Brexit - Smexit? Smexit being the shorthand for Single Market Exit, I hear, now considered inevitable because free movement means free movement. Though not in the case of several countries which already have free trade deals with the EU but definitely do not allow free movement, like Monaco (try living there if you're not Lewis Hamilton), the Channel Isles and San Marino. OK, so they are all small states, but the list includes Turkey and totals over 50 countries which have free trade deals with the EU without having signed up for freedom of movement. Presumably we'll be an unspecial case. Hmmm.
But are we the only country worried about immigration? No - Sweden, often the favourite country of the hand wringing soft left, has effectively bolted the door to migrants by a "temporary" reintroduction of border controls and is restricting benefits for those who are already there. And this was done not by a bunch of right wing Tories but a liberal Social Democrat-Green coalition, which decided it had been "a bit naive" according to a leading Green. The Swedes' problem is that spending on refugees is about to overtake defence and can't be afforded without trimming their "holy of holies" welfare system. A wave of violence linked to migrant gangs has been part of the picture. A debate about "Swedish values" has started, a topic that it was considered taboo, indeed racist, to suggest even existed.
So, no, we aren't the only ones concerned. What we are is one of the few EU countries that goes queasy at the thought of subjecting arriving child migrants to dental x-rays to confirm their age: most of the other countries do this, including Germany and France. Though a doctor writing in to the Daily Telegraph said hand/wrist x-rays are actually more reliable. I read a spirited piece in The Guardian arguing that people who are fleeing war and have no home to go to deserve help even if they are over 18. Good point, but so is being wary of people who believe in deception, even if they are desperate. After all, France isn't a war zone, so they don't need to flee further on that account.
But returning to the cold front that has descended at Calais. Could it turn into a full on cold war? At least in trade and economic terms. I'm not the only one to have said that France will still want to sell us their wine and Germany will still want to sell us their cars. After all, our addiction to Mercs and BMWs - yes, I'm guilty, though one of my last 4 cars was British built and I'd happily buy another Jag if I could get my golf clubs out of one in comfort - means we are 20% of their market. And of course we buy more from them than they buy from us. All true, but it's still an asymmetric relationship, as I pointed out before the referendum. We send 47% of our exports to the EU, but we aren't anything like that important a market for any single EU country. I can't imagine Estonia, for example, screaming for a trade deal with us, even if they'd get a hearing. This implies there will be more pain for us than for them; not conducive to us getting "the best deal for Britain".
So could the cold front turn into a full blown Cold War, at least in trade and economic terms? Well yes, it could. In a normal negotiation between parties with a long term stake in each other the inexorable logic of what is most optimal for both parties drives them towards a mutually beneficial outcome. There's no need to play hard ball or for histrionics if both sides want to get the best deal, it can be worked through without emotion. But this situation isn't like that, because one party has an agenda that is more important to it than anything else, whatever the pain. That party is the EU and what matters most to Europe is the well being of Project Europe. In the limit nothing else matters to Eurocrats. Certainly not some further economic harm on top of that already self-imposed in southern Europe, causing 50% youth unemployment, to protect the euro. So they won't agree to anything that will damage their project, for example anything that would give the slightest succour to separatist movements within the EU. As a country, we have never felt that way about Europe. They do, which is why I have always felt that, in the limit, we do not belong. They care more about the organisation's survival than the well being of their people. After all, if the EU was a private corporation it would probably have decided it was in the interests of its stakeholders to demerge some time ago.
So making Britain suffer will be a small price to pay for incurring pain themselves. After all, can you negotiate successfully with a psycopathic sado-masochist?
Meanwhile some have been saying that our banks don't need the EU passporting regime to trade in the EU, as they can use equivalence arrangements. Juliet Samuel pointed out in the Telegraph that 10 countries (including Singapore and South Korea) have these arrangements with the EU, where their regulation is deemed "equivalent" - and ours, to start with, isn't just equivalent, it's the same. But others say equivalence won't be good enough, if only because it can be removed at no notice. So the banks continue to run their cost benefit models to decide whether to relocate some people and functions from London, with one industry spokesman claiming that several banks have their finger hovering over the relocate button. Others say that's nonsense, banks aren't likely to relocate, though they tend to refer to high street clearing banks, citing examples like Santander who, let's face it, don't need to relocate as it is already the UK outpost of a continental bank, rather than the investment banks like Morgan Stanley.
