Tuesday, 26 September 2017

Get a plan ready for no deal Mrs May. You are going to need it.

There are some good pieces today on this topic that I cannot improve on so I give you the links to click on.

First from IDS


and from BoJo's former advisor Gerard Lyon


and a less good piece from John Baron


It has been clear from the off that the EU Juncker led Commission  will settle for nothing less than complete humiliation and unconditional surrender by the UK and this from the home of what George Bush described as cheese eating surrender monkeys.

I do hope Mrs May does not give away even more to Tusk today. She is a hopeless negotiator as well as being a hopeless PM.

We will gain from operating under WTO rules. The big losers will be the German car industry.


L fairfax said...

Fortunately Juncker's desire to humiliate us might help us get hard Brexit.

Blind stoat said...

Dr Edmond, I think it is an over-simplification to say that, if all bets are off and we revert to WTO rules, the UK will gain and German carmakers will be the big losers.
Agreed, the German auto sector would face significant challenges under that scenario. Approx 20% of all German car exports end up in the UK.
a) it is inconceivable that we would ever end up trading with Germany under basic WTO rules - i.e. with no other market / customs agreement in place. Clearly such an outcome would be a disaster for all concerned, not least the UK consumer and the UK motor parts industry.
b) to declare war on the German car industry in such a way (because that's what it would amount to) would invite massive retaliation from the EU. That retaliation, I suspect, would be directed primarily at the UK 'services' sector.

In reality, the UK is never going to resort to pure WTO rules - i.e. without a supporting framework of market and customs agreements covering a wide range of goods and services.
We know that. The Germans and French know that. And that's why I think that statements from Duncan-Smith and others that we should prepare for a WTO-only future are not particularly helpful.

Blind stoat said...

Duncan-Smith (and others) are right to suggest that, in parallel with the current talks, we should be preparing a contingency plan. But that contingency plan should be based on some 'real world' assumptions, and should be prepared jointly with the French and Germans.

When we get down to the hard nitty gritty, it's quite obvious what the big issues are. We want to ensure that our investment banks / insurers / consulting firms / lawyers etc etc still have the ability to sell into the EU with as few obstacles as possible. The Germans and French want to ensure that they can still export their cars, and other manufactured goods, directly into the UK without any customs hindrance or punitive tariffs.

That being the case, we should send a separate negotiating team to agree a 'worst case' contingency plan. That plan would basically start at the bottom (i.e. would be based on pure WTO rules) but would add on a series of mutually acceptable agreements covering specific goods and services. Yes, it would be a 'worst case' plan - because both sides would suffer significant market disruption and economic loss were it to be implemented. But at least German carmakers (and their UK distributers, parts suppliers etc etc) as well as UK accountants, architects etc. etc. would have some idea as regards what would happen in the real world the day after it is implemented

Eric Edmond said...

Dear Mr Stoat,

Business negotiation is like war. Right now France and Germany run the EU which wants to humiliate us. We currently do not do as well out of sales of UK services as we should because of non-tariff barriers. We have to talk tough and act tough just like Barnier is doing for the EU. There will come a time for compromise but with the EU that will not come until mid March 2019, at the last hour of the last day. The EU operates on last minute deals. its not terribly efficient but that's the way it is. Incidentally the big investment banks are all US companies. We do not have any UK pure investment banks.

Ability to negotiate is a rare talent that most people do not have. We do have to tell the EU we will go to WTO rules if they don't start serious talks.

Then we just shut up and wait. That's the hard part our politicos and civil servants do not grasp.

Blind stoat said...

I understand your point of view Dr Edmond.

But, my point is that, if we leave it until the last moment, we will all be worse off economically than we need be. By all, I mean both the UK and the eu27.

Warry and North (and others) make the valid point that simply defaulting to 'pure WTO' rules would be a disaster - and I have to say, I think it's unrealistic to say that we could / should wait until March 2019 before attempting to sort out how it would work in practice.

In that regard, saying that we will resort to WTO rules becomes an empty threat - a complete bluff - and the Germans and French will recognise it as such.
Which is why I am suggesting that we should start negotations regarding a WORKABLE 'worst case' WTO scenarion in good faith. Then it is no longer an empty threat.
We should be saying to the Germans and the French: 'look, we know that none of us wants to revert to a WTO framework, but let's at least put in place some sort of workable WTO solution (which will have to involve at least some additional tariff and customs agreements) so that, failing any other more comprehensive agreement, there is at least something to fall back on. So at least the German car industry is not plunged into case and we do not see a mass exodus of 'City' firms to Paris and Frankfurt.

Blind stoat said...

^ and regarding your point about all major investment banks being US / US owned, yes, agreed but it's sort of irrelevant. Obviously we want those banks to remain baesd in based in London and continuing to generate employment, tax revenue and wealth here, rather than in Paris, Milan or Frankfurt.

Blind stoat said...

correction above.......... German car industry is not plunged into chaos......

