THE SPECTATOR SEES CLUES IN DAVIS' STATEMENT TO PARLIAMENT

The Spectator was a cheerleader for Brexit and James Forsyth has gone through David Davis' statement and the follow up answers to see if it can discern the direction the government is taking (HERE).  He sees says this:

"...Davis indicated that he didn’t favour paying anything or conceding anything on border controls to get a free trade deal with the EU. When Andrew Tyrie, the chairman of the Treasury select committee, pressed him on whether the UK would remain inside the customs union once it left the EU, Davis said the government hadn’t yet decided whether to do this. But the language of his answer strongly suggested that he agreed with Liam Fox, the Secretary of State for International Trade, that the UK should leave the customs union so that it has a free hand to do trade deals outside it."

On this basis the UK will not be part of the EU, the EEA, EFTA or even the customs union.  In Europe we will be totally different to every other nation and means a deal similar to the one Canada has with the EU.  This does not include financial services at all and has quotas on some agricultural products. Manufacturers have to abide by EU regulations and when shipping into the EU must provide certificates of origin (costed at £3Bn per year for British Industry).  

I wonder how Phillip Hammond's meeting with the bankers went after this?

FORD SCALES BACK ON WELSH INVESTMENT

Ford have announced a sharp reduction in the planned investment at its Bridgend plant which makes engines for various models (HERE).  They will reduce investment to £100m from the planned £181m and will halve number of engines made from 2018 to 125,000 per year.

There is no suggestion in the report that this has anything at all to do with Brexit and probably Ford have had this in the pipeline for some time.  But the Unite union said it was "deeply concerning and must raise serious questions over Ford's long term commitment to Bridgend".

It is a long time since Ford produced vehicles in the UK but they have invested heavily in engine production here but now it appears even that is coming to an end.

PHILLIP HAMMOND MEETS THE BANKS

There is a meeting today at The Treasury between Phillip Hammond and various large bank and financial institutions (HERE). They are apparently seeking clarity on the government's plans for Brexit and in particular what this will mean for the passporting system that allows them to trade with other EU countries.  Banks want to keep the status quo according to Bloomberg (HERE).

I am sure they will be disappointed. I don't think the government knows what it will get from the EU and even if it did, they will not tell the banks in case (a) it's bad news and (b) it leaks out.  One unnamed banker said:

"If the government doesn't have a clear idea of what it wants the banks will just go," said one senior banking source, who asked not to be named. "They are not going to be hanging around waiting for the cliff edge."

I don't know what the government are expecting. The EU have already made it perfectly clear that banks will lose access if we leave (the last time just a few days ago HERE) but they continue to hold out the prospect that something can be negotiated. Other countries have no interest in conceding passporting rights when it is they who will gain when banks move to the EU.  Bankers are among the most cynical of people and if one bank announces a major relocation you can bet there will be a domino effect.

This morning's Brexit Bulletin from Bloomberg says:

"Hammond's meeting is well timed. UBS Chief Executive Officer Sergio Ermotti said yesterday that he may have to move as many as 1,500 jobs, the equivalent of 30 percent of the total, from the U.K. Lloyds of London Chairman John Nelson warned on Monday that he and other insurers would be forced to go elsewhere if the government fails to secure continued access to the single market."

TRADE DEAL WITH AUSTRALIA?

The BBC (HERE) are reporting this morning that we are beginning preliminary talks with Australia about a trade deal although yesterday Reuters (HERE) said Australia have claimed it will take years for the UK to negotiate withdrawal from the EU and only then can we begin formal negotiations and think about actually signing a trade deal.

The article says Sydney will press on with a trade deal with the EU in the intervening period.  So, we would have a trade deal with Australia quicker if we stay in the EU.  Amazing.

MIXED MESSAGES FROM THE PRESS ON JAPAN

The warnings from Japan about investment in the UK if we give up membership of the EU are taken seriously by The Independent (HERE) which says they won't be alone in quitting the country if we fail to heed the warnings.

Meanwhile, over at The Telegraph (HERE) they say Jexit would hurt us but is unlikely to come true. They think it doesn't "reflect the public aims of the EU".  Oh really?  What about the countries actively trying to attract our businesses already?

One can easily imagine when Nissan and Hitachi and others announce they are moving or building new facilities inside the EU that part of the press most enthusiastic about Brexit will be saying don't worry they'll soon come back. For some people reality never appears.  Read the letter (HERE)

COUNTRIES MAKE PITCH FOR UK JOBS

A number of countries are making a pitch for UK jobs in the financial sector as we know. Now Sweden has joined the list with a proposal to attract the European Medicines Agency (EMA) when it moves out of London as it is almost certain to do (HERE).

This follows the Japanese government saying yesterday that their pharmaceuticals companies would seek to move to the EU if the EMA leaves the UK.  I assume this will also have an impact on other pharma companies and even research in the life sciences.

Even Poland is now getting in on the act with this item from The Guardian (HERE) about the Polish foreign  minister being in London to attract financial businesses to Warsaw.

Prosper like never before.

CAN THE UK EVER BE INDEPENDENT OF THE EU?

