Brexit and the waning days of the United Kingdom

[Sheilbh]

The eternal optimism of Sheilbh is exhausting. 

Where is the optimism?

I think there's a not unrealistic chance we'll have a full-blown sterling crisis in the next year or two

Edit: I suppose the optimism in that is that I think we need drastic change and crises force change happened after the war, or (in a less than ideal way) after 1979.

[Zanza]

Cheaper NZ lamb could of course have been achieved without a FTA through unilateral action, so presumably that is not the core achievement for Britain out of the NZ FTA.  Maybe the enhanced market access for British companies to NZ is worth it, no idea. But I merely wanted to communicate my impression that it was more about the photo-op than tangible results. Else she would have worked with the EU on the multitude of open topics, but that of course wouldn't have looked good in the English tabloid press, so she did not ...

[Sheilbh]

Cheaper NZ lamb could of course have been achieved without a FTA through unilateral action, so presumably that is not the core achievement for Britain out of the NZ FTA.  Maybe the enhanced market access for British companies to NZ is worth it, no idea. But I merely wanted to communicate my impression that it was more about the photo-op than tangible results. Else she would have worked with the EU on the multitude of open topics, but that of course wouldn't have looked good in the English tabloid press, so she did not ...

Isn't that more because the negotiations with the EU weren't her department's responsibility? There was the Department for Exiting the EU and then Johnson took it within the Cabinet Office and Number 10, with Frost as the relevant minister. She only picked up any responsibility on the EU relationship when Johnson moved that from Frost (in the Cabinet Office) to the Foreign Secretary in autumn last year.

Maybe part of it is that she doesn't want to annoy the tabloids. I think a bigger thing is that it wasn't her job. So why would the EU engage with her even if she wanted to do something? And it would look like she was preparing for a leadership bid? A bit like when any cabinet minister gives a "wide-ranging" speech on areas outside their brief. It would be like if Dombrovskis who's the trade commissioner suddenly got involved in Sefcovic's responsibility.

The New Zealand example is because you see lots of criticism about how bad a deal it is for British farmers - my point is that only matters if your priority is British farmers. My sense is that British trade policy will have quite different priorities than European (or American) trade policy and, in particular, will be more focused on cheap imports than British exporters.

There were lots of photo ops, there's no doubt she used it politically. But there were also lots of trade people flagging big risks about the non-EU deals and trade relations - and that it'd be politically challenging to manage. Those generally risks didn't happen and she was the Secretary of State responsible for rolling over the deals which she did - while milking it for all it was worth in photo ops. In retrospect perhaps the risk was never really there and was just being hyped by people who were anti-Brexit, in which case Truss didn't achieve much after all.

[Zanza]

Isn't that more because the negotiations with the EU weren't her department's responsibility? There was the Department for Exiting the EU and then Johnson took it within the Cabinet Office and Number 10, with Frost as the relevant minister. She only picked up any responsibility on the EU relationship when Johnson moved that from Frost (in the Cabinet Office) to the Foreign Secretary in autumn last year.

Yes, and my impression is that she has achieved nothing in this new brief since taking over.

The New Zealand example is because you see lots of criticism about how bad a deal it is for British farmers - my point is that only matters if your priority is British farmers. My sense is that British trade policy will have quite different priorities than European (or American) trade policy and, in particular, will be more focused on cheap imports than British exporters.

I would hope the EU does not do that. Cheap imports can be achieved by unilaterally removing trade barriers (or just not enforcing them like UK in Dover). Calling that trade policy is a bit far-fetched though. Normally trade policy is about opening other markets for your domestic businesses. Which is much harder. Not sure if she achieved much in that regard.

There were lots of photo ops, there's no doubt she used it politically. But there were also lots of trade people flagging big risks about the non-EU deals and trade relations - and that it'd be politically challenging to manage. Those generally risks didn't happen and she was the Secretary of State responsible for rolling over the deals which she did - while milking it for all it was worth in photo ops. In retrospect perhaps the risk was never really there and was just being hyped by people who were anti-Brexit, in which case Truss didn't achieve much after all.

