Diary Day 332: UK Government’s paper on customs arrangements does not impress. Inflation rate steadies. German GDP growth looks good for Mrs Merkel.

My #Remainer’s Diary Day 332: the UK Government’s Department for Exiting the European Union (DExEU) published a paper called “Future Customs Arrangements” subtitled “a Future Partnership paper”. 16 pages including covers. 

Who dreamed that title up, hey? When the UK is preparing to leave a partnership, it is very odd. 

Page 1, Preface, says the UK “wants to build a new, deep and special partnership” with the EU. No it doesn’t; it wants to take back control, remember? Partners in partnerships have to share control. That would never do for the Brexit zealots. So the first line of the paper is a lie. Not a good start. 

It also confirms the exceptionalism that is suffused through Brexiter thinking. Why do we feel the need to tear down a shared institution and insist on special treatment all the time? What realistic ground is there to think the EU would agree it? Isn’t this just arrogant? What is wrong with us? 

Pages 2 and 3, executive summary: the first paragraph says “as we leave the European Union and therefore the EU Customs Union…” 

Can someone explain that “therefore”, please? Just slipped in, unobtrusively. What about the EEA countries? 

It continues: “…the Government seeks a new customs arrangement that facilitates the freest and most frictionless trade possible in goods between the UK and the EU, and allows us to forge new trade relationships with our partners in Europe and around the world.” 

It is as if HMG were deaf. EU spokespeople have repeatedly explained that the freest and most frictionless trade possible is by staying in the Single Market and Customs Union. It is not possible to have frictionless trade if we leave. 

Then two paragraphs of general waffle and then this: “The Government believes that there are two broad approaches the UK could adopt… 

“● A highly streamlined customs arrangement between the UK and the EU, streamlining and simplifying requirements, leaving as few additional requirements on EU trade as possible. This would aim to: continue some of the existing arrangements between the UK and the EU; put in place new negotiated and potentially unilateral facilitations to reduce and remove barriers to trade; and implement technology-based solutions to make it easier to comply with customs procedures. This approach involves utilising the UK’s existing tried and trusted third country processes for UK-EU trade, building on EU and international precedents, and developing new innovative facilitations to deliver as frictionless a customs border as possible. 

“● A new customs partnership with the EU, aligning our approach to the customs border in a way that removes the need for a UK-EU customs border. One potential approach would involve the UK mirroring the EU’s requirements for imports from the rest of the world where their final destination is the EU. This is of course unprecedented as an approach and could be challenging to implement and we will look to explore the principles of this with business and the EU.” 

My bullshit monitor is beeping frantically. Note the long words and the repetition.

The next paragraph does little more than say HMG believes “a model of close association with the EU Customs Union for a time-limited interim period” could avoid a cliff edge. Obviously that isn’t true either. It will just postpone the moment of jumping off. 

The only other substantive point in the executive summary is that the UK says we must avoid a return to a hard border between Northern Ireland and Ireland. 
As this will become the external border of the EU, that will be difficult. 

Pages 4 onwards are largely waffle, the sort of thing you see in a company prospectus. I presume this is aimed at the Tories’ UK audience rather than the EU. Paragraphs 23 and 24 contain these nuggets though: 

“In assessing the options… the Government will be guided by what delivers the greatest economic advantage to the UK, and by three strategic objectives:

  • ensuring UK-EU trade is as frictionless as possible; 
  • avoiding a ‘hard border’ between Ireland and Northern Ireland; and
  • establishing an independent international trade policy.

“…achieving these objectives in full will depend on other elements of the deep and special partnership and trading arrangements we secure with the EU. The Government will set out proposals in relation to these other areas in due course.”

The first two bullet points are best achieved by staying in the EU. The third is in conflict with what the Government has just declared to be its guide, the greatest economic advantage to the UK. 

That’s the essence of it. The rest of the paper just develops those themes. 

No wonder David “No Notes” Davis’s former chief of staff James Chapman couldn’t stand any more of this. 

It is embarrassing being British at the moment. 

