Tuesday, 27 September 2016

What Boris Johnson doesn't get (or want to get)

Why would any logical human want to buy goods and services of a country or visit a country that wants his/her money but not him/her there to live/work?

The EU is spreading this principle via the membership of the EU's Single Market. It has made EEA members such as Norway and non EEA Switzerland accept that.

That is what Boris eg does not get (or pretends he does not) and V. Schauble offered to explain to him by explaining the EU Treaty recently.

The emerging rule of the game in the world is: If you want absolutely free trade of goods and services and movement of capital then accept freedom of movement of people too and the EU is promoting it. 

Well done EU. That is a cause others should promote too. It is a human value cause, that humans are no less in freedom of movement rights than capital or goods and maybe one day this may be part of the WTO.

Monday, 26 September 2016

EU Single Market: A French operation in Italy

How well is the EU Single Market for services working sur le terrain?

August 2012.  Trying to find the TGV ticket office at the Garibaldi train station in Milano.

Main ticket guiches would not sell you those tckets.

Finally, I found it hidden near one of the platforms.

The reason, apparently, is that is a French operation in an Italian city. 

The UK's competitive advantage

What good in a UK which is not part of the EU market for not only goods but services and capital as well and where you cannot recruit the best European and world talent? 

That is why a reported very large % of CEOs in the UK are considering moving their companies post referendum.

And that is an issue Theresa May and her team must address ASAP. 

Mrs May has recently claimed that she wants to make the UK a leader/champion for global trade. That is nice and useful, but if the UK was to launch a campaign within the WTO to further liberalise world trade, it will take years and years to achieve that.

If she means creation of regional agreements, eg with the Commonwealth, that is nice but they too will take years and what is the trade gain in value? The EU market (sans the UK) is still the most lucrative one in the world, ahead of the US. 

If she means bilateral trade deals, well many are doing such already and they, too, take years. And she does not have the trade negotiators for it.

Plus, trade usually covers just goods, what about the City's and UK services export needs?

Theresa May needs to come up with answers and do it fast.

Sunday, 25 September 2016

Brexit for the City and UK services

Liam Fox pointed out this week:

- "First, if we take the top 10 markets where the UK has a trade surplus only one of them, Ireland, is in the EU.

- "And if we look at the 10 markets with which the UK has a trade deficit, seven out of the 10 are in the EU. It is, therefore, very much in the interests of other EU states that Britain and they makes a success of Brexit and our new relationship."

That implies that the EU will want to strike a good trade deal with the UK.

That's fair enough. The EU has a good trade of goods deal with Serbia. Also Canada.

But will a trade deal cover the needs of the City and services exporters? That is the 1 trillion pound question!

Meanwhile, two European finance ministers offered to give Boris Johnson free tutoring on the EU Lisbon Treaty after he claimed that freedom of movement is not an integral part of the EU Single Market.

It is clear that the UK cannot achieve the access Norwegians services have in the EU market without offering free movement as part of the deal.

Without free movement it can get some sort of deal bu nothing that emulates that type of access for the City and for other UK services.

Services is what turns a goods trade deficit into a surplus for goods+services.

Wednesday, 21 September 2016

Theresa May's Borders

Theresa May's UN speech, two days before the World Peace Day, preaching to UN members from all over the world that it is their "duty" to control migration flows was not very helpful for Britain's world image. Plus won;t bring any results. Few if any countries have the intent, let alone the resources, to do what she asks for.

People fleeing war or political persecution or wanting to improve their lives will continue to cross borders and go to extreme lengths to reach Britain and other "attractive" countries.

They will continue to arrive by boats to Greece and Italy aiming to reach mainly Britain or Germany.

Why is Britain such an attractive destination. I have not seen a thorough analysis of that. Brexiters will say: The NHS. Yet Germany and other countries have better systems. Maybe it is the language and BBC World!

