Listening to business

If you want to know, ask

A big Brexit-related story came yesterday from the Society of Motor Manufacturers and Traders. The Guardian reported that investment by car companies had "halved" to less than £350 million in the first half of 2018. "That’s the cost of uncertainty," said Mike Hawes, SMMT chief executive, "that’s the price we pay for slow decision-making". Which confused me, because I remembered a Financial Times report from last year which told us "Investment in the UK car industry has fallen to just £322m in the first half of 2017", and £350 isn't half of £322.

So I emailed the SMMT: "I understand that figures might be revised when more information comes in, but I can't find useful comparable figures on your web site. Do you publish year on year figures?" and (a pleasant surprise) received an answer: |"Yes you're right, the figure was updated to £647.4m in the first half of 2017. Please bear in mind also that this figure is calculated from public announcements of fresh investment into the industry". The trend, I was told, is:
2015 - £2.5 billion
2016 - £1.7 billion
2017 - £1.1 billion
H1 2018 - £347.3 million

Last year Hawes said "A lot of people have spent the best part of decades turning round the industry, when you think back to how it was characterised in the 70s, 80s and into the 90s. It is very different now. It has had very difficult times and it is a cyclical industry, and there is a fear that that success could be put at jeopardy.

"We consistently said do not expect [the German car industry to demand a good deal]. The European market and to a certain extent the European project is more important to them than the UK, so they want to safeguard the four freedoms which benefit them. If any sector has really benefitted from growth and development across Europe, it’s the German car industry. It is frustrating and it also reveals a lack of understanding of the way markets operate."

And this year his message is "There is no Brexit dividend for our industry, particularly in what is an increasingly hostile and protectionist global trading environment. Our message to government is that until it can demonstrate exactly how a new model for customs and trade with the EU can replicate the benefits we currently enjoy, don’t change it".

This follows BMW's UK boss Ian Robertson warning "If we don't get clarity in the next couple of months we have to start making those contingency plans... which means making the UK less competitive" and the company's chief executive commenting that it must remain "flexible" about production facilities. BMW's director of customs operations said "if in the end the supply chain will have a stop at the border, then we cannot produce our products in the UK".

BMW has already raised the possibility that the new electric Mini might be made in Germany or in the Netherlands, which already produces a third of all Minis, but the current position is still that "While Brexit has made BMW hedge its production bets, the company is still committed to the Oxford plant and the English heritage of the brand," though future developments will be in cooperation with China's Great Wall Motors.

We've had similar statements from Honda and Unipart among several from other industries. Unipart reminds us of the issue of supply chains, and of rules of origin. Almost 90% of BMW parts used in their British plants come from Germany, though the industry average of UK content in British-made cars is currently 44%. To qualify as a product of "EU origin" the normal rule is that around 55% of components must be produced in an EU country, and EU companies have been warned that "too many" British parts could cause trouble when cars are exported. How any future UK-EU agreements handle these rules of origin (and whether trade partners accept it) might have a significant impact on UK exports. Unipart and the SMMT also raise the subjects of dealerships, servicing and spares.

These are warnings of the implications of a sub-optimal Brexit (if there can be anything else), and whether you ended up blaming EU intransigence or the UK red lines would be irrelevant if it happened, but obviously no company wants to have to incur the cost of moving production. And we hear from the midlands that Jaguar Land Rover plan major investment over the next few years after a poor year. "Sales and revenue did not grow as much as we planned [last year] with diesel uncertainty impacting the UK and European markets, exacerbated in the UK by Brexit and cyclical weakness".

Then we heard from Carlos Ghosn, head of Renault-Nissan, who never minds being the centre of the story: 

Carlos Ghosn tells me on Brexit: “We don’t have a clue how all this will end up...we frankly are in the dark...”

— Theo Leggett (@Theothebald) June 27, 2018

And now, services

There's a lot of stuff about manufacturing and goods in the Brexit debate, though it's a relatively small part of the UK economy. Now the European Services Forum, "a European private sector grouping that represents the interests of the European services industry in international trade and investment negotiations related to services". has sent a letter to the chief negotiators Michel Barnier and David Davis. It's clear, concise and well enough written, so I'll let it introduce itself.