Guy Verhofstadt tweeted: “To be in & out of the Customs Union & “invisible borders” is a fantasy. First need to secure citizens rights & a financial settlement”. 

A European commission spokesman said the negotiators would study the document, and continued: “We take note of the UK’s request for an implementing period and its preferences as regards the future relationship, but we will only address them once we have made sufficient progress on the terms of the orderly withdrawal…

“As Michel Barnier has said on several occasions, ‘frictionless trade’ is not possible outside the single market and customs union.” 

A UK Labour Party spokesperson said: 

“Labour is clear that we need to retain the benefits of the customs union and avoid a cliff-edge for the British economy.”

Well, that’s a lie. Labour has been anything but clear. 

The spokesperson added: “That means committing now to strong transitional arrangements on the same basic terms we currently enjoy — including the single market and customs union.” 

Which is not what Labour said before. And a transitional arrangement just postpones arrival at the cliff edge. 

The Liberal Democrats’ spokesperson Tom Brake said: “Even if they were agreed to by the EU, these proposals will only delay the economic pain caused by leaving the customs union…
”The only way to ensure ‘free and frictionless’ trade with the EU is to remain a full member of the Customs Union and Single Market. It doesn’t matter how it’s dressed up or how long it’s postponed, the government’s extreme Brexit will end up leaving Britain poorer.” 

The Chief Executive of the Society of Motor Manufacturers and Traders Mike Hawes said: “…to maintain frictionless trade and ensure business only has to adjust to one change, interim arrangements must retain membership of a customs union with the EU and full participation in the single market.”

I suppose it is karma for so many business people having supported the Conservatives all these years in the belief that they were competent at managing the economy. It would seem quite funny now if it weren’t so painful. 

The Office for National Statistics (ONS) said consumer price inflation held at 2.6 % a year in July, unchanged from June. So the value of the pound in our pocket keeps steadily draining away. 

In Berlin, the Federal Statistics Office said that seasonally adjusted gross domestic product (GDP) rose by 0.6 percent on the quarter, confirming Angela Merkel’s strong position going into next month’s elections. With better governance we could have had an economy like that. 

Diary Day 331: Norway casts doubt on EFTA solution. UK minister wants a temporary customs arrangement with EU. What a Chatham resident said. 

My #Remainer’s Diary Day 331: Norwegian Prime Minister Erna Solberg, speaking to Reuters, cast doubt on the idea of membership of the European Free Trade Association, or EFTA, being a solution for the UK. She said: “There would be a cost they would have to share, and an authority outside their border that could impose binding decisions on them, which is not entirely in line with what they’ve said they want.” 

She added that Norway was nonetheless “prepared for various scenarios”. 

David “No Notes” Davis told the BBC that he wants a temporary customs arrangement with the EU to last for two years after Brexit. Davis said: “It’s very hard to say exactly how long, the most likely is something like two years, maybe a bit shorter.” 

It is puzzling to reconcile this with what Philip Hammond and Liam Fox said the previous day. 

Mr Davis said the UK wanted to be able to strike new trade deals with non-EU countries during this period. “We should be able to have an arrangement where we can do the negotiations, sign it off, but not enter into effect.” 

He also claimed that the negotiations with Brussels were going “incredibly well”. Any confusion about the UK’s position was deliberate “constructive ambiguity”. 

These claims were met with derision on social media. 

Reuters correspondents went to investigate sentiment in Chatham, Kent, and obtained this gem from retired construction worker Peter Murdoch: “This used to be a lovely town, Chatham. Now all you hear is foreigners. They’re coming over getting all the benefits, houses, the lot. Struggle, that’s all we do. It’s not fair.

“That’s what’s turned us: immigrants and what they get when they come over here. Of course it should stop. Blow the tunnel up as well.” 

Has the man ever bothered to wonder how the country will function, run the NHS and afford to keep paying his pension without the help of migrant workers? 

The Tories, in their desperation to hold parliamentary seats like Chatham, crave approval from people with attitudes like Peter Murdoch’s. This, not desire to act in the country’s best interests, is driving the policies of this Government. 

Diary Day 330: cracks get more visible in both Labour and Tory parties. 

