2 thoughts on “Groundhog Day in Brexitland”

  1. Posted 12/01/2018 at 09:45 | Permalink

    Given parliament is now to be given a meaningful vote on the final deal, presumably there needs to be a detailed plan b – otherwise the vote is a joke (and I don’t think it is healthy for the opposition to be able to argue forever that the EU deal was forced on them). Given the number of economic analysis we see that assume bad policy choices and go from there, what would the opposite exercise look like. i.e. if you wanted to minimise economic harm then what policies should the UK adopt unilaterally in the scenario of no deal. Where is this being spelled out in detail?

    Working from some basic rules such as:
    – keep control of future rule changes
    – treat current people fairly (with one-off changes you can afford to be generous so err on the side of giving too many people rather than too few the right to remain – no ECJ though)
    – aim for a self created transition regime
    — thus the initial policy should allow free movement of EU workers, students, tourists as the initial policy (rights to benefits are a separate discussion)
    — no new impediments to incoming trade
    — risk based standards, with the EU being the first regime given equivalency. Structuring standards this way makes it clear that EU products (including medicines) will always be legal (with some safety over ride), and long term the UK has the ability to grant the same recognition to other regimes in order to expand trade
    – drop tariffs rather than raise them (WTO gives you the choice of raise tariffs vs EU or drop vs ROW)
    – super simple processes to minimise costs and execution risk – current inspection regimes are sufficient for health, safety, etc. Dropping import tariffs would avoid the expense of creating new customs infrastructure and the ongoing cost – as importantly, no new inspection regime avoids any risk of the silly “trucks backed up for hundreds of miles and food rotting in yards”
    – if companies can create/retain EU access through the creation of EU subsidiaries then provide whatever facilitation might be required under UK law [e.g. some insurance companies will have an issue with servicing current policies post exit, this can be addressed by a change of corporate form but that needs a slow court proceeding – the UK can simplify these processes]
    – Ireland, zero border we shouldn’t worry about people or goods smuggling across the border (especially if EU goods are deemed legal and customs free). With smuggling if it is small it does not matter, if it is large you can track and stop it. Full co-operation with the Irish (data, etc) to help them minimise whatever border the EU requires them to build. If it is legal in Ireland it is legal in Northern Ireland, does not imply that it is only legal in Northern Ireland if it is legal in Ireland – regulatory recognition but as a subset not ongoing automatic adoption of EU rules.
    – if this frees up 40bn then that should not just be swallowed into the government budget, there should be a clear allocation of the money between handing back to citizens or specific increases in spending or short term mitigation spending. [Massively off topic, but hopefully they don’t give it to the NHS, if you want to get change in structure then you usually have to offer money, so increase spending by giving people their own healthcare accounts (and put “free” money in those) and introduce charging – but don’t just tip more money into the current structure]

    When you pick through it it seems you can get 80% of the benefits of any transition regime with no payment and without the freedom of movement to engage with the ROW. In the unilateral scenario what you do not control is
    – the EU can treat UK citizens in Europe badly – hopefully a generous offer to their citizens here can shame people, and at worst offer money to individual countries (not the EU)
    – the EU can stop UK people from working and studying in the EU or make it more difficult for them to travel there. True, but if people can freely come here then the EU would just be being petty and self destructive – acting in a classy way proves that something is possible and thus undermines any “we have to treat you as a 3rd country arguments”.
    – the EU can impose tariffs and may create issues with customs – again their choice, but if goods are flowing freely into the UK and the pile up occurs in france then the French look pretty silly.

    Some other benefits would come from a more clearly articulated and debated no-deal option
    – a clear BATNA helps in any negotiation
    – it makes the vote on the deal meaningful and gives it much needed legitimacy
    – I believe that an open no-deal scenario should command the support of many remain supporters and a large share of the brexit supporters and it would be very good to help move the debate towards who do we want to be, away from leaving-is-a-disaster vs the-eu-is-a-disaster

  2. Posted 14/01/2018 at 02:16 | Permalink

    One thing I cannot understand is this. What will the EU do to punish us? Will they put tariffs on imports from Britain risking our retaliation? Will BMW stand for that? We are not an insignificant consumer market. Will they put export tariffs like the desperate Argentina where nobody pays VAT nor income tax so they have to resort to export tariffs! No, I do not think so. Why are there such fears? Also, Economics is a most imperfect of subjects. They say that the engineer can diagnose and fix the machine because he or she built it. The doctor can hardly fix the body as he did not build it but evolution did! and doctors were until recently bleeding patients or treating them with water. And Economists I ask you a question which the late Lotfi Zadeh asked me in a lift at the Intercontinental in Wellington New Zealand: “what is the value of a mathematical proof in a subject such as Economics?” The answer is of course: none. Did Economists predict the miracle on the Han River? Obviously not! Did they predict the financial crisis of 2008 or the crash in the 1930s. NO. More likely they caused it. Look, the answers are NOT financial. The South Koreans and Chinese will make the robots, spend two decades training them and send them to our consumer market to replace all of our employment. The country that makes the robots will train the robots and will benefit from full employment and high productivity. This will happen whether we are in the EU or not and is more likely we can adopt a nationalistic Trump approach by standing on our own two feet to catch up with the Far East if we go Brexit. Did China, South Korea and Japan need an EU? Not at all, they all hate each other, and they came took our STEM knowledge, kept virtually zero immigration and a mono-racial and mono culture and they are selling us mobile phones they make for 100 USD for 1000 USD much as the Spanish exchanged mirrors for the Amerindian gold in the 1400s.

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