In any case, May is promoting to the world an image that is not only not one of an Open Britain. And while many will rush to specify that a) migration of people and b) trade of goods and services and movement of capital and investment are not the same thing, many others will claim that they go hand in hand, at least in terms of image to the world.

Monday, 19 September 2016

Does triggering Art 50 mean Brexit?

The Liberal Democrats, with +20,000 members since the ref and the highest number of members since 1993 (but still at 8-9% in the opinion polls) have pledged that they will offer the British people a referendum on the final Brexit deal.

One detail though: Once Article 50 has been invoked, it cannot be revoked. Thus the new ref can be on the type of Brexit deal not on Brexit per se.

Now, friends have argued that  various legal opinions are around on that issue and that the author of the actual Article 50, as well as members of the ECJ have said that there is nothing in any of the treaties that says a member state can't withdraw its intention to leave the EU after invoking Art.50 and before the 2 year time period is up.

while I fully understand the predicament the EU cannot spend years negotiating a deal and then have the whole thing scrapped. Plus, by the next UK elections (2020), it will be all over, the triggering and the two years. The issue is to avert the triggering and that can happen if the current government gets a no confidence vote.

Friday, 16 September 2016

Britain's EU friends

Herman Van Rompay bluntly claimed that the UK did not have that many friends in the EU even before the referendum.

That may be partly true.

First, let's point out that HVR claimed the EU would never become US of Europe a few years ago.

It is true that many in the EU were tired of British antics re the EU way before the ref. It was not just Farage and the UKIP in the EP. It was Tories' (let us not forget that the Tories left the pro EU European People's Party years ago) antics too.

It was Thatcher, it was Major (and his veto on the Maastricht Treaty at first and then on the Euro and the Social Protocol) and Cameron too.

Blair's UK was rather pro EU.

The UK has been nagging for ages about:

The structural funds
The UK contribution to the EU budget
The agricultural policy of the EU

It was the UK that was one of the champions of EU enlargement from 15 to 28 as a strategy for preventing deepening of the EU.

But as Germans have pointed out, Germany and the UK see things eye to eye regarding markets philosophy.

Plus the UK is the most international member of the EU in terms of migration, both intraEU and from outside the EU.

NVR was exaggerating. But the UK has become a problem for the EU and the EU will deal with it.

Brexit means exit? Update

T. May's experience is the G20 must have been trying.
She then cam back to Brttain to insist that an exit from the EU Single Market is not the objective of the future negotiations.

Contacts have been made but it has been pointed out that trade negotiations with eg Australia will take years and EU-Australia negotiations have priority.

For some reason Mrs May publicly insists that a deal for access to the EU Single Market (capital, goods, services) can be reached without free movement in it. That is against all evidence so far.

The UK needs this access because:

a) Many of its exports are ecological premium products that are adverse to customs and other red tape.

b) Export of services is not part of WTO trade deals

c) The City needs freedom of capital with tthe EU.

Why is then Britain leaving the EU, one might ask.

It shall be long and it shall be hard

Saturday, 10 September 2016

Where were you in 2000?

In 2000 people who thought Gore was not good enough to be president voted for Nader and get of all us Dubya. Hope this time it's the other way round, people vote for Johnson instead of Tramp.

Hillary was 45 when Bill became president, 53 when he left office and 69 now (born 1947). It's been 15 years since Bill left office, oh my how quickly time passes.

CNN is getting heat about the accuracy of its poll showing Trump leading. That's OK, people have to grasp what a Trump win would mean in order to vote for Hillary.

If Remain had

Now that the ref is done and over with, it is worth doing an evaluation of the Pro EU - Remain campaign.

I remember debating hordes of Eurosceptics - Kippers about the EU all the way back in 2005 in the European Commission's Online Forums.

Where were pro EU Britons then?

It is evident the ref was going to take place as many as four years ago. Who started campaigning then, especially online?

Much like the Swedish Euro ref, the pro EU - Euro side started way too late to win.