My #Remainer’s Diary Day 330: David Miliband joined the group of outspoken opponents of Brexit. While he wrote that he favoured EEA membership, his arguments made the case for cancelling Brexit altogether. 

Mr Miliband was environment secretary 2006-7 and foreign secretary 2007-10. In 2010 he narrowly lost the Labour leadership to his brother Ed, who won with the backing of large trade unions. In 2013 David Miliband left Parliament to take a post in the voluntary sector based in New York.

He now wrote in the Observer that the country was in a “governability crisis”. He drew a parallel between President Trump’s attempts to repeal President Obama’s healthcare package and the Tories’ attempts to negotiate Brexit. “Support for Obamacare is growing, dramatically, because the alternative has finally been spelled out. It turns out that populism is popular until it has to make decisions.” 

Similarly over here the “fightback” against what he called “the worst consequences” of the referendum vote has the “opportunity and responsibility to get its bearings fast”. He commended as “sensible” membership of the European Economic Area and the idea that “a reformed Europe centred on the euro implies outer rings”. 

He had lukewarm praise for a transition phase which “postpones a rupture rather than avoiding it.” 

He went on to say it was “essential that parliament or the public are given the chance to have a straight vote between EU membership and the negotiated alternative. That is a democratic demand, not just a prudent one…

“…The referendum will be no excuse if the country is driven off a cliff. MPs are there to exercise judgment. Delegating…[to May’s cabinet] the settlement of a workable alternative to EU membership is a delusion… 

“Brexit is an unparalleled act of economic self-harm. But it was a big mistake to reduce the referendum to this question. The EU represents a vision of society and politics, not just economics. We need to fight on this ground too.

“The Europe of Emmanuel Macron and Angela Merkel stands for pluralism, minority rights, the rule of law, international co-operation…

“It is not just a market. It is a vision of the good society.” 

“The EU is not just a group of neighbouring countries. It is a coalition of democratic states which pledge to advance human rights, the rule of law and democratic rules. That is not a threat to Britain; it is the team we should be in.” 

“There is nothing more fundamental than the economic, social and political rights that looked like the norm at the end of the cold war. Now they are in retreat. Europe is their bastion. And that is the side we should be on.” 

So the pressure on Mr Corbyn to shift his stance grows. 

In the Sunday Telegraph, Cabinet members Philip Hammond and Liam Fox jointly wrote in an article apparently intended as a show of unity: “…we believe a time-limited interim period will be important to further our national interest and give business greater certainty – but it cannot be indefinite; it cannot be a back door to staying in the EU.” 

They also wrote: “We are both clear that during this period the UK will be outside the single market and outside the customs union and will be a ‘third-country’ not party to EU treaties.”

Vince Cable issued a statement: “Over the summer, we heard that Philip Hammond was courageously fighting off the more extreme Brexiteers. Supposedly he was looking for a compromise to keep Britain within the customs union and single market as long as possible. The rebellion didn’t last very long.  He has now teamed up with one of the more extreme and ideological supporters of a ‘Hard Brexit’.  
It is now painfully clear who calls the shots in the Cabinet; it isn’t the Chancellor.” 

In the Mail on Sunday, Tory Anna Soubry MP wrote: “If the Prime Minister or her successor (in the event of Theresa standing down) is not prepared to confront the ideologues, I gravely fear that the party could split – and that would change Britain’s political landscape completely.” 

Hurry up then. Split. Change the political landscape we now have. Can’t happen too soon. 

Diary Day 329: bad reporting creates much ado about nothing. 

My #Remainer’s Diary Day 329: a Sun headline screamed that a study said “Majority of Brits including Remainers now back a ‘hard’ Brexit with full border controls”. Brexit zealots were delighted. 

On closer reading of sources it turned out that the study has not been peer reviewed nor published yet. 

So misleading were some of the news reports that two of the study’s three authors (who are Sara Hobolt and Thomas Leeper of LSE and John Tilley of Oxford) published a blog which explained what it was actually about and what it showed. 