I came across this very interesting article (HERE) published by Edinburgh University's European Futures website about what the EU is like for non-members in Europe, as we are likely to be in a few years.  The point of the article is that the EU has become so large and powerful that it completely dominates Europe or has hegemony over it as the article puts it.

Countries like Norway and Switzerland have voluntarily entered into agreements where they accept EU rules and directives and shape their laws to be directly equivalent to EU laws. They have allowed the EU to have hegemony in Europe.  If we leave the EU and do not become part of EFTA or the EEA and we even exit the customs union (as we must if we are to sign separate trade agreements) we will be the only European nation to be completely independent of the EU.  But in practice, how independent would we really be?

We would have to abide by a lot of EU rules if we are to continue to trade with them. Our financial services sector would have to show equivalence with EU financial regulation.  There is bound to continue to be cross border cooperation on environmental issues as well as security.   EU citizens in the UK will almost certainly continue to enjoy the same rights as they do now and UK citizens in the EU will have reciprocal rights.

The UK will therefore ipso facto be forced to accept many rule changes and new directives but will have little or no influence in shaping them. The article puts it this way:

"What is peculiar about the form of dominance that the associated non-members experience is that it is both structural and at the same time voluntary. It is an arrangement that accidentally inhibits and intimidates the parties. The management of externalities and collective action problems created by interdependence is skewed by a European political order in favour of full members of the EU. By being excluded from common decision-making procedures, the citizens of the associated states find themselves as second-rate Europeans".

STATEMENT TO PARLIAMENT

David Davis the SoS for Brexit made a statement to parliament this afternoon - although I am not sure why since we learned nothing new.  The government does not know what Brexit means beyond meaning Brexit.

It is amazing to me because the new government is trying to do exactly what the previous Cameron administration tried to do albeit from the opposite direction.  Cameron tried to keep the status quo but without freedom of movement of labour.  May is trying to scrap everything then negotiate most things back in except freedom of movement of labour.

What the EU members will make of this is anyone's guess.  Amazingly, Mr Davis did not accept the premise from Anna Soubry that it would come down to a choice between controlling immigration and retaining tariff free access to the single market. He still thinks we can have both!

And in answer to a question about the customs union (which has huge implications for the border with Ireland) he was equivocal to say the least.

And I am struck by how many MPs (usually those who encouraged a leave vote) are absolutely certain what people voted for. It's either controlling immigration, regaining sovereignty or avoiding budgetary contributions.  But none of them think it had anything to do with the £350m per week going to the NHS or any of the other claims made by Vote Leave.

Update:  The only thing of note he said about it being improbable that we would join the single market if we could not control immigration has now been denied by Downing Street (HERE). He was apparently just giving his own opinion.

BRITAIN TO FLY TO NEW HEIGHTS AFTER BREXIT!!

Con Couglin, writing in The Telegraph (HERE) thinks we can fly to new heights as a global trading power after we Brexit.  He doesn't say what has kept us grounded until now but I assume he thinks it's EU regulations and the prospect of new trade deals.

He mentions Australia and India and says, "the world post-Brexit clearly offers Britain a glittering array of new commercial and business opportunities".  This comes just before the Japanese government's letter (HERE) and Obama's warning that the UK will still be at the back of the queue. Mr Coughlin thinks swapping unlimited tariff free access with the world's biggest, richest and closest market for a trade deal with Australia, 20 million people and 12,000 miles away is a good think. Amazing.  Prosper like never before.

That kind of wishful thinking will only get us into trouble.

Japan has 1000 companies located in Britain employing 140,000 people. They are a "global trading power".  I wonder what the equivalent numbers are of British companies in Japan? Japan is twice our size so we should have 2000 companies employing about 280,000 people - but I bet it's nothing like that.

MAY BACKS AWAY FROM KEY BREXIT PLEDGES

The Guardian are reporting that Theresa May in a TV interview (HERE) is backing away from pledges to introduce an Australian points based immigration system as well as refusing to commit to £100m per week extra for the NHS (not even the £350m BoJo promised).

Leave campaigners and voters seem quite relaxed about it all but I wonder how they will feel in a few years when not only has every pledge been broken but none of the perceived benefits have materialised and actually, the economy is doing significantly worse, the jobless total is rising and the balance of payments grows ever wider.

HANNAN AGAIN

Daniel Hannan has written something on the ConservativeHome website (HERE) about one of his favourite topics. He goes on about access to the single market not being the same as membership. He's right in a way but listen to this. He says the Isle of man through Switzerland to Turkey all have "full access" to the single market.  This is not quite true, Switzerland's banks are headquartered in London precisely because they don't have full accees.

This is the main point but Mr Hannan does not even seem to realise it.

SOLVAY QUESTIONS UK INVESTMENT

Solvay are a huge Belgian chemical manufacturer with plants all over the world. They are now saying (HERE) that Brexit has put a question mark over future investment in the UK.

This is exactly what I expected. Any European company is bound to do this. If they plan to build or expand here and import products to the EU there is bound to be a question mark and if tariffs or other trade barriers are erected, they will almost certainly conclude the money would be better spent inside the single market.u

I am sure we will hear more of this sort of thing in the coming years. Prosper like never before.