In the UK, the pro EU camp relied on the offices of the European Commission and the European Parliament to do "PR" for the pro EU side.

The other reason, was complexity of the messages. The Leave side spoke to the hearts, the Remain side to the brains.

Scotland in the EU: How?

What the ALDE leader actually said is that it would be (relatively) easy for Scotland to apply and join the EU. He did not say it would e automatic.

Imho, the only way Scotland could automatically remain in the EU is if the UK officially divided into two or more parts before Article 50 is triggered, something which is not going to happen or May allow it, Scotland would have to gain independence from the UK which is not the same thing, it would not inherit any of the UK's rights.

Monday, 18 April 2016

Once upon a time in Europe

Once upon a time, the European Union was poised to become a federal union. Leaders gathered in a Dutch city and tried to agree. The UK,which never wanted a federal union, disagreed.

Delors, Kohl, Schmidt and others wanted an ambitious union. They did not get it.

They got a single currency for some (which began 10 years later) but under pressure from the UK and others they did not get their federal way. Plus the UK and Denmark got official opt outs from the single currency. The UK also got an opt out from the so called Social Protocol.

They thought they would improve things in later Treaties of the EU. That did not happen. In 2005 for example the EU Constitutional Treaty was rejected by France and the Netherlands. The federal idea had been shaken.

The euro started in 2001 but high interest rates by the ECB created unbalances.

The subprime crisis later hit Europe too.

Enlargement of the EU was partly the cause of slower deepening.

In the meantime, public opinions in the member states changed too.

The EU never got a single tax system or a real budget (comparable to the US). In many member states, fiscally conservative governments wanted an EU that cost less, no matter the cost.

As a result, in 2016, the EU has lost its way.

World growth is slow and the EU has growth troubles. Unemployment is still high in many member states.

24 years have elapsed since the Maastricht Treaty of 2001/2002 and one can wonder what is the reason for having an EU with 20+ different languages, no single tax system, no federal budget, only laws decided at EU level, an EU el cheapo that is.

If the British voters decide to leave the EU in June 23, this may cause similar appetites in other member states.

One solution is for a new EU. A leap forward towards a United States of Europe with those countries that want and can. An EEA type of EU for the rest. Can the EU make such a bold move? Unlikely.

Europe's problem, which led to two world wars, is that it comprises of too many nation states. Europe has too much history. Can it have a (united) future?

The Greece problem serves as a stark reminder that the EU cannot make decisions. For example its insistence of having the IMF in the Greece troika.

The economic logic of the EU is still a hard case to make. EU economies are still too different, too national, too complicated for a central economic policy. Again, without a single tax system, single laws, a single social security system and of course a real federal budget, the EU does not make economic sense. Especially given the liberalisation and growth of TWO trade in recent decades.

Let's see what the Britons decide in June.

I still think the EU needs an IGC very badly.

Thursday, 7 April 2016

More troubles for an unbalanced EU

The rejection of the EU-Ukraine partnership agreement by the Dutch populous, albeit non binding for the Dutch government, serves as a stark reminder of the troubles the EU is in.

The recent decision of the ECB to cut the Eurozone's central interest rate to 0% marks the worry of the EU policy makers regarding lack of growth inside the Eurozone.

In 1959 the EU started as a mere Common Market because the French Parliament rejected a fuller union.

The UK is to make a decision on EU continued EU membership in a few weeks.

Ireland has rejected a new EU Treaty twice.

In 2005, the French and Dutch voters rejected the Treaty of Lisbon.

Swiss voters have rejected EU and EEA membership years ago.

Swedish voters rejected EMU/Euro membership.

Danish voters rejected the Maastricht Treaty and EMU/Euro membership.

19 of the 28 current EU members have joined the Euro, 9 have not. That creates an unstable system.

ECB interest rates with the insistence of the inflation phobia driven Bundesbank have traditionally been high, to avoid inflationary pressures. That has kept the Euro high and has hurt Eurozone industry not only in foreign markets but also (from imports) at home.