The authors “examined public opinion on various dimensions of Brexit using an innovative technique for revealing preferences that asks survey respondents to evaluate bundles of negotiation outcomes.”

Sample voters were given pairs of options and forced to choose between them. Remaining in the EU was not offered. The results were then analysed. 

Since remaining in the EU was not offered, and participants were forced to choose between pairs of Brexit negotiation options, the study said nothing about whether Remain voters actually now wanted Brexit. It was nothing like the screaming headlines. 

So the whole kerfuffle was over a travesty of the truth. But what else can we expect? It was the Sun. 

The Buzzfeed report was better, but still capable of being completely misconstrued. 

What the results do seem to indicate is that there is not much point in Remain campaigners going for the Norway option, because it would not please many people. 

It would not please me. I am an EU citizen and that is how I mean to stay. I want to support the EU and see it thrive. I want the shield of EU citizenship to protect me from the excesses of an extreme national government. And given the dreadful First Past the Post vote counting system and the present shower in charge of the two main parties, that could be very useful. 

Exit from Brexit is what I want. 

Diary Day 328: sterling is forecast to be worth less than a euro by March. Musings on single currencies and single markets. 

My #Remainer’s Diary Day 328: Morgan Stanley, the investment banking firm headquartered in New York, forecast that by the end of Q1 2018 the exchange rate for sterling would be less than a euro. The Guardian headline was: “Brexit pain for holidaymakers as pound expected to fall further against euro.”

The reasons for this are basically: 

  • The fundamentals in the Eurozone are getting stronger so more investors will buy euros. 
  • The pound is “likely to weaken in its own right, driven by weak economic performance, low real yields and increasing political risks”. 

Firms like Morgan Stanley are refreshingly free of spin because it is their job to give clients good advice. Their unsentimental team wrote: 

“Last year, the British economy maintained its growth momentum even after the Brexit vote, but the structure of growth has changed. The household sector has increased spending, primarily funded by unsecured lending, which is unsustainable…

“A consolidation of the household balance sheet, coupled with negative real wage growth, may reduce consumption, which has been propping up growth so far… Brexit uncertainty may also weigh on business investment, which will weaken the already lackluster productivity growth outlook, suggesting real rates staying low.”

Andrew Sheets, chief cross-asset strategist at Morgan Stanley, told Bloomberg TV: “What markets will focus on is this idea that the core of Europe, France and Germany, are working toward a stronger European Union, making a push toward reform that we haven’t seen in a number of years. That’s structurally bullish for the euro.” 

Strong and stable — the EU, not the UK. The EU-haters’ plan to destroy the EU has backfired. Ultimately this is down to politics — to the good sense of the people of EU member states who rejected rabble-rousers at the ballot box. 

But in the UK we are lumbered with the albatross of the referendum vote. I was convinced at the time that the referendum was of massive importance, but people either did not understand or were complacent. Few would campaign with me. I trust that they are repentant now. 

If Morgan Stanley is correct, Q1 2018 will be the first time in the euro’s history that it is worth more than a pound. 

The euro was established by the 1992 Maastricht Treaty. The name euro was invented by a Belgian linguist, Germain Pirlot, who wrote a letter suggesting it to Jacques Santer, President of the European Commission in 1995. The name was adopted in December of that year. The euro was introduced in non-physical form on 1st December 1999. At the same time the national currencies of the 19 participating EU member states were locked into fixed exchange rates against each other and ceased to exist independently. Coins and paper notes were introduced on 1st January 2002 and during a transition phase were exchanged for the old currencies. 

The euro is the sole currency of the 19 current participants: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. Their territories together constitute the Eurozone. 

The European statistical authority Eurostat collects and publishes data for the Eurozone (also referred to as the euro area or EA19) as well as for the EU as a whole (EU28). 

What difference does a single currency make? It eliminates currency exchange transaction costs, eliminates exchange rate uncertainty and gives price transparency. These are all good for business confidence. The main disadvantage is that a single “one size fits all” monetary policy (control of money supply and interest rates) is inflexible and might not be what suits all parts of the zone. We have certainly seen that in the EU. It also happens in the USA, China and so on. 