During her tenure, rollover deals with about 30 countries were signed, the biggest ones being Japan, EFTA and Canada. Fox had a similar amount done before, e.g. Switzerland. Australia or NZ were after she already moved on. Of course the most important trade agreement was not done by her despite being the responsible secretary, but by Frost and Johnson. Not really a big endorsement when an extra department is installed next to yours.

[Tamas]

Excellent brief summary of Johnson's time in power:

https://www.youtube.com/watch?v=pPkrmPIxK1Y

[Sheilbh]

Yes, and my impression is that she has achieved nothing in this new brief since taking over.

That's fair. No argument on that - the mood music was positive for a bit and then, my sense is, she made a decision that wrecked it.

But I don't think there'll be any movement with the EU under this government. There would be (a bit) with a Labour government and I think possibly there could be again if Truss (or Sunak) were to win the next election because they would be able to put their case to voters - at the minute I think they will be a little hemmed in by their majority being Johnson's. 

I would hope the EU does not do that. Cheap imports can be achieved by unilaterally removing trade barriers (or just not enforcing them like UK in Dover). Calling that trade policy is a bit far-fetched though. Normally trade policy is about opening other markets for your domestic businesses. Which is much harder. Not sure if she achieved much in that regard.

There's always a balance though. Another reason New Zealand is striking is because the UK and EU signed deals at roughly the same time - inevitably there was a "who did it better" takes.

Sam Lowe's summary was basically it depends. The UK-New Zealand deal went further in trade liberalisation. It also went much further on liberalisation of food tariffs - so the EU will phase out their tariff free quota to 10,000 tonnes of NZ beef which isn't much across the entire EU. It was explained by reference to the "particular sensitivity of the beef sector". By contrast the EU is completely phasing out tariffs which isn't great for British farmers but is probably better for consumers. My suspicion is the UK will make those trade offs more generally than the EU or US because, generally, I think the consumer interest is stronger than the producer interest. Also, perhaps, because the UK tended to push for that type of move at an EU level the EU will be less keen on that than when the UK was a member.

There's no better or worse - there are choices over which interest group you prioritise. What I think will be interesting is if trade policy becomes political in the UK now that it's back at the UK level and whether the parties start to develop different approaches/priorities. I've not seen much sign of it yet.

During her tenure, rollover deals with about 30 countries were signed, the biggest ones being Japan, EFTA and Canada. Fox had a similar amount done before, e.g. Switzerland. Australia or NZ were after she already moved on. Of course the most important trade agreement was not done by her despite being the responsible secretary, but by Frost and Johnson. Not really a big endorsement when an extra department is installed next to yours.

I think this is just a little unfair though. Fox did rollover deals for about 12% of the UK's international trade and said that it wasn't a numbers game and some might not get rolled over. Truss did about 50, which covered 93% of the UK's trade (including Fox's 12%). I think it's fair to say she did a better job and, as I say, the head of the People's Vote campaign had instead predicted that the UK was "years away" from signing any deals and would instead be "losing access to the EU's trade deals" which was a concern echoed by trade policy people - I'm not sure if that was a genuine risk but there was more to it than just photo ops, though as I say she absolutely milks it.

I'd also give her Australia and New Zealand because both were signed within weeks of her moving to FCDO and all the reporting was that the heavy lifting was done under Truss.

On leaving the EU - I'm not sure. I go back and forth on this. On the one hand the EU is not just a trading bloc so actually you need something that can draw in all the strands of what the EU touches when you're negotiating leaving - this goes to your point normally on foreign policy. It wouldn't work if it was just run by trade or the FCDO. On the other hand I think it's so central to May and Johnson's time as PM (or anyone's time as PM after the referendum) that I wonder if it would have just been better if it had always run from Downing Street.

In a way it's similar to the way we went into the EU. It was very much Heath's project, which was run from Downing Street and not really run by his Foreign or Trade Secretary (though obviously they had a role).