CALAIS IN THE NEWS AGAIN

French lorry drivers and farmers are beginning a protest today about the migrant camp in Calais and they they want the French government to close it down (HERE).

I am not in the least surprised. If such a camp was on British soil full of migrants wanting to get to France we can only imagine the uproar in parliament and the press all demanding it be closed down. I think by the time Brexit happens the camp, or something very much like it, will be in the UK.  The processing of claims will be done here and not in France.

JAPANESE WARN OF JEXIT

The Japanese government has delivered a 15 page memo to the UK government and the EU warning that many Japanese firms will consider moving their European headquarters to the continent, "if EU laws cease to be applicable in the UK after its withdrawal" (The BBC HERE) and The Independent (HERE).

It is almost certain that EU laws will NOT be applicable after we exit. The letter (HERE) warns of "dire consequences for the interests of the world if an open Europe cannot be maintained" and calls for tariff free access to the single market and continued freedom of movement as well as passporting rights for their financial institutions.  The letter is a response to concerns expressed by Japanese companies to their own government.

I was surprised to see that 1000 Japanese companies have operations here employing 140,000 people directly and presumably more in the supply chains.  No doubt Brexiteers will resent this intrusion but the letter, it seems to me, is a logical response to Brexit. The stakes could not be higher.  

Some EU countries will be quite happy with the threat to move operations to them. And remember this is only Japanese companies. Others will no doubt be thinking the same things. The EU hold all the cards and I can't see how we will avoid conceding almost everything to keep the companies we have here now and attract others in the future.

CANADIAN TRADE DEAL IN TROUBLE

To emphasise how difficult new trade deals are to negotiate, we now learn that Austria has serious problems with the Canadian trade deal known as the Comprehensive Economic and Trade Agreement (CETA). This doesn't actually include financial services and has taken seven years to negotiate.  Now Austria (HERE) say they will start a conflict to derail the deal because it's very similar to TTIP and has the same problems.

Brexiteers will point out that this is the problem with EU negotiated trade deals. They take too long and are too protectionist.  But this is what we will be up against when (if) we negotiate our own trade deal with the EU.  As the article says at the end national and even some regional parliaments will have to approve it.  If you ask me 2035 looks optimistic.

WE STILL DON'T KNOW WHAT WE VOTED FOR

It's amazing that after two months there is still disagreement about why we voted the way we did. I read that we voted leave to regain control of our borders (Farage et al). Some people (Bojo and Daniel Hannan for example) think it was all about sovereignty.  Now Jeremy Warner in The Telegraph (HERE) is telling us it was all about free trade.

He says Theresa May should reassure the G20 when she meets them later this week that Britain voted "for the advancement of free trade, not against it".

This again highlights the problem. No one knows what Brexit means - except Mrs May perhaps who thinks it means, well .. Brexit. There you have it. What a shambles. There are bound to be tears when 80% of the population find out what Brexit means for them.

Those who voted because they thought migrants were driving down wages will be ecstatic to know that they will now be competing in world markets with folks from India (Per capita annual income about $1500).  No doubt Mr Warner will be able to explain all that easily down at The Dog & Duck.

NO RETURN TO HARD BORDER IN IRELAND

David Davis says there will not be a return to a "hard" border in Ireland (HERE) but I note he adds that there will be no "unnecessary" barriers to trade.  This leaves the necessary ones for us to worry about.

He also says (HERE) that it's in the long term interests of the EU to grant us tariff free access to the single market.  He seems to think that what the EU was not prepared to give us while we are a member they will concede quite readily when we leave!  Amazing.

Brexiteers want to get their act together. They say (IDS among others) that we just just leave without any trade deal while others, now apparently including the Brexit secretary himself, think tariff free access is vitally important.

THE PROBLEM WITH REFERENDUMS

The Electoral Reform Society has released a report about the EU referendum (HERE) setting out what it calls the "glaring democratic deficiencies" with voters turned off by big name politicians and negative campaigning, a report says. The ERS attacked both sides of the referendum campaign, saying people felt "ill-informed" by the "dire" debate.

I agree with this but personally I think the remain arguments are mostly unproven but the leave campaign admitted most of their claims were misleading the day after the vote!

Coincidentally, and on a separate topic (Trump in the USA) the Washington Post has an article (HERE) about the part played in a democracy by emotion over reason when it comes to voting. The author talks about the "indifference to truth and consistency is what happens when the honest efforts of political scientists to grapple with the balance between the rational and irrational in politics become an excuse for absolute cynicism — about voters, their attention spans and democracy itself".

He also mentions the attention span of today's electorate and I have often talked myself about people's need for simple answers to complex questions.  

Yesterday the Joseph Rowntree Foundation published a report on why voters made the choice they did and it's quite revealing (HERE).  A graph shows 27% support for Brexit from people with a post graduate degree against 75% from those with no qualifications.  As I said to someone in the week after the vote at least we know pretty accurately how many stupid people there are in the UK - the JRF seems to confirm this view.