Eric Edmond said...

Avoid emotive meaningless words like disaster. Most of the world trade is done on WTO rules including US, Japanese, Chinese exports to the EU.

Warry and North are incorrect about this. It is no bluff. We could do this Both sides would suffer but the EU much more than us. Barnier knows this.

The EU has been after City business for years. They wil continue to try. What underpins City trade is the trust in the independence of UK courts. The ECJ is a corrupt court dedicated to supporting the EU's expansionist aims. The Yanks are well aware of this which is largely why they are in London. The EU can pressure French and German banks but they are small potatoes. The Jap banks Nomura etc are much bigger in size and geographical spread.

The German car industry has its fiddling performance figures scandal and now dieselgate. The Yanks and US Supreme court will sort them out.

Warry & North do not know how the City works. I do. I was in the BoE for almost 6 years as was Mrs May!

L fairfax said...

When you say the EU would suffer more than us, the problem is that EU citizens would suffer not commissioners - do the commissioners care about EU citizens? There is evidence they don't.

Eric Edmond said...

They only care about their grande projet. Ordinary people are collateral damage to these unsackable bureaucrats.

Stephen Harness said...

What a mess. A remainer PM negotiating Brexit and an opposition leader who will urge ECJ, Single Market/Customs Union and immigration, in fact urge anything that will be good for a vote.

Blind stoat said...

Dr Edmond, the word "disaster", as I have used it, might well be considered 'emotive' but it is certainly not 'meaningless'.

As far as I'm concerned, resorting to WTO rules without any supporting framework of supplementary tariff and customs agreements would represent a form of ecomomic 'mutually assured destruction'. At best it would cause a preiod of extreme, if temporary, uncertainty and market dislocation. At worst it would degenerate into a spiral of tit-for-tat petty (and not so petty) vendettas which would cause permanent damage to both large and small enterprises in the UK and also within the eu27. Ultimately, the only real beneficiaries would be the non-european economies.

Eric Edmond said...

So Mr Stoat you know better than those who drafted WTO rules which have worked successfully world wide since 1995 when they replaced GATT that had run since 1948. Your difficulty is you are considering only European trade which is a steadily diminishing proportion of world trade.
Increasing world trade has been hugely beneficial to the whole world and raised nations like India out of poverty. You can be a little European but I prefer to be a citizen of the world.

Blind stoat said...

Dr Edmond, I am not questioning the efficacy of WTO rules as regards our trading relationship with other countries in a post-Brexit environment. Nor am I doubting that there will be numerous new opportunities to trade with non-eu countries, as soon as we are free of some of the strictures that we are currently obliged to adhere to as a member of the eu.

But as regards our multiple trading relationships with the eu27 countries, these are so embedded and inter-connected, that to simply revert to basic WTO rules with no other supporting framework in place, really would be foolhardy - and I believe, UNNECESSARY - on our part.

Just to emphasise: I think we should have a back-up plan in place, which would essentially mean the UK reverting to WTO rules. But those WTO rules should be augmented by a framework of additional agreements, which are clearly mutually beneficial to both the UK and, at least, some of the other eu 27 countries. The back-up 'worst-case' plan would not cover all countries and all sectors, but would at least allow for some continuity and stability, so enterprises both in the UK and in the eu27 can at least start to plan and prepare for the future.

Eric Edmond said...

KISS Mr Stoat. The EU has to trade with all the other non EU countries on WTO rules. You cannot pick, chose or augment WTO rules. You either use WTO rules or .. well there is nothing else.

Niall Warry said...

Does it never occur to you that your six years experience in the B of E comes a poor second to the multiple author, four years with Farage in Brussels and over 25 years of detailed expereince of the EU that Dr North has?

Stephen Harness said...

In all respect Dr North is not a political party. I greatly admire the work done by Richard and indeed Booker. I own some of their books and have used them for reference. They are great contributions to a movement dedicated to leaving the EU. I have favoured Flexcit as a plan to leave the EU in the past and I regularly visit his blog.
However many aspects of Flexcit have been overlooked by the politicians, the Referendum campaign was not about Flexcit. David Cameron set out the terms of reference and clearly stated the UK would leave the Single Market. If Cameron had embraced Flexcit instead of rubbishing the Norway option, perhaps the UK would now be in EEA/EFTA. The Leave Campaign ran a greatly flawed campaign but it was clear, leave the Single Market, no to the 4 freedoms, leave the Customs Union/commercial policy, end EU contributions, take back control of our territorial waters and become an independent sovereign nation.

Eric Edmond said...

6 years in the BoE is roughly the same as our current PM had. Plus of course I did 2 years in Whitehall and dealt with DG 13 on various IT projects. in the early 80s in Brussels. I have never written a book but then neither did my old tutor Mrs Hodgkin, Nobel prize, Order of Merit and tutor to Margaret Hilda Roberts for 4 years.