There are no single taxation system, no strong federal EU budget, no single social security system in sight. No wonder intra EU migration is very low compared to the US one then. Plus there are some 23 national languages among the EU 28.

No wonder an unbalanced union as the current one faces unemployment and growth problems. And when such problems arise, then many voters vote for nationalist parties and policies.

True, the EU has helped Europe avoid feuds such as another world war. But this peace has come at a price. The EU decision making machine is seen as foreign by many citizens of the EU member states. Member states with a strong social model such as the Netherlands and Germany have revised these models downwards in recent years. For example Dutch unemployment benefits used to be high, now they are significantly lower. Who are the voters expected to blame?

Countries with strong social models such as Sweden, Norway, the Netherlands have attracted intra and non EU migration in recent years and that has promoted xenophobia among the population.

To this day, the EU has 28 distinct countries as members, there is no real union to speak of. Plus the existing EU has produced too many laws, in addition to the national ones. As a result, too many small companies do not like the Single Market, they see it as a threat, not an opportunity.

Problems have brought fiscally conservative parties into government in many EU member states. Their policy agenda has been conservative, austerity driven and as a result anti-EU and de facto xenophobic. The Eurozone's austere economic policies by its members and the ECB have hurt the Eurozone. The 0% rate by the ECB is maybe too late. The Eurozone is damaged goods. The EU is damaged goods.

A No by the UK voters in the coming weeks may be a blessing for the EU. It may force it to take a good look at itself. On the other hand, it may not. Some EU policy makers have a tradition of dismissing reactions in the member states. They will be mistaken to dismiss the Dutch No to the EU-Ukraine agreement.

Ukraine has a right to feel betrayed at a result. But it should realise that the EU is in trouble, not the Ukraine. I spoke to many youths in Georgia a year and a half ago and they are not gang ho about joining the EU. Maybe they realize it is not paradise for countries in trouble. The ex USSR and ex Eastern bloc states that joined the EU went through very dire straits because of the need to follow the EU standards.

What is the solution? It is hard to say. A United States of Europe would be a solution but so far the EU is stuck with a Eurozone of 19 without a common tax or social models. At the same time, not only Greece but other EU and Eurozone member states as well are facing significant growth and employment troubles.

The EU could ask for things at an international level to help deal with its own problems. For example use its size and its internal market as leverage for even more free trade. Free migration should exist to counter balance freedom for capital and goods. People migrate because there is war (refugees) and to seek a better life (economic migrants). Two and a half decades after the fall of communism in the USSR, the world has structural problems. The West has become de-industrialised to a large extent. Migrants want to flow into the de-industrialised US and EU whereas new jobs are being created elsewhere.

These things need to be discussed and debated in the WTO and the UN. Probably they won't. In absence of a global summit on growth and jobs, countries will continue to pursue their own remedies. And the EU will make even less sense.

The EU needs an IGC to decide on its future, with or without the UK. It needs, above all, to start making sense to the European common man.  It probably won't, though.


Thursday, 31 March 2016

Should the UK leave or stay in the EU? Some crucial questions.

Well, it is up to British voters/citizens to decide.

My analysis.

Many Britons feel that Britain has lost sovereignty to Brussels. Policies and laws in many areas are decided by the EU institutions and this takes power away from Westminster. This includes standardisation issues for products and services produced and sold inside the EU.

Many argue that Britain needs to be part of the EU Single Market so that it can sell more easily to its most significant trade partner, the rest of the EU. That is true, but more and more minor as the cause of WTO world trade advances. Plus a non-EU UK can be a member of the European Economic Area as Norway and others do.

Has non EU and non EEA membership hurt Swiss exports? That is a crucial question proponents of the Yes and No to the EU must answer.

My 2 cents is that a globally strong and competitive UK does not need to be a member of the EU and its single market.