"Given that ESF’s focus is on trade and investment negotiations, we have so far refrained from commenting on the negotiations over the United Kingdom’s withdrawal from the European Union. Now that the European Council has agreed to authorise the negotiators to turn to the future relationship, we would like to offer you some views on points of critical importance to our members.

"Trade in services will have a central role in the future EU-UK relationship. Services are the basis of both economies representing 74% of EU GDP and 73% of the EU labour force and 80.4% of UK GDP and 83.5% of the UK labour force. 

"it also needs to be remembered that cross-border flows of goods depend on services, including air, rail and sea transport, port services, road haulage, logistics, freight forwarding, customs clearance, delivery services, professional services, trade finance, insurance and insurance intermediation.  Action is needed on many aspects of  regulatory  frameworks in services sectors, including arrangements that secure contract continuity, to ensure unbroken flows of goods and services.

"Based on our experience of trade negotiations, we are concerned that - even with the strongest political will from both sides - a period of 21 months is unlikely to be sufficient to cover all the stages needed to put in place the  future relationship (completion  of  negotiations, agreement in principle, legal scrub of agreed texts, signature, ratification and implementation).

"The UK is the largest services exporter among the EU28, at €189.2 billion, representing 22.4% of total EU28 services exports (extra EU). The EU27 take 58.2% of UK services exports. According to Eurostat, the EU27 exported €92.8 billion services to the UK in 2016 and the UK exported €110.2 billion services to the EU27. The EU27 and the UK trade in services are highly integrated as a result of progress towards the EU single market in services.

"According to the Trade in Value Added (TiVA) database developed by the OECD and the WTO, in 2011, 37.1% of the value of UK total exports of goods is in fact "goods-related services" and this figure rises to up to 39.9% for the EU28."

What does the UK say to Japan?

A letter to my MP

Recent statements by industrial concerns such as Airbus, Unipart, the Freight Transport Association and BMW have drawn positive engagement and more critical comments in recent days, and periodically over the last year. The issues they raise are significant, such as the damage that concluding the Brexit negotiations without a deal would cause to the UK, Ireland and every other EU country. I don't want to push those points today, but rather to ask a single question.

I hope you've seen the letter the Japanese government addressed to the UK government and every citizen of the EU, including the UK, in September 2016 (it can be found at https://www.mofa.go.jp/files/000185466.pdf and was discussed by the Independent here: https://www.independent.co.uk/news/business/you-should-read-japans-brexit-note-to-britain-its-brutal-a7833396.html ).

We enjoy a lot of Japanese investment in this country, with the employment, technological and export benefits that spring from it, and we have had reassuring statements on new model investments from Nissan and Toyota, yet companies are still left dangling - in public at least - about what we can all really expect. By my calculations we have only 114 calendar days and 30 normal Commons sitting days before the current timetable has the Commons debating a final withdrawal agreement.

My question is: has the British government published a public response to the Japanese government's public letter?

Those whom the gods wish to destroy...

... they first make mad

"We are facing some real difficulties at the moment," said Dominic Grieve on Wednesday as he presented his last ditch argument that Parliament, and the Commons in particular as the elected chamber, should really decide on how the British government proposes to end this process of negotiating to withdraw from the European Union.

"It is rightly said that those whom the gods want to destroy, they first render mad. There is enough madness around at the moment to make one start to question whether collective sanity in this country has disappeared. Every time someone tries to present a sensible reasoned argument in this House vilification and abuse follow, including death threats to right hon. and hon. Friends [MPs on the Conservative side]. There is a hysteria that completely loses sight of the issues that we really have to consider. There is an atmosphere of bullying that has the directly opposite consequence in that people are put into a position where they feel unable to compromise, because by doing so they will be immediately described as having 'lost'—as if these were arguments to be lost or won. The issue must be that we get things right."

