Overseas students are a big earner for the UK, contributing over £20 billion each year to the UK economy. This is after deducting costs such as housing and health care. Over 100,000 overseas students have applied for places this year. This compares with 559,000 home-grown applicants. However, Brexit is going to put a giant crimp in the business. Universities are already starting to prepare, with many starting up subsidiaries in the EU.
Their fear is that overseas students will cross the UK off their post-Brexit list, due to complex visa requirements, a government set on reducing the numbers of overseas students, and the spectre of rising racism and xenophobia in the UK, exemplified by the "Go home!" snarled at a holidaying family from overseas.
"Excellent," cry the Brexit headbangers. "Send them all home! All these foreigners taking up British places at British universities. Let our own kids have a place!"
If only it were so simple (and if only they weren't so simple). Even if we ignore the economic boost to the local area from spending on food, transport, accommodation and entertainment; even if we ignore the benefits for our trade balance, even then it will be painful to lose them.
Overseas students pay full tuition fees. This means that they are subsidising home-grown students. In effect they are paying down our own students' debt. Furthermore, as they are so keen to come and are so profitable, universities are able to fill lecture theatres, provide an enormous variety of courses, and pay good salaries to attract top-flight academics - thereby attracting even more overseas students. A classic case of a 'virtuous circle'.
As a result, UK universities are among the best in the world. In this year's university rankings the top two worldwide are both British.
An exodus of foreign students will mean fees going up, courses closing, the flight of top-notch academics to richer institutions overseas. Admittedly, government ministers have a answer for the fees issue - forcing students to work in the fields over their summer holidays. The virtuous circle will become a vicious one.
Meanwhile the Chinese are drawing in thousands of students, offering funding, grants and low fees - and excellent teaching, in English as well as in Mandarin.
They understand that it isn't the students that matter, it is who they grow up to be. The UK universities see overseas students as cash cows, Mrs May brands them wannabe immigrants, but the Chinese see them as ambassadors, who will complete their studies and take up powerful positions back home, with fond memories of their time in academic China.
Britain used to boast of its 'soft power', the fact that many of the world's most powerful people were educated in the UK. With the turning inwards of recent years, with Brexit-fuelled xenophobia, with the tabloid-stoked fears over immigrants and refugees, we are now letting go of our privileged position even as we try to cash in on it.
Not that we have much to pawn. Those promised trade deals still haven't been signed, universities are becoming paper-sellers (a third of graduates being awarded a First Class degree?!) who simply want bums on seats (up to 84% of offers are now unconditional - who cares about A-level grades?), our Parliament is held up to mockery (deservedly so).
So we may as well put the cherry on top of Mr Johnson's cake and pull out of the one supra-national organisation where we still have an outsized influence.
This is certainly the time we should be thinking about where we should be going as a nation. Sadly, the Brexit boosters never did get around to that. So here we are.
Thursday, 31 January 2019
Sunday, 27 January 2019
Run, don't walk
The Dutch are negotiating with over 250 British-based companies, hoping to persuade them to relocate to the Netherlands.
The French are trying to tempt a fair chunk of our financial services industry to move to Paris - if the Irish or Germans don't get there first.
Dyson (pre-tax profits £100 million) is moving its headquarters to Singapore - it has already moved its manufacturing to Malaysia.
Burberry warn that Brexit without a trade deal will cost them "tens of millions" in WTO tariffs.
Our car manufacturers are running on short weeks and relocating their factories overseas.
The super-wealthy are already buying up London property, attracted by the low pound (fallen by a quarter against the dollar) and the weak housing market (house prices down by 20%). If we Brexit without a deal then UK assets would become even more attractive to the vulture capitalists as the pound falls further and the economy falters.
Union leaders are worried that Brexit will allow workers' rights to be taken away from them - the 'low-tax, low-regulation' vision of the free marketeers who support Brexit.
Is this what we were promised?
The French are trying to tempt a fair chunk of our financial services industry to move to Paris - if the Irish or Germans don't get there first.
Dyson (pre-tax profits £100 million) is moving its headquarters to Singapore - it has already moved its manufacturing to Malaysia.
Burberry warn that Brexit without a trade deal will cost them "tens of millions" in WTO tariffs.
Our car manufacturers are running on short weeks and relocating their factories overseas.
The super-wealthy are already buying up London property, attracted by the low pound (fallen by a quarter against the dollar) and the weak housing market (house prices down by 20%). If we Brexit without a deal then UK assets would become even more attractive to the vulture capitalists as the pound falls further and the economy falters.
Union leaders are worried that Brexit will allow workers' rights to be taken away from them - the 'low-tax, low-regulation' vision of the free marketeers who support Brexit.
Is this what we were promised?
A pragmatic Brexit
The EU is pragmatic and understands that the UK crashing out of the the union will be damaging to many of its members. This has been the bedrock of Brexiteer strategy - if we play tough then the EU will finally roll over.
