Belt and Road opportunities

Brexiters dream of trade deals with the biggest markets such as China, but what can we do in the meantime if a full trade agreement with China is some way off? An interesting tweet appeared on Friday, from the Permanent Secretary at the Department of International Trade, Liam Fox's top civil servant. $1.8bn of business opportunities is not to be sniffed at, but what are we actually talking about here?

As the tweet says, we already do £67.5bn of trade (exports + imports, 2017) with China, and £1.8bn is less than 3% of that. It might be worth a bit more to the UK in the long run if the estimate is for new exports, especially services. And the long run is important. One Belt, One Road is a huge, vague initiative taking in more than half the world's people and nearly half of the world's GDP as of today.

"'It means everything and it means nothing at the same time,' said Christopher Balding, a professor of economics at Peking University." So there you have it. It's China's new trade policy, it's a "philosophy" or a "party line", it's a way for China to get into every country in Eurasia (with Africa on the side). "'China is looking to use OBOR as a way to ship its own domestic overproduction offshore,' said Nick Marro, an analyst with the Economist Intelligence Unit".

Map and quotes above from "Just what is this One Belt, One Road thing anyway?

OK, so it's big. And we might get 3% or so more trade than we currently do with China out of all that business in all those countries. As I responded to Ms Romeo on Friday, that's "hardly ambitious". I assume it's £1.8bn per year by the way.

The link in her tweet is to "A guide for British businesses interested in selling goods and services in China" which is presumably the place to start for a British business interested in branching out. I'd recommend you give the department a ring as well, though, because they organise trade trips to places like China, and they have a Minister of State with some business experience (one Rona Fairhead, sometime chair of the BBC Trust and director of HSBC) who's written a piece called "Why China’s Belt and Road offers the UK huge opportunities" which starts in some familiar places:

"China’s middle class is expected to number 600 million by 2020 – greater than the current entire population of the EU. This too offers fantastic potential for UK businesses looking to sell their goods and services in China, as illustrated by the £9.8 billion worth of trade deals signed by the International Trade Secretary Dr Liam Fox’s visit to China and the Prime Minister earlier this year [this is a bit garbled, but I know what she means]. These deals covered a range of sectors, including energy, education and financial services, and included major new investments into the UK."

£9.8bn of trade deals eh? That'll be over several years presumably, and it's not just exports, but even so £1.8bn isn't very exciting next to it. Indeed, Fox told the Guardian on that very trade trip that "Chinese e-commerce sellers had signed up to sell £2bn worth of UK goods over the next two years". Do you suppose Antonia Romeo missed a zero or two out?

Oh, and is any of that business actually dependent on Brexit in any way? We're doing business now. What does being an EU member prevent us doing? The headline of the Guardian piece is "Liam Fox admits being in EU doesn't stop more trade with China". A Chinese businessman, as reported by the BBC on 31 January 2018 during Fox and May's trip, told us that the UK has seen his country only as a trading partner, whereas Germany has worked with China in strategic economic areas. Unsurprisingly, the Germans do more trade with China than we do, and last time I looked Germany was a member of the EU.

Pesky facts and knowledge!

“It makes no sense for the UK to continue to impose taxes on New World wines, coffee, rice and thousands of other products, and then to send the proceeds to Brussels. The EU masquerades as a free trade organisation, but it is really a protection racket which imposes import taxes on the 93% of the world's population that is not in the EU.”

So says Tim Martin, chair of Wetherspoons. By that measure the USA is a protection racket which imposes import taxes on the 96% of the world's population that are not US residents. Donald Trump appears to be making a similar case in this conversation with the Secretary General of NATO, as discussed by an EU foreign policy specialist:

The Wotsit Mussolini says US farmers "aren't allowed to sell their product into the European Union". He says EU carmakers pay "hardly any tax" in the US while the EU charges "a massive tax" to American exporters. Guess what?! He's lying. [thread]  https://t.co/5zSRAlVCcN pic.twitter.com/eqcyS0ZFoc

— Chris Kendall 🇪🇺 (@ottocrat) May 18, 2018

Read the whole thread, but snippets such as 'EU import duties on passenger cars are 10%; US duties are 2.5%. But the US market is far more reliant on pickups and trucks, and here the US charges 25% duties as opposed to the EU's 10%' and 'those BMWs and Mercedes "pouring into the United States" - BMW's largest car plant IN THE WORLD is in South Carolina, producing 450,000 vehicles a year' might come in useful.