I agree with almost every word of that. I see the vilification and abuse every day, in media reports, and raw on social media. And as an observer rather than a Twitter cage fighter I don't see a hundredth of what some of the protagonists, or their staff, have to deal with. Can you really block, mute or ignore a tweet which might contain your address and a threat of violence? The right to free speech as a right to raise a posse and dominate your target's life is an ugly thing.

Where Grieve and I part company (this month) is on tactics. Last week he had a majority to pass his amendment. It would have gone back to the Lords and returned to the Commons. The government would have tried, and probably succeeded, to water it down, but when you have a majority you should bank it.

Grieve's amendment attempted to define how the elected representative body of this country should handle the situation of its indirectly elected government conspiring to present an agreement to withdraw from the European Union which is unacceptable to the majority of our representatives, or even, having utterly failed to reach such an agreement, coming back to tell us "OK, we're just dropping out". And Grieve wanted to tell them to sod off. If you've failed the country, you don't just get the job of pretending to manage the failure.

I'm sure I'd disagree with Dominic Grieve on many things - fox hunting for example - but for the last few years I've been aware of him I've admired his intellect, his eloquence and - I really hope - his straightness. But he's given way, last week to promises from the prime minister which weren't delivered, and this week to pleas that the government might be weakened if his logical provisions were actually enacted. As a former head of the Treasury civil service said this week (he's deleted it, but I saw the original tweet and Laura Kuenssberg quotes it) "Axiom of the last 30 years. Europhile Tories always compromise to preserve party unity, Their opponents don't".

Who has been made mad? Some would say Brexit itself is crazy. It's certainly unlikely to help a lot of the people who voted for it. Laura Smith became famous for a moment when she resigned from her position as shadow cabinet office minister (No, I hadn't noticed her either). Five other Labour MPs resigned from even more junior posts to vote for an amendment calling on the government to try to maintain EEA membership.

But Smith voted against, rather than adopting her leader's principled instruction to abstain. She insisted that she was observing the wishes of her constituents, who voted Leave because - to coin a phrase - they had been left behind. She's right that large parts of this country have been served badly by the people who run it and the way they manage our relationship with the "globalised world" we've built and allowed to be built. But, at the very best, Brexit would waste a few years NOT doing anything about why they voted Leave.

Incidentally

This month we, the EU, have completed the third round of trade talks for a new, modernised free trade agreement (FTA) with Chile. Daniel Hannan MEP can continue to get his favourite Chilean wine tariff-free, and we're working on higher, agreed standards on animal and plant health, employment and women's economic position.

We mustn't be too unkind to Mr Hannan. At the time of his tweet he'd been an MEP for barely 17 years, and obviously hadn't worked his way into the job. Unlike those damned tweeters who read stuff:

Didn't Hannan once try to claim there was a 32% tariff on Chilean wine? Just a few problems:
a) the tariff isn't 32% but 32 cents per litre
b) that's the rate for sparkling wine - it's a lot less for still wine
c) Chile has an FTA with the EU so the rate is zero anyway

— Simon (@uncriticalsimon) April 20, 2018

Australia's prime minister Malcolm Turnbull (centre)
launches EU-Australia trade agreement negotiations
with EU commissioner Cecilia Malmström (right)

We, the EU, have also opened trade negotiations with Australia. As the blurb says, "The EU is Australia's second-biggest trade partner. Bilateral trade in goods between the two partners has risen steadily in recent years, reaching almost €48bn in 2017. Bilateral trade in services added an additional €27bn. According to an impact assessment, trade in goods and services between the two partners could increase by around a third".

Still in June we, the EU, have started trade negotiations with New Zealand. Commissioner Malmström said, "Trade agreements are about economic opportunities but they are also about strengthening ties with our close allies. In New Zealand, we know that we have a partner who stands up for the same vital values as us. This agreement is an excellent opportunity to set ambitious common rules and shape globalisation, making trade easier while safeguarding sustainable development. We can lead by example".

