Wednesday, 29 March 2017

Brexit LOLZ and not-so LOLZ

Spotted by Shiney in Reaction:

Brussels apparatchiks are in a state of shock: until Theresa May’s letter was opened, many of them had clung to the delusory hope that, in an Oscars-style mix-up, the envelope would contain a humble request for Britain to join the euro.

From The Evening Standard:

With Chancellor Angela Merkel toughening her stance on Brexit as German elections loom, Berlin is demanding a united EU front during the talks on Britain’s departure.

It wants the UK’s exit negotiations rushed through in 15 months rather than up to two years, according to a leaked German government paper. However, the document also suggests that a detailed trade deal could take up to 10 years to complete…

Ms Merkel, seeking a fourth term in power in the German general election slated for September, says all “contentious issues” — such as the free movement of people across EU borders — must be negotiated now and not left to some undecided date.

But she recognises that “future relations” with the UK could take far longer to crystallise and believes that the European Commission could be correct in predicting talks on these matters could take up to 10 years.

OK, so Merkel wants us to concede on the bits that are important to her within 15 months, but the bit that is important to us will have to wait ten years?

By that time we will be used to the new status quo, probably WTO rules, so that vague promise is less than worthless as at today's date.

If the EU is not going to take it seriously, we might as well call the whole thing off right now and walk away unilaterally, there is nothing worth haggling for and no whiff of a compromise. Does Merkel not understand the British mentality?


Bill Sticker said...

"If the EU is not going to take it seriously, we might as well call the whole thing off right now and walk away unilaterally"

Well, those of Merkel mentality certainly don't appear to understand the concept of bargaining. Especially if a net market and contributor like the UK simply walks away. The EU has so much more to lose than the UK if that happens. Only a fool can't see that. Oh, wait...

Mark Wadsworth said...

BS, they must have seen how Project Fear just tipped some people into saying "Right sod it, I'll vote Leave just to see if it really is that bad", which is why we ended up with a slim majority for Brexit. We've got to thank that little twat George Osborne for giving us Brexit.

So either they are fools, or they are playing some other game, maybe Merkel is just pandering to her home audience by wanting to seem "tough"?

paulc156 said...

The EU doesn't have 'so much more to lose',in the event of a 'no deal'. We send over 40% of our exports to the EU. This is a conflation of German motor manufacturers and French farmers with 'EU'. Fashionable but wrongheaded.
Worth noting also that such overt posturing along those lines has already been absorbed and standard game theory suggests this is foolish tactics. Perceived freeloaders will be punished by the community even at considerable economic cost to those dishing out the punishment if the integrity of the community itself is threatened.
What's referred to in this context as the British mentality owes more to a hangover from the days of Empire than anything and is as such rather misplaced.

Mark Wadsworth said...

PC, way to confuse several different issues! There's no response to that stream of consciousness tirade.

Bayard said...

M, P156, no-one is going to lose anything. No-one is going to stop trading with us simply because we are not in the EU any more and vice versa. FFS, we continued to trade with Germany even when were were at war with her. All we are talking about is tariffs, and even the maximum allowable under WTO rules are smaller than the exchange rate movements we've get all the time. Merkel is just talking tough because she's got an election coming up. When that's over and done with it will be back situation normal, with everyone pretty ho-hum except the French, who will continue to spit feathers for the next five years or so.

DBC Reed said...

The Germans have got too much to lose by acting tough with us argument seems to be falling apart on Day Two.

paulc156 said...

B 'no-one is going to lose anything'...except British consumers who have to pay more for their goods due to tariffs and still more when sterling falls further to take account of the WTO option if it becomes likely...and ultimately investment which only increases post brexit as part of some curious wishful thinking or short term due to cheap sterling. Though state investment may well have to increase to make up any shortfalls in private investment.