Dan Hannan, hard at work in the EU Parliament

And then, what did Martin say about New World wines? I remember something from a man the media keep calling an "arch-Brexiteer" - Daniel Hannan MEP. He's deleted the tweets in question (wonder why), but the Mirror tells the story. The British Retail Consortium warned international trade minister Laim Fox that "shop prices on a range of goods would go up considerably if Britain was forced to default to World Trade Organisation rules".

Hannan protested: claims that the price of Chilean wine (a New World product he is apparently fond of) would rise by 14% on Brexit were "idiotic" because, after all, it would no longer be subject to a 35% EU-wide import tariff on wines. And he was immediately reminded (by people who haven't deleted their tweets) that the EU has a free trade agreement with Chile, so no tariff on their wine. In fact:

• The general tariff on wine actually seems to be "about 8p a bottle"
• We've been paying Hannan to represent some of us in the EU parliament for 19 years now. Has he learned nothing?
• And another thing - "European Commission deputy Brexit negotiator Sabine Weyand said that London will need permission from all of Europe’s more than 40 trade partners to stay in agreements during the post-Brexit transitional period. She revealed that two countries - South Korea and Chile - had already raised objections", so Mr Hannan can't yet be sure his post-Brexit Chilean wine will still be tariff-free.

Dan Hannan has done this kind of thing several times, objecting to an apparently terrible tariff on a product from a third world country which turns out to be very, very wrong or non-existent (and people have learned to keep images of his tweets as evidence when he inevitably deletes them).

****

David Miliband "intervened" in the ongoing Brexit debate this week and it brought a celebrated image to Hannan's mind (among many others, I'm sure).

But young Daniel couldn't resist one of his forays into tariff-hunting. This time he was taken apart by Essex University's Professor of EU, Human Rights and World Trade Law.

1 Here's Dan Hannan MEP, Dansplaining about banana imports to the UK. His comments are not only misleading but also give us an insight into what he actually thinks about the Commonwealth. pic.twitter.com/r5DYXjuAr1

— Steve Peers (@StevePeers) May 16, 2018

Again, a quick extract: "The link which Hannan himself provides points out that there are no tariffs on bananas from African, Caribbean and Pacific countries". Could those perhaps include a lot of bananas from the Commonwealth?

****

Returning to Tim Martin's list of concerns, let's look at coffee. Nadine Dorries MP puts her head up every now and then - in February it was to claim that "Roasted coffee beans have duty applied to prevent poorer countries from creating an industry of processing. British pay, German and Italian roasters benefit - the countries that produce the beans, remain poor".

Here, Jim Cornelius takes us through step by step for the top ten coffee producing nations in Africa, concluding with "Eight of them are on zero tariff. One is on a reduced tariff and only one, Gabon, is on the full tariff for roasted coffee. An EPA [Economic Partnership Agreement] is in the pipeline that will reduce this to zero".

Nadine, I think it's very important that politicians with large twitter followings impart accurate information and do not mislead their followers.. So lets examine you what you said:

So let's look at the tariff for ROASTED coffee imported from poor countries.

— Jim Cornelius🇪🇺🇬🇧 #FBPE #WATON (@Jim_Cornelius) February 3, 2018

In general, therefore, products from the poorest countries normally attract no tariffs on imports under the EU's Everything But Arms scheme, reduced or zero tariffs under the EU's Generalised System of Preferences, or zero tariffs under an actual free trade agreement.