In the case of such American banks the Sunday Times Business Editor points out that their scenario modelling is done under the eyes of the American regulators. Who aren't that impressed by the British regulator, but are a lot less impressed by the European one (see my commentaries on the problems with European banks, eg Mamma Mia here we go again, 18 July). It's even possible the US regulator may take a dim view of their banks increasing their presence in the Eurozone, as they may feel euro-regulation of parts of an American bank could weaken it. So the fall out from Brexit might be that the business moves from London but not to Frankfurt or Paris, but Asia. Indeed, the boss of the LSE has suggested that clearing houses would rather move to New York to be outside the EU sphere of influence.
I think I also read that EU banks are indebted to UK banks to the tune of more than a trillion pounds... might that give us a lever in the negotiations? There's probably no mechanism that the UK goverment could use in practice, though maybe they could hint at pressure from the Bank of England to get the relevant banks to call in loans if it gets really dirty. But it wouldn't work anyway since, as I note above, the EU lives in a kind of mad house, so they would take the pain. And we are more in debt than the average EU country.
So I could see things descending into an economic cold war. Indeed, there was a phrase for this sort of scenario in the real Cold War: Mutally Assured Destruction, MAD, in which both sides could do terminal damage to the other, whoever started it.
If Brussels is determined to foist freedom of movement on the UK in return for a free trade deal, from which they would benefit more than us, when they didn't require it from over 50 other countries then, in the words of the reluctant Nobel Laureate, A Hard Rain's a Gonna Fall on everyone, us and them.
We are also told that the Nissan CEO, Carlos Ghosn, has been to see Mother Teresa before his company takes a decision on whether to proceed with plans to make the next version of the CashCow, sorry I think that's Qashqai, at Sunderland, where the locals seem to like harakiri (or is that more correctly seppuku?) and voted 61% for Leave. Sunderland is one of the world's most efficient car plants - it's certainly Nissan's best - and it makes a staggering 30% of Britain's production, 80% of that going to export. Apparantly Teresa made a number of promises to the Nissan grand fromage, including offering Britain's roads as a test track for driverless cars, an area of interest for many car makers terrified that Google will disrupt their hegemony. Sources say Ghosn left Downing Street "confident" Britain will remain competitive post Brexit. I guess the further Qashqai investment at this stage is small, so Nissan may go ahead with it but, even if they do, there will be many future decision points like this.
Driverless cars? Yes, Britain wants to be in the forefront of this development if it can. But is this an allegory for our situation? Teresa, Boris, David and Liam think they are at the controls but is this a situation where time will tell their steering wheel is as useful as that on the car seat of a tot sitting in the back and the car is really on rails heading to the edge of the cliff?
Perhaps the "best deal for Britain" will be the only available deal for Britain; hard Brexit/Smexit, no free trade deal like Turkey or cosy equivalencing like Singapore for Les Rosbifs.
Maybe we are all on the way to going MAD. In that case, bring it on, I say! If Europe is determined to impoverish itself in pursuit of their project, then there is no doubt in my mind that we are better off out of it. I want no part of it. If you are with an abusive and self-harming partner the only way forward is to get out. We'd be crazy to think again because the only Brexit is hard Brexit. We'd be daft to stay in on terms that meant we didn't really leave. They would know they could bully us forever.
Sorry if this is a bit of an essay and not terribly fluent: I find it much easier to assemble on the pc rather than the tablet I have to hand. Sources included:
- Swedes abandon tolerance as 'sacred' welfare buckles under migrant burden, Sunday Times 9 October 2016
- The EU cannot afford to offer the City a poor financial services deal. Juliet Samuel, Daily Telegraph, 21 October 2016
- Letters, Daily Telegraph 21 October 2016
- Business Comment, Sunday Times 16 October 2016
- May offers Nissan deal on driverless cars to soften Brexit blow, Sunday Times Business, 16 October 2016
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