How will an exit from the EU affect the revenues of The City? That is a question for the City to answer. Will there be another financial hub in the EU that will compete with a non EU City if the UK leaves? To what extent?

The EU, via its policy on EU enlargement, has managed to hinder the process to a United States of Europe by the EU. Why does then the UK have to leave? Are EU laws enough reason for the UK to leave the EU?

Now, let's be reminded that the UK is neither a member of the Euro area nor the Schenger area. Will thus EU exit allow the UK to better determine its immigration policy?

The EU does not have an industrial policy. Will a non EU UK be able to have an industrial policy and help develop more manufacturing? Maybe yes. But is any political party arguing this factor? Cameron should have been arguing for an EU industrial policy for years now. He has not. Why? Has Labour?

A non EU UK will be able to depart from the EU working time legislation and have the type of social, industrial affairs and employment policy it wants to. Be reminded that Blair incorporated the EU social protocol other UK governments had vetoed (most notably, the Maastricht Treaty opt-out).

A non EU UK will be able to also develop its own environment, transport, VAT and other policies and laws. Will they be much different than the existing EU ones though? That is a question UK policy makers must answer.

There is no question that some non EU companies with manufacturing activities in the UK may be tempted to leave the UK and settle inside the EU if the UK leaves the EU. It will depend on what they perceive the problems of selling in the EU if the UK leaves to be. Who has asked them, in the debate so far?

A non EU UK will not have to contribute to the EU budget. But is the UK contribution to the EU budget (much inferior to the US one) so important (see UK Rebate) after all?

Now, what will happen to UK citizens living and working "freely" in other member states and citizens of other EU member states living and working in the UK? That is a matter that may be settled via UK-EU negotiations as part of an exit agreement, should the UK decide to leave the EU.

Of course, it is most likely these questions will remain unanswered and the decision in the referendum will depend on more top of the mind issues.

In any case, there will be no Doomsday though. Why? Because the UK has the policy makers and think tanks to address policy issues, whether the decision is Yes or No.

Enlargement vs Deepening. What future for the EU? The EU needs an IGC. Badly. To decide on its future.

Enlargement vs Deepening. That was the big strategic dilemma in the EU years ago. The main proponents of enlargement were the UK and Germany. The UK hoped enlargement would hinder the deepening of the EU. It has worked. 19 members may be in the Eurozone but Eurozone and the EU as a whole are facing considerable problems.

How can a single market work properly without a single language, a single tax system, a single bureaucracy? With a single currency for merely 19 out of it 28 members?

The current migration crisis shows the lack on union within the European Union.

The decision of the ECB to lower interest rates to 0% shows its despair in trying to make the Eurozone more competitive. Triche interest rate policies some ten years ago hurt the cohesion of the Eurozone significantly and it has not recovered.

A de-industrialising EU cannot create enough jobs to curb the joblessness issues.

If the UK decides to leave the EU in a few weeks, an earthquake will shake the EU. It better. The EU needs a wake up call.

Is the EU a failure, so far? Yes. It has taken 60 years and failed to become a United States of Europe.

Can the EU change its course and succeed?
Yes, it can.

How likely is that? Not very likely.

Will the EU dissolve? Not likely.

What should member states do?
Well, they are focusing on national affairs increasingly, taking care of their national needs.

What is the future for European business? Well, 2.5 decades after 1992, there is no European business, merely, companies doing business across the EU. 28 tax regimes, 23 languages, what kind of a single market is that?

The existence of world trade and the EU puts pressure on the cohesion of the EU. Why should members stay members when world trade is now more free than ever and one (eg the UK) can sell to Europe without needing to be part of the EU.

The EU needs an IGC. Badly. To decide on its future. I argued that 2 years ago. The need is more urgent today. Even after the UK referendum.

An IGC should decide whether to move the EU into a United States of Europe (as some want and it makes economic sense) or take back the EU to the Common Market it was decades ago (that would please the UK). More or less union make sense, both, as strategic option. The current status of the  union does not.