In April we, the EU, concluded negotiations with Singapore on a Free Trade Agreement and an Investment Protection Agreement, which are now going through the ratification process. They aim to 

• "remove nearly all customs duties and get rid of overlapping bureaucracy
• "improve trade for goods like electronics, food products and pharmaceuticals
• "stimulate green growth, remove trade obstacles for green tech and create opportunities for environmental services
• "encourage EU companies to invest more in Singapore, and Singaporean companies to invest more in the EU"

The Singaporean foreign minister spoke to Radio 4's Today programme on 20 April, expressing the hope that the deal would be in place by "Brexit day" to ensure continuing good relations. He told us that Singapore would happily continue trading with the UK on the same terms. That's just a few dozen other countries we have to get the same agreement with.

(I'd give you some quotes from that interview, but the programme's no longer available so I can't transcribe it. It was notable, however, that Justin Webb demonstrated detailed knowledge of customs unions and the state of negotiations between the UK and countries we currently have trade deals with via the EU. The people who deliver our news know stuff, but they're too seldom allowed to show it.)

Also queuing up for ratification and implementation some time soon ("The Commission will then submit the agreement for the approval of the European Parliament and EU Member States, aiming for its entry into force before the end of the current mandate of the European Commission in 2019") is the EU-Japan Economic Partnership Agreement. To quote the "in-depth analysis", "The economic gains from this agreement are of the same magnitude as a free trade agreement with the United States, and could lead to major increases in exports (notably in the food and feed, processed food sectors). There are also considerable benefits for consumers, business and employment from an effective liberalisation of both markets that encompasses tariffs and regulatory issues. These gains are more symmetrically distributed than earlier FTAs, and benefit groups that do not always stand to gain from trade liberalisation". 

Laim Fox already has his work cut out to ensure that we can still trade in the same way during transition as we do now, let alone thereafter. He'll have to put us in the queue for other talks, starting with Australia and New Zealand perhaps. Who was it who said this is the wrong thing, done badly? Oh, it was me.

It's not all about us

In a cosy little chat with John Humphrys on yesterday's Today programme (the 8:10 interview), David Davis told us that the EU doesn't want to end up with a No Deal Brexit. He said it quite forcefully too: "Europe does not want no deal, I promise you. They do not want no deal. That's the thing to understand". I'd venture to suggest that "Europe" realizes how damaging No Deal would be, and that many on the Brexit side simply don't, or refuse to admit it for ideological reasons.

Do May & co really believe they have to retain the option of walking out of the negotiations, or are they playing a game theory game about game theory with their own side?

Walking out and retaining the status quo is often considered an acceptable negotiating tactic. Walking out and losing little more than time might well be an acceptable negotiating tactic. Walking out of the Brexit talks offers neither of those results and, depending on exactly when you did it, would be more or less disastrous.

By October, Davis said, he would have "the withdrawal agreement complete, and with it the substance of our future partnership". At least he's now recognising that there won't be a trade agreement. Unsurprisingly, with the debates on Lords amendments to the EU Withdrawal Bill coming later yesterday, much of the interview concerned what would happen if the UK Parliament rejects whatever withdrawal agreement he comes back with. I'm going to keep this one simple, and not rehearse the arguments around various kinds of meaningful vote. Yet. Because there's a different question which is at least as important.

Negotiating with ourselves

Another of Davis's jovial observations was "The prime minister and I are both surprised when we talk to foreign leaders... the extent to which they read all the British newspapers avidly, and even more surprising they believe them all, or at least they appear to". Is that a lie or simply evidence that we are in the hands of idiots? How could they not expect our "friends and partners", as they still call the EU27 less and less believably, not to keep themselves informed of opinion in this country, not to keep track of what (little) the government is telling the British people and what lies and unpleasantness are being spread by other sources? And, conversely, is he telling us that the British government and its negotiators don't do the same with the 27's media? Are we led by liars or idiots?