You can have a single market without a single currency though. And here in the EU we do. Currencies are traded within the market along with other kinds of property. 

The USA has a single currency but is the USA a single market? It seems that as with the EU the answer is “yes, but”. It is an imperfect one. Professor Michelle Egan has written an award-winning book called “Single Markets: Economic Integration in Europe and the United States”. In an interview in March she said: “Though markets in the US are far more integrated across state boundaries than Europe, as evidenced by levels of labour mobility for example, many of the long-standing rules in place at the state and local level in services, procurement, licensing and professions have promoted decentralisation and fragmentation. Those choices in American political development are now the sticking points in trade negotiations with the EU, as states are fiercely protective of their local jurisdictions.” 

Well, well. Again, this is down to politics and protecting local fiefdoms. That was not how the mainstream media reported the TTIP talks, at all. One might have thought it was all about predators buying the NHS. It was not. Another epic failure by the MSM. 

We see the same fierce protectionism in the UK, for example in the professions, such as my own, the law. And the same struggle to harmonise rules and procedures against local resistance. 

I want to get my hands on Prof Egan’s book. 

A recent Pew Research Global survey found that few people worldwide name the EU as the world’s top economic power. In most countries people name the USA. In Europe a significant minority of responders choose China. Pew got a similar result in a survey in 2014. Yet by one measure the EU was the biggest economy that year. I guess that the EU is not perceived as a single economy. But in reality it is a mighty one.

Brexit is just a sideshow then, a distraction caused by a bunch of very silly people. 

Diary Day 327: we are not in sunny uplands. The service sector appears to have slowed. What Lord Heseltine said. 

My # Remainer’s Diary Day 327: I spent time poring over new bulletins from the Office for National Statistics. It helpfully provides a list of main points. On UK trade, June 2017, the main points included these: 

  • Between Quarter 1 2017 and Quarter 2 2017, the total trade deficit (goods and services) widened by £0.1bn to £8.9bn.
  • The UK’s total trade deficit (goods and services) widened by £2bn between May and June 2017 to £4.6bn, due to increases in imports of both goods and services.
  • Comparing Quarter 2 2017 with Quarter 2 2016, UK goods export and import prices rose by 8.2% and 7.8% respectively and sterling depreciated 8.7% over the same period.
  • Despite higher trade prices and weaker sterling, there were similar increases in export and import volumes of goods, by 5.0% and 4.8% respectively, in Quarter 2 2017 compared with Quarter 2 2016. 

The ONS also produced its index of production for June 2017 and highlighted these main points: 

  • In Quarter 2 2017, the index was estimated to have decreased by 0.4% compared with the previous 3 months, due mainly to a fall of 0.6% in manufacturing.
  • The largest contribution to that fall in manufacturing came from transport equipment, which fell by 2.2%. 
  • In June 2017, total production was estimated to have increased by 0.5% compared with May 2017, due mainly to higher oil and gas production.
  • Manufacturing monthly growth was flat in June 2017; the largest downward contribution came from transport equipment, which fell by 3.6%, partially offset by an increase of 4.0% in other manufacturing and repair.
  • Total production output for June 2017 compared with June 2016 increased by 0.3%, with manufacturing providing the largest upward contribution, increasing by 0.6%; energy supply partially offset the increase in total production, decreasing by 4.6% due largely to warmer temperatures.

There was a bulletin on construction too. It was not cheery. 

A table of short-term indicators was published as well. Deputy National Statistician Jonathan Athow commented: 

“Manufacturing has been broadly flat with recent falls due to dropping car production offsetting growth earlier this year. On the other hand, oil production increased as the usual summer maintenance shutdowns failed to materialise.

“Construction again declined after a strong start to the year with public and commercial building and repair work all falling.

“Meanwhile, the UK’s trade balance was little changed in the second quarter with the import and export of chemicals and services all increasing.” 

There were scathing comments in the FT on the spin put on reporting of this news by the Telegraph and by Brexit buffs. One commentator, going by the name VanHaarlem, wrote that the supposed boost from a rock bottom sterling had led to the biggest trade deficit in eight months. “Brexit sunny uplands, the biggest farce in a generation.” 

