by Monbiot as "perhaps the most controversial corporate-funded thinktank in the US" and which has extremely close ties to the Trump administration (see Monbiot’s article for the detail). After registering as a charity in 2003, the UK arm of Atlantic Bridge was dissolved in 2011 after the Charity Commission concluded that it was "not evident that [it] had advanced education" and "may lead members of the public to call into question its independence from party politics.”
Monbiot convincingly makes the case that Fox has consistently blurred the lines between the public interest and his own personal interests. However, by being tasked with the job of securing trade deals with other countries, Fox is ideally placed to lead the way in securing a UK trade deal with the US. But as has been pointed out numerous times before, any trade deal will be on terms which put US interests ahead of those of Britain. As Monbiot put it, “European laws protecting the public interest were portrayed by Conservative Eurosceptics as intolerable intrusions on corporate freedom. Taking back control from Europe means closer integration with the US. The transatlantic special relationship is a special relationship between political and corporate power. That power is cemented by the networks Liam Fox helped to develop.”
You may or may not agree with this view, but whilst it is plausible, Monbiot has “form” and we know where he stands on the political spectrum. But the blog post by Tony Yates, professor of economics at Birmingham University and which made some similar points, comes from someone who in my experience does not consistently advocate a particular political stance (here) Yates points out that many of the grievances which led to the Brexit result "have been stoked and crafted ruthlessly. The vortex is stoked and our descent into it is piloted in the name of the ‘will of the people’. But in fact the journey is in the service of the populist-controllers who have managed to sell the people the bad policies. What do they get out of it? Publicity, gratification, media careers, control over policies that affect the net worth of companies they and their associates are connected with."
Precisely because I regard Yates as a rational commentator is the reason why his argument hits with such force. Regular readers will know that I have consistently questioned how the policies of Trump – or the UK government with regard to Brexit – serve the economic interests of their respective electorates. If both the US and UK governments are pursuing policies designed to benefit a small group of individuals, we are in more trouble than I thought. I will leave it to the political scientists to assess the impact on the democratic process. More worrying from an economic perspective is that the international institutions upon which our security and prosperity have been built for 70 years are under threat. I have noted previously (here) that the parallels with the 1930s are more worrying than people care to admit, and historians will tell you that despots come to power riding a wave of popular support to impose policies which impoverish their countries. Whilst Trump may not be a despot, and Theresa May is certainly not, they both lead governments whose policies are economically harmful.
Perhaps we are all being a little bit jumpy in the wake of the political upheavals of the last year and wiser heads will soon prevail, such that by the end of the year we will all wonder what the fuss was about. Or maybe, as Yates wrote, the failures of current policies "can be sold as a success, whose ill effects are blamed on simply not punishing the imaginary villains enough. And the next round follows." This is not my father’s world. It’s my grandfather’s.
The first was by George Monbiot, an environmentalist and political activist. I have to confess that I have not always been a fan of his work, believing for many years that he hugely exaggerated his stance on many positions. But I was impressed with his intellectual honesty in reversing his position on nuclear power and I now take him much more seriously, even if I don’t always agree with what he writes. However, the article, published in The Guardian (here) took a cogent look at how so-called "dark money" – used to fund organisations involved in political advocacy without disclosing where it comes from – has a huge impact on the way in which government policy is shaped.
In particular, he focused on the activities of one Dr Liam Fox MP, who is a prominent supporter of Brexit and currently Secretary of State for International Trade. In 1997, Fox founded Atlantic Bridge, described as an educational organisation designed "to bring people together who have common interests [and] ... defend these interests from European integrationists who would like to pull Britain away from its relationship with the United States.” In 2007, a sister organisation was set up in the US with affiliations to the American Legislative Exchange Council (ALEC), described by Monbiot as "perhaps the most controversial corporate-funded thinktank in the US" and which has extremely close ties to the Trump administration (see Monbiot’s article for the detail). After registering as a charity in 2003, the UK arm of Atlantic Bridge was dissolved in 2011 after the Charity Commission concluded that it was "not evident that [it] had advanced education" and "may lead members of the public to call into question its independence from party politics.”