It certainly seems that they don't want us to be worrying our pretty little heads about what's happening "over there", because they never mention that the British parliament is not the only body which can reject a Brexit withdrawal agreement. If a deal is agreed between the UK government and the other 27 heads of government in the EU Council it goes to the Commons for more or less inadequate debate and decision. But it also goes to the EU parliament, and they could reject it too. May & co don't want our representatives in the Commons to have the power to send her back to get something better but MEPs, including our own MEPs, including Nigel Farage, already have that power. And so might other parliaments.

Considering this question, I find that "any deep(er) and more comprehensive free trade agreement is likely to cover areas of national (as opposed to EU Commission) competence and would then require approval by all EU national parliaments". The EU-Singapore FTA was submitted to the EU Court of Justice for a decision on this issue. The Brexit negotiations are being carried out under "an exceptional horizontal competence to cover in this agreement all matters necessary to arrange the withdrawal". And yet if the withdrawal agreement does cover, or is accompanied by other agreements which cover, the security and law enforcement areas Davis is talking about for example, might the question of competence not be raised again?

(Incidentally, I notice from the Sussex University document quoted in the previous paragraph that "if the UK signs an FTA with the EU that includes mutual recognition of standards and conformity assessment in certain sectors, it could not then sign deep free trade agreements with third countries affecting these sectors, except where the EU chose to do so also".)

A No Deal Brexit might not, therefore, be the decision of anybody in the UK. Two to tango and all that.

Call it Project Fear and then it isn't real

Well done Sunday Times!

Sunday Times 3 June 2018

This morning's Sunday Times "exclusive" is all good stuff, but that headline ensures it can be dismissed easily as "Project Fear".

From what I can glean from the front page and other sources (I'm not currently paying to view Tim Shipman's original in all its glory), civil servants have been through the results of various possible levels of government stupidity in some detail. They've worked out what could be expected to happen if David Davis (how is he still in that position?) is told to walk away from negotiations with nothing to show for it.

But what does No Deal mean? "Walking away and trading on World Trade Organisation terms" is what the piece says, and the way many people seem to think. But that's getting ahead of ourselves. The Article 50 process is not a trade negotiation. It's intended to produce a withdrawal agreement. If possible.

We'll read the will in a minute

But really, what does no deal mean? It depends on what deal you haven't got, which negotiations you walk away from, and when.

Some hard Brexiters advised from the start that we shouldn't bother with Article 50, we should just get out and start paddling. The CBI, and actual businesses, fainted at that idea, and government thought "We're British. If there's a nicely written way in the treaty to get out of the treaty, let's do that". What they didn't do was produce a plan before invoking Article 50.

We're now advised to expect a government white paper (a "policy [document] produced by the Government that set[s] out their proposals for future legislation") a few days before the June EU Council summit at which the whole Irish border issue is supposed to be resolved ("Please!" implores the Irish government, though in fact they merely remind May & co that it would be the decent thing to deliver some proposals in time to discuss them).

If the British negotiators walked out of a trade negotiation and no agreement was forthcoming that might be unfortunate, but we could go home, lick our wounds, conceive a better strategy and try again a couple of years later. But that's not where we are. Olly Robbins, the DExEU front man, and his merry band are busy trying to sort out a UK Withdrawal From the EU Agreement. It's planned to include arrangements for transition and it's hoped that it can be accompanied by a political statement on the future relationship between the UK and the EU. Not a trade agreement.

** Walk out now, and we have no agreement on transition, no agreement that business can carry on as it is for a couple of years while some maniac government tries to work out what things might look like in future (and how many more years of transition we'll need not to fall apart on the way there).

** Walk out now and we instantly lose the dozens of trade agreements, some with major economies, that we currently work under (and the hundreds of more minor agreements about things like recognition of each other's veterinary inspectors). Chilean wine might still arrive for Daniel Hannan, and we might still not charge a tariff for it, but the agreements under which that trade is done would be null and void, and things would start to fall apart.

** Walk out now, and all the British expats in EU countries wouldn't know what their position was, and the authorities of the next EU country they wanted to go to for work wouldn't know what their status was.