Here's a list of people who get things wrong:

• Tim Martin
• Dan Hannan
• Nadine Dorries

And here's a list of people who put them right, by actually knowing things and doing research:

• Chris Kendall
• Steve Peers
• Jim Cornelius

Guess who gets paid to get things wrong (all of them) and to get things right (Chris Kendall and Steve Peers). Now guess who you're more likely to see or hear on the news (the wrong group).

And in case you were wondering about that point at the top, the US being just like the EU as a "tariff-charging protection racket", here's a chart showing the average tariffs charged (weighted by actual trade) by the EU (including the UK), the US and Australia. Tariffs will be higher and lower on some products than others, in one country compared with another, but the overall effect isn't all that different.

Don't worry, we've got ten years

Jacob Rees Mogg
adopting the Belgian bargee look
which some will liken to Lenin
(Image Ben Cawthra/LNP)

It's all over lots of timelines, but what brought me back to zyxpwf was one of my contacts informing me that "JR-M has exposed the fundamental flaw behind May's entire Brexit negotiation strategy: there's a guaranteed 10yr 'cost-free' tariff-free transition deal available just by going to WTO-only next March. WTF she's been handing money & everything else over for, Lord alone knows".

I'd seen the man himself on Daily Politics (starting at about 17:30), in his cut fudge accent, assuring those of us who just don't understand that "The House of Lords has missed one very important thing. That is that if you are in a negotiation for a free trade agreement you can maintain your existing standards for ten years under WTO rules... So we have ten years from the moment in which we leave the European Union to negotiate a free trade agreement with the EU which would mean we could carry on with our zero tariffs".

Oh really, I thought, I know Big Jake always delivers his debating points pre-packaged on tablets of stone, but you'd think such a slam-dunk would be pretty useful ammunition for - ooh, to pluck a name from the air - David Davis, Laim Fox, even Theresa May on a day when she wasn't fire-fighting some Grenfell or Windrush scandal. You'd think it would be the basis of the UK negotiating position.

It isn't. They never mention it. Could it be less than a slam-dunk?

I sent a query out into the social media ether: "Can you point me at relevant parts of the WTO rule book?" and waited. "Sounds like a strange interpretation of ART XXIV GATT and interim agreements to me," Benjamin Thorn told me, so I started reading.

Some tweeters (inhabitants of my jungle of choice) seem to start from the JRM position and... just stay there. "It's remarkable that this isn't better known" said one, to which I responded "If it should be better known, find the link to the relevant WTO rule and share it". Nothing.

"JRM just keeps producing plain common sense solutions almost on a daily basis." said somebody. "No hysterics, always in control, well researched and clarity in speech. Like him or loath him he is the leader that Mrs May is not. His understanding of the complexities of Brexit is second to none." It must be useful to have a hero. Even if it's Big Jake Mogg.

I take my lead on this from Jim Cornelius - this is "about an interim arrangement of a new FTA/CU" and "It's got nothing to do with any previously existing arrangement. It's surely about a sensible limit to the delay between interim agreement becoming a firm agreement, and it's conditions applying during that period".

I look to the Professor of EU, Human Rights and World Trade Law at Essex University - "Isn't this the old ERG misunderstanding of Article XXIV GATT?" - and a reader in international law at Cambridge University who also happens to be a Senior Counsel at Linklaters, the "Global Law Firm" - "It’s amazing how this awful misinterpretation of Art XXIV GATT won’t die, no matter how many times I point this out" - and I conclude that Article 24 concerns ways of working if you are in the process of establishing an agreement, requiring you to proceed by agreement and according to conditions.

I don't see a glibly specified allowance of time during which nobody needs to worry or - apparently - do anything.
https://twitter.com/StevePeers/status/995324280270401537

https://twitter.com/Jim_Cornelius/status/995341588632096768
https://twitter.com/Jim_Cornelius/status/995341588632096768
https://twitter.com/Jim_Cornelius/status/995341588632096768https://twitter.com/Jim_Cornelius/status/995341588632096768