Monbiot convincingly makes the case that Fox has consistently blurred the lines between the public interest and his own personal interests. However, by being tasked with the job of securing trade deals with other countries, Fox is ideally placed to lead the way in securing a UK trade deal with the US. But as has been pointed out numerous times before, any trade deal will be on terms which put US interests ahead of those of Britain. As Monbiot put it, “European laws protecting the public interest were portrayed by Conservative Eurosceptics as intolerable intrusions on corporate freedom. Taking back control from Europe means closer integration with the US. The transatlantic special relationship is a special relationship between political and corporate power. That power is cemented by the networks Liam Fox helped to develop.”
You may or may not agree with this view, but whilst it is plausible, Monbiot has “form” and we know where he stands on the political spectrum. But the blog post by Tony Yates, professor of economics at Birmingham University and which made some similar points, comes from someone who in my experience does not consistently advocate a particular political stance (here) Yates points out that many of the grievances which led to the Brexit result "have been stoked and crafted ruthlessly. The vortex is stoked and our descent into it is piloted in the name of the ‘will of the people’. But in fact the journey is in the service of the populist-controllers who have managed to sell the people the bad policies. What do they get out of it? Publicity, gratification, media careers, control over policies that affect the net worth of companies they and their associates are connected with."
Precisely because I regard Yates as a rational commentator is the reason why his argument hits with such force. Regular readers will know that I have consistently questioned how the policies of Trump – or the UK government with regard to Brexit – serve the economic interests of their respective electorates. If both the US and UK governments are pursuing policies designed to benefit a small group of individuals, we are in more trouble than I thought. I will leave it to the political scientists to assess the impact on the democratic process. More worrying from an economic perspective is that the international institutions upon which our security and prosperity have been built for 70 years are under threat. I have noted previously (here) that the parallels with the 1930s are more worrying than people care to admit, and historians will tell you that despots come to power riding a wave of popular support to impose policies which impoverish their countries. Whilst Trump may not be a despot, and Theresa May is certainly not, they both lead governments whose policies are economically harmful.
Perhaps we are all being a little bit jumpy in the wake of the political upheavals of the last year and wiser heads will soon prevail, such that by the end of the year we will all wonder what the fuss was about. Or maybe, as Yates wrote, the failures of current policies "can be sold as a success, whose ill effects are blamed on simply not punishing the imaginary villains enough. And the next round follows." This is not my father’s world. It’s my grandfather’s.
Tuesday, 13 September 2016
With friends like these ...
I realise that Brexit-related posts are mounting up on this
blog, but the Leavers provide such good ammunition to undermine their own case
that it is a subject too hard to resist. The latest gaffe came in the form of recent
derogatory comments by Trade Secretary, Liam Fox, who suggested that business
leaders do not work hard enough. These are certainly not the most helpful
comments ever to come from a government minister – let alone one tasked with boosting
UK trade at this sensitive time.
According to Fox, at what he thought was an off-the-record drinks party, “this country is not the free-trading nation it once was. We have become too lazy, and too fat on our successes in previous generations … Companies who could be contributing to our national prosperity - but choose not to because it might be too difficult or too time-consuming or because they can't play golf on a Friday afternoon - we've got to be saying to them if you want to share in the prosperity of our country you have a duty to contribute to the prosperity of our country.”
Businesses can be accused of many things but I would never level a charge of laziness. As for “too lazy and too fat”, British businesses are operating in one of the most competitive markets in Europe, with the OECD pointing out that labour market regulation is the lowest in the EU and product market deregulation is second only to the Netherlands. Successful businesses in the UK have to work very hard to be successful against that backdrop. Not surprisingly the comments did not go down too well with large parts of the business community. Richard Reed, founder of Innocent Smoothies and a leading figure in the Remain campaign, hit back by saying that Fox had “never done a day’s work in business in his life” and “How dare he talk down a country that he has damaged?”
Indeed, with Fox having been a prominent Brexit campaigner, at odds with large swathes of the business community, his remarks threaten to undermine relations between business and certain elements of government. The comments were not supported by 10 Downing Street. Nor indeed were David Davis’s comments last week suggesting that it is “very improbable” that the UK will remain a member of the EU single market. I still have not worked out whether government ministers are deliberately talking at cross purposes or whether it is all part of Theresa May’s master plan to undermine the credibility of pro-Brexit MPs.