** Walk out now, and British local authorities would no longer know whether Ms Bueltmann  of 23 Railway Cuttings is eligible to vote in next year's local election (though they might actually be more concerned about the coming 2018 general election).

** Walk out now, and the Irish border would suddenly become important in practice as well as in theory. What legal system would be used to check food products crossing into the Republic? Especially if milk produced or processed in the North was to be used in a product intended for export to "the continent"?

** Walk out now, and agreements on aircraft safety would no longer have a legal basis. Everybody might know that our planes were fine yesterday, and everybody knows British engineers are OK, but that's not the way insurers work.

Let them eat langoustines -
if they can't be certain of getting through the border and
across the channel, we'll just have to eat them here.

** Walk out now - and this is the front page story - and lorries would keep turning up at Dover and Calais, but on what legal basis would their goods be accepted or rejected? "The government has said it would in effect throw open Britain's borders in the event of a no-deal Brexit," the Sunday Times tells us from somewhere. "But officials fear the EU, particularly the French, would not do the same". You mean they'd follow the law - with the UK suddenly a third country - until somebody told them otherwise.

"We don't recognise that" said every minister asked about the story this morning. That's a weasel-words formulation to avoid actually denying the report exists, so they can pretend they're not lying. If the report didn't exist, they'd happily say so. Journalists know this as well as the rest of us and should call it out.

Walk out now, and all that and much more would happen. Walk out at the last minute, or contrive a vote in the Westminster parliament which rejects the agreement the hapless Davis has returned with... or watch the EU parliament reject it for us... and a lot more will happen, with much less time to recover from it.

Echoes

Here's a response to the story from someone who's definitely not a friend of Brexit

The Port Of Dover paid for adverts at last year’s Conservative Party Conference explaining precisely this. The Conservative MPs who believe they understand the Port Of Dover better than the people who run the Port Of Dover are still going unchallenged in all corners of the media. https://t.co/QBPbjhGgsA

— James O'Brien (@mrjamesob) June 3, 2018

And this is from somebody who did vote to leave:

You need to retweet/share the bejesus out of this thread because we are facing national ruin if this government crashes out of the EU without a deal. https://t.co/AfscOffB0i

— Pete North (@PeteNorth303) June 3, 2018

Here's a government which is warning its citizens of the effects of Brexit. And it isn't ours.

Government* offers personalised 11 page “Brexit impact scan” for millions of small businesses covering issues such as customs, plant, medicine imports, UK passport holder rights for changes from 29.3.2019

*Dutch Government, that is. https://t.co/iIkSlt026P

— Faisal Islam (@faisalislam) June 2, 2018

It could easily be too late

OK, Brexit is the wrong thing to do, but people voted for it. Just like a Theresa May government is the wrong thing to do, but people voted for it. Ish. And then they shuffled a few things and the odd billion and it happened. But democracy demands that we keep pushing our ideas, and the interests of our children.

Brexit is the wrong thing, done badly.

The sight of Laim Fox, pretending the world will take notice of him when Cecilia Malmstrom has been negotiating with the Trump people since the beginning of March when he announced this trade war thing, is pitiful.

He flew to Washington to bleat.
He bleated.
He flew back.

Malstrom put together her contingency plans, which might now come into play, and Fox needs to look at what he would do, sitting in the UK's newly polished WTO seat and being ignored by somebody four levels down from Trump just as he is now (except when he's at one of their fundraisers, when it's always good to have a bit of foreign - but not too foreign - colour).

David Davis chose today (let's humour him: it was planned, he didn't just wake up with the idea) to announce his genius "We'll make Northern Ireland part of the EU as well as part of the UK, and as an added bonus we'll throw in a ten mile border area where just about anything goes" idea.

Literally nobody applauded.

We're paying hundreds of British civil servants to talk to hundreds of EU civil servants (who we're also paying) about the least ruinous way possible to extricate ourselves from this structure which is currently engaged in reacting to the man-child over the water's attack on some of our industries and some of our futures.

Could somebody in Westminster please engage a brain cell or two?