[Zanza]

No way she did anything close to 93% of British trade. Close to 50% was done by Frost after all and the UK has no FTA with US or China. Or maybe I did not understand your point? 

And yes, managing the relationship with the EU is significantly more complex than an FTA, so having some other organizational setup for that in the UK government made sense during the Brexit process and would makes sense now. E.g. Switzerland has a state secretary (level below a full minister) for that.

[Sheilbh]

No way she did anything close to 93% of British trade. Close to 50% was done by Frost after all and the UK has no FTA with US or China. Or maybe I did not understand your point? 

Sorry 93% of (non-EU) trade volume that needed rolling over which was within her remit and the priority.

And yes, managing the relationship with the EU is significantly more complex than an FTA, so having some other organizational setup for that in the UK government made sense during the Brexit process and would makes sense now. E.g. Switzerland has a state secretary (level below a full minister) for that.

The UK has a Minister of State (which is just below Secretary of State) for Europe which is mainly dealing with the EU - technically they're responsible for the TCA etc. We also had one when we were in the EU. At the minute because of Northern Ireland I don't think they're the key figure in the relationship - but I imagine that'd change once a deal's done and relationships normalise a bit.

At the minute I think it's probably too political for just a junior minister.

[Sheilbh]

Via Duncan Weldon - I think I'm still broadly in favour of handouts rather than price caps. But the context of everything for the rest of this year:


Separately I found ths Tweet pretty striking in the context of small businesses who are less protected. The choice here isn't passing on the cost to consumers but just shutting down (two very lovely local cafe bars near me have announced they're closing in recent weeks ):

James Allcock
@jrmallcock
my current energy bill for my tiny 22 cover restaurant is £2,928 a year. This is my new quote. Unsure what to actually do next but as a business that cost would now be more than I pay in rent and more than I take some months. I simply don't have the money for this.

[Josquius]

Heard from the local board game cafe they've done their sums and would need 90 customers paying to play games and have a drink a day.

On a good weekend they get 70 in a day. That many on a weekday evening just isn't physically possible with the space they have.

Sad times.

Meanwhile in Switzerland.... A lesson for us all. Can't find an article but... Some years ago there was a referendum heavily supported by big business to privatise energy somewhat. Small users would stay with the state whilst big users would be able to bid on the open market. It managed to pass and for a while the companies loved it, saving lots of money vs that darn inefficient state monopoly.
Now... They're begging to be allowed back on the state monopoly. It isn't fair.

[Richard Hakluyt]

I saw something similar for a largeish roadhouse pub; their bill was set to rise to around £100k.

These increases look near to the sort of profits I would expect such places to make. Unless the government comes up with something I think we can therefore expect a large proportion of hospitality businesses to close.

[Sheilbh]

I think it's a thing that hasn't sunk in to politics yet. This winter isn't going to be about helping the poorest or the most vulnerable - I think basically everyone but top rate taxpayers are likely to need support and a large number of businesses will too.

Separately I see that Rough has received regulatory approvals and sign-off so we should be able to start storing gas again soon - which will be good.

[celedhring]

My gym has started turning off the lights in everything that's not an exercise area or a dressing room. So far it's workable because there's still plenty of natural light, but people will start complaining later in the year.

Thing is that they were already in quite dire straits because of the pandemic, they nearly shut down back then. I don't think many small businessess are in a position to take yet another punch.

[Richard Hakluyt]

I think it's a thing that hasn't sunk in to politics yet. This winter isn't going to be about helping the poorest or the most vulnerable - I think basically everyone but top rate taxpayers are likely to need support and a large number of businesses will too.

I'm hoping that immensely clever civil servants and economic advisors are working on plans as we speak and will persuade Truss to adopt them once she becomes PM 

OTOH I'm wondering whether to buy some physical gold for the first time ever 

[Josquius]

They need to move fast if they're going to help businesses. Smart business owners don't wait until they are bankrupt if it's obvious they're unavoidably going to fail in a a few months.