Furthermore, Fox’s comments highlight a gross fallacy at the heart of the Brexit campaign. Recall that many Leavers argued that it was the EU’s bureaucracy that was holding back the UK. But now that the post-EU future may not be as easy to negotiate as many of them argued, there appears to be an attempt to pin the blame on corporate UK as the Leavers get their retaliation in first. I have long pointed out that it would always be difficult to secure the trade deals with the rest of the world that the Leavers promised. This view was reiterated last week by Sir Andrew Cahn, former chief executive of UK Trade and Investment, who pointed out that Fox’s claims the UK would have a network of deals in place by the time it left the EU were “highly unrealistic.” Sir Andrew noted that “trade deals are unsentimental instruments of real world economic and political reality. The more economic weight you have the better deal you get.” In the grand scheme of things the UK is a small to medium-sized open economy. Any trade deals we do get will thus be on terms which are favourable to the bigger players such as the EU, the US and China.
The letters page of The Times yesterday was full of comments regarding Fox’s remarks, noting variously that “Dr Fox’s comments on exporters would carry more weight if the government’s policies backed them … Not only were Dr Fox’s comments ill-considered, they were unhelpful … I have spent my life exporting British-made products [and] I am incensed by his ill-chosen remarks … his support of Brexit has not done exporters any favours. Dr Fox needs to offer constructive help to the business world.“ That is the voice of business. With friends like Fox, who needs enemies?
According to Fox, at what he thought was an off-the-record drinks party, “this country is not the free-trading nation it once was. We have become too lazy, and too fat on our successes in previous generations … Companies who could be contributing to our national prosperity - but choose not to because it might be too difficult or too time-consuming or because they can't play golf on a Friday afternoon - we've got to be saying to them if you want to share in the prosperity of our country you have a duty to contribute to the prosperity of our country.”
Businesses can be accused of many things but I would never level a charge of laziness. As for “too lazy and too fat”, British businesses are operating in one of the most competitive markets in Europe, with the OECD pointing out that labour market regulation is the lowest in the EU and product market deregulation is second only to the Netherlands. Successful businesses in the UK have to work very hard to be successful against that backdrop. Not surprisingly the comments did not go down too well with large parts of the business community. Richard Reed, founder of Innocent Smoothies and a leading figure in the Remain campaign, hit back by saying that Fox had “never done a day’s work in business in his life” and “How dare he talk down a country that he has damaged?”
Indeed, with Fox having been a prominent Brexit campaigner, at odds with large swathes of the business community, his remarks threaten to undermine relations between business and certain elements of government. The comments were not supported by 10 Downing Street. Nor indeed were David Davis’s comments last week suggesting that it is “very improbable” that the UK will remain a member of the EU single market. I still have not worked out whether government ministers are deliberately talking at cross purposes or whether it is all part of Theresa May’s master plan to undermine the credibility of pro-Brexit MPs.
Furthermore, Fox’s comments highlight a gross fallacy at the heart of the Brexit campaign. Recall that many Leavers argued that it was the EU’s bureaucracy that was holding back the UK. But now that the post-EU future may not be as easy to negotiate as many of them argued, there appears to be an attempt to pin the blame on corporate UK as the Leavers get their retaliation in first. I have long pointed out that it would always be difficult to secure the trade deals with the rest of the world that the Leavers promised. This view was reiterated last week by Sir Andrew Cahn, former chief executive of UK Trade and Investment, who pointed out that Fox’s claims the UK would have a network of deals in place by the time it left the EU were “highly unrealistic.” Sir Andrew noted that “trade deals are unsentimental instruments of real world economic and political reality. The more economic weight you have the better deal you get.” In the grand scheme of things the UK is a small to medium-sized open economy. Any trade deals we do get will thus be on terms which are favourable to the bigger players such as the EU, the US and China.
The letters page of The Times yesterday was full of comments regarding Fox’s remarks, noting variously that “Dr Fox’s comments on exporters would carry more weight if the government’s policies backed them … Not only were Dr Fox’s comments ill-considered, they were unhelpful … I have spent my life exporting British-made products [and] I am incensed by his ill-chosen remarks … his support of Brexit has not done exporters any favours. Dr Fox needs to offer constructive help to the business world.“ That is the voice of business. With friends like Fox, who needs enemies?
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