DBC. This is what the head of the German car industry, (upon whom our entire strategy to secure a 'great' deal seems to rest) said recently. Germany's priority must be "to keep the EU27 together... If the UK doesn't want to suffer the same fate as Italy's car industry, it must be concerned to retain full access to the single market...The UK is an important market for us but the EU market is much more important. If the EU were to fall apart, that would be a lot worse for our industry." Following Merkel's orders by the looks of it.

MW. Then sticking to one and only one issue. The 'they need us more than we need them shtick' has been repeatedly made by some of our political class on the right of the Tory party/UKIP. BS made the same point above. I think it's counterproductive, particularly when telegraphed so openly. Game theory seems to suggest (plausibly I'd argue) 'perceived' freeloaders (those that want the benefits of co-operation,with few of the costs) may be 'punished' even at great cost to those handing out the punishment. That's all.

Bayard said...

"..except British consumers who have to pay more for their goods due to tariffs"

What tariffs? Have anyone said that we are going to indulge in a tit-for-tat imposition of tariffs on stuff from the EU, even if they impose them on our exports to them, which is not a certainty either? Why should we? There are no rules saying we have to. Admittedly, our government may just be waiting to be freed from the shackles of the EU to slap huge tariffs on all our imports, but firstly they can't do that under the WTO rules and secondly, the argument that we need the EU to keep the crappy governments we elect under control is probably the weakest of all the valid arguments for staying in the EU.

Exchange rates have moved more in the past due to something other than Brexit and our export markets haven't collapsed. Similarly things have not got noticeably more expensive in the shops since last year's 20% fall in the value of sterling, all of which has been blamed on Brexit when 1) sterling has moved more in the past due to other reasons before Brexit was invented as an excuse for all our economic ills (we were probably then blaming the EU instead) and 2) sterling was due a fall anyway; it wasn't as if the financial pundits hadn't been saying it was overvalued before the referendum. It's simply typical Bremainer fearmongering to go on about "paying more" when that "more" is likely to be too small to notice.

In three months or so we will be coming up to the first anniversary of that 20% fall in sterling, but I am prepared to bet that papers like the Guardian will still be wailing about doom and gloom to come and not be looking back over the previous year and pointing out that, by and large, things have carried on exactly as they were before the vote, which, if you look at history, is usually what happens barring wars and natural catastrophes.

Mark Wadsworth said...

B, thanks for stepping in and pointing out the bleeding obvious

paulc156 said...

B. The inference that there will be two way tariffs was implicit in the first post on here. If we walk away [no deal better than a bad one] tariffs seem a better than even way bet. If we do a deal then zero tariffs are obviously more likely. I have no idea which of the two outcomes are more likely. Either way it seems fanciful that we will be net beneficiaries or even no worse off based on pronouncements uttered thus far.

More negative would be other impediments to the flow of trade which will likely accompany a walk away. As for sterling that's just the easiest and most obvious one to calculate. Sterling was widely tipped to fall on a brexit vote and widely expected to fall further on a 'walk away' denouement. It's no coincidence that relative performance of the economy is correlated with exchange rate moves over long periods. Erosion of national income is as certain as night follows day in the aftermath of sustained falls in sterling. 1 or 2 percent a year for three or four years might not seem a big deal, but then most folks said they wanted lower immigration but did not expect to pay for it. How much of that fall in income is distributed between profits and wages remains to be seen but a good portion will likely be felt in the pockets of workers.

Ironically, in the case of a messy or collapsed negotiations London probably won't be much affected. The provinces [as far as England is concerned] will be the areas worst hit by grist in the wheels of trade with the EU and any reductions in direct investment because they are the areas most reliant on EU trade. The same areas that voted most heavily for brexit. All so we can claim the high immigration that seems to be likely in the future will only be high because 'we' have decided to allow it!

Mark Wadsworth said...

PC, in an ideal world, there would be no "negotiation". The UK would simply outline some sensible policies which intends to adopt anyway*, and tell the EU to do its worst.