The National Institute of Economic and Social Research (NIESR) published its monthly estimate of GDP growth. Amit Kara, Head of UK Macroeconomic Forecasting at NIESR, said: “We estimate that economic growth decelerated to 0.2 per cent in the three months to July, compared with 0.3 per cent in the second quarter of 2017. The service sector, which was the main driver for economic growth in the second quarter, appears to have slowed.” 

That doesn’t seem like a sunny upland either. 

Lord Heseltine, who was sacked from an advisory post by Theresa May in March, gave an interview on the political situation to Business Insider and said: “It’s an unprecedented situation… Brexit is trans-party. It means a long period of uncertainty and all the adverse consequences that flow from that.”

He says Boris Johnson, David Davis, and Liam Fox are “the right people to prove the job can’t be done… It was the only political answer I could see — to let the Brexiteers prove that their policies work. Patently they don’t. There are no policies.

“They are just floundering along and I’m afraid, they must be allowed to continue to do that until the public opinion gets the message. It’s an impossible task, there is no upside to this negotiation.” 

He said: “Public opinion will become disenchanted and Parliament may not be prepared to support Brexit. These are very difficult predictions and I don’t give any degree of certainty to them, but I do detect that opinion is moving.

“People who were certain are now talking about a growing period of transition. A concluded agreement with a transitional arrangement would leave the thing for grabs in a general election campaign.” 

So uncertainty is growing but precious little else. 

Diary Day 326: more about tweets. Scottish ministers still oppose EU Withdrawal Bill in its current form. Prudential Regulation Authority asks for implementation period. 

My #Remainer’s Diary Day 326: it turns out that the author of the anti-Brexit tweets I mentioned, James Chapman, was a former political editor of the Daily Mail as well as former special adviser to David “No Notes” Davis at DExEU. Both career choices are thoroughly off-putting to the likes of me. Perhaps he has experienced a Damascene conversion. Being married to a non-UK EU citizen could have something to do with it. 

Vince Cable drily tweeted: “Warned by .@jameschappers ex-Chief of Staff to Brexit Secretary @DavidDavisMP and ex #dailymail that #Brexit ‘catastrophe’. He should know.” 

Yes, he should. That is the point. 

I particularly enjoyed the tweet to the rabble-rouser Farage, who had asked whose side he was on: “Not yours. We are going to grind you and your appalling party into the dust. How’s the German citizenship application going?” 

Mr Chapman later told the Guardian: “There is going to be an issue with leaving the European Economic Area. There is a separate trigger for that, which is article 127, which will have to be considered next March. There is no majority in parliament for leaving the EEA, so the government is going to have to shift its position…” 

As I said before. 

He wants to start a new party called “the Democrats”. He thinks it will be like En Marche. Bad idea, because we don’t have presidential elections to kick start a new party with, and because we have First Past the Post vote counting. But about time the Conservatives split. 

Theresa May’s lieutenant Damian Green met Scottish Deputy First Minister John Swinney and Brexit Minister Michael Russell in Edinburgh. Afterwards Mr Russell said the latest talks were “useful”, but had not changed anything. He said the Scottish government remained “absolutely clear” that it could not recommend Holyrood give its consent to the EU Withdrawal Bill in its current form. 

Sam Woods, deputy governor of the Bank of England and CEO of the Prudential Regulation Authority, said in a letter to the new chair of the Treasury Select Committee, Nicky Morgan MP, that “some form of implementation period is desirable, in order to give UK and EU firms more time to make the necessary changes to the UK’s new relationship with the EU in an orderly way”. 

He said the PRA had received 401 responses to a call for Brexit contingency plans from the firms it supervises. It identified four main risks from the banks’ execution of their Brexit contingency plans and that the PRA might face “a material extra burden on [its] resources” by having to authorise and then supervise a significant number of additional firms. “We may have to make some difficult prioritisation decisions in order to accommodate it,” he said.

All in all quite a bad day for the Brexit zealots. I will raise a glass to that thought. Cheers.