* Let EU nationals who are here remain here on same terms and conditions; unilaterally abandon tariffs and quotas; regain some control over new immigrants (those one million criminals who arrived in Germany are not welcome here - but having Europeans who want to work and support themselves and fit in is a no-brainer, the NHS needs them); stay in sensible things like the EHIC system in Interpol and share information on criminals and terrorist; scrap the shite stuff like requirement for Daytime Running Lights, the EU Arrest Warrrant system and the Human Rights Act etc etc.

If the EU stamps its little foot, demands continued un-conditional free movement and threatens us with trade barriers, then so be, that's their loss not ours. We will adapt soon enough and they will be seen as the petty partner in all this. Nobody can criticise the UK for adopting all the measures I have outlined above.

Bayard said...

"If we walk away [no deal better than a bad one] tariffs seem a better than even way bet."

I wouldn't give you those odds. Currently we have no trade deal with China AFAIK. We also have no tariffs on goods we import from China, which must be a lot of goods. It's just another Bremainiac myth that no trade deal = tariffs all round. Yes, I wouldn't put it past the Eurocrats to slap WTO max tariffs on all our exports to them out of sheer spite and to punish us for having the gall to leave, but, as I said before a) we've coped with worse and b) we don't have to retaliate.

Ok, a fall in sterling will make us poorer in the long run, but that is only because we are living on borrowed money. If we balanced the books on trade, then it wouldn't matter - our exports would earns us more by exactly the same amount as our imports cost us more. Living on borrowed money is going to send us to hell in a handcart eventually anyway, all that poor exchange rates will do is speed up the pusher.

"Sterling was widely tipped to fall on a brexit vote and widely expected to fall further on a 'walk away' denouement."

Yes, that's what happens when you hand over the control of your exchange rate to speculators. It's all just gambling, it has nothing to do with the actual value of the currency concerned. There is no law that said that a vote to leave had to be accompanied by a fall in sterling, it was simply a result of it being "widely tipped". Think about it: you have a scenario where the great and good are all saying that the economy of the UK will collapse if the country votes to leave the EU. Now the speculators know the game. They know that some people are going to believe this guff, sell sterling and buy euros. That will push down the value of sterling a bit. Now if all the speculators sell sterling and buy other currencies, then the value of sterling will fall a lot, which will bring in more sellers to give a classic run on the currency. However the old hands will have sold at the start and then they can buy back at the end and make huge gains. Thus it turned out on the day. Would this have happened if the Project Fear had not been deployed? I doubt it. So now the Bremainiacs have a double whammy: having caused the run on sterling in the first place, they can now point to it and say "see, look what happens if you don't do what your lords and masters tell you to do".

paulc156 said...

MW. In an ideal world there would be no EU or UK. That's what libertarian means to me anyway.
B. I thinks that one needs to strip out short term speculative moves in currency from secular ones. Pretty much all those views I had heard pretty Brexit was that sterling was overvalued. Though regards the closing of our trade/current account deficit we've been here before under Gordon Brown. A sizeable post crash devaluation followed by a small increase in exports and a bigger increase in imports. Yes credit bingeing is part of the story but I can't help but think that people's buying into the hype over some outlandish pre Brexit predictions being wrong has generated further credit bingeing post Brexit based on Walt Disney fantasies about a brave new world that awaits us.

DBC Reed said...

MW If you want foreigners to come here and do a job of work and prop up the NHS,(see above) you are acceding to the free movement requirements of the EU and may as well support staying in. Would save a lot of bovver.
Having been kept in their place by patrician Tories during Mosley's Notting Hill era and the Powell Rivers of blood episode, the white mob that has been simmering away since before the War has finally been let loose by the feeble May whose property-owning-democracy caper has predictably gone up in smoke/ is now "broken". We have left the EU because of an upsurge of pent-up anti-immigrant venom.(This is why, according to sixth-form text books, we can't have referendums :they become attacks on minorities) . She is now likely to be held to ransom by this mob which will, led by the Mail, insist on the preservation of the economic supremacy of house prices/land values and the death of the industrial wage system. ( A re-run of the 19th century face-off between Land [Tory] and Industry [Liberal].)