Certainly, it seems to have done this before - look at Greece and its flouting of the economic rules, yet the EU still bailed them out. Well, if you do look carefully, you see that Greece had to completely capitulate to EU demands in order to be given the bail out - and the bail out was in the EU's wider interest, preventing a member from collapsing and quite likely dragging others down with it.
What about Germany and France breaking the EU fiscal rules they had insisted on themselves and escaping punishment. Instead of fining them, the rules and penalties were changed.
This is a good example of forward looking policy. If a big player who sets rules then breaks those rules it is time to look at retuning the rules and how they are enforced. Next time the rules are less likely to be broken.
What about the bespoke deals with non-EU members such as Switzerland and Norway, even the Ukraine (free movement of goods without free movement of people)?
If a country is going to join in the future then why not tempt it in with some special deals? Even your local TV shop does that.
In each of the above cases the pragmatism of the EU was clear.
With Brexit, however, we have a country leaving the EU. This time there are serious disadvantages to the EU if they sweeten the deal. This would make leaving more attractive for other members, and joining less advantageous for non-members. The swell of nationalism in Europe makes generosity even more dangerous. Being forward-looking the EU27 negotiators know they have to be intransigent.
It is important also to understand that the rest of the EU don't want us to leave. The reason they don't want the UK to leave is that Brexit will be bad for them economically. This is why they are willing to break-and-rewrite rules to allow us to stay in. This is why they are willing to offer a transitional period. This is why they are willing to renegotiate all the trading arrangements.
They are willing to do all this because they understand these things will benefit them. If we try to strong-arm them into expensive concessions then they will refuse, even if it means no deal. Hence, for example, their refusal to allow a leaky border in Ireland. We are one country, they need to keep 27 others together and encourage more joiners. If that means absorbing the costs of a chaotic Brexit then they will.
What a pity that our own politicians are not as forward looking as them. With only a few weeks to go we still can't agree on our plan for Brexit - forget dealing with the aftermath.
Mrs May's deal gives even the most rabid Brexiteers what they initially asked for. It would be up to them to keep the momentum going if they want to isolate us further. Trying to force us out without any deal by demanding everything now shows they understand that the country has turned against their vision.
It is now up to the many politicians who want the best for Britain - they need to get behind the deal.
Certainly, it seems to have done this before - look at Greece and its flouting of the economic rules, yet the EU still bailed them out. Well, if you do look carefully, you see that Greece had to completely capitulate to EU demands in order to be given the bail out - and the bail out was in the EU's wider interest, preventing a member from collapsing and quite likely dragging others down with it.
What about Germany and France breaking the EU fiscal rules they had insisted on themselves and escaping punishment. Instead of fining them, the rules and penalties were changed.
This is a good example of forward looking policy. If a big player who sets rules then breaks those rules it is time to look at retuning the rules and how they are enforced. Next time the rules are less likely to be broken.
What about the bespoke deals with non-EU members such as Switzerland and Norway, even the Ukraine (free movement of goods without free movement of people)?
If a country is going to join in the future then why not tempt it in with some special deals? Even your local TV shop does that.
In each of the above cases the pragmatism of the EU was clear.
With Brexit, however, we have a country leaving the EU. This time there are serious disadvantages to the EU if they sweeten the deal. This would make leaving more attractive for other members, and joining less advantageous for non-members. The swell of nationalism in Europe makes generosity even more dangerous. Being forward-looking the EU27 negotiators know they have to be intransigent.
It is important also to understand that the rest of the EU don't want us to leave. The reason they don't want the UK to leave is that Brexit will be bad for them economically. This is why they are willing to break-and-rewrite rules to allow us to stay in. This is why they are willing to offer a transitional period. This is why they are willing to renegotiate all the trading arrangements.
They are willing to do all this because they understand these things will benefit them. If we try to strong-arm them into expensive concessions then they will refuse, even if it means no deal. Hence, for example, their refusal to allow a leaky border in Ireland. We are one country, they need to keep 27 others together and encourage more joiners. If that means absorbing the costs of a chaotic Brexit then they will.
What a pity that our own politicians are not as forward looking as them. With only a few weeks to go we still can't agree on our plan for Brexit - forget dealing with the aftermath.
Mrs May's deal gives even the most rabid Brexiteers what they initially asked for. It would be up to them to keep the momentum going if they want to isolate us further. Trying to force us out without any deal by demanding everything now shows they understand that the country has turned against their vision.
It is now up to the many politicians who want the best for Britain - they need to get behind the deal.
Wednesday, 23 January 2019
Coping with change - who will weather Brexit best?
Ironically, Cambridge scientists have discovered that Remain supporters are better at coping with change than Leavers.
They tested 332 UK citizens by giving them a task where the rules changed while they were doing it. The researchers found that Remain voters showed the most flexibility. Leavers also came up as less creative than Remainers.
The scientists found that people with "tight, impermeable mental boundaries" dislike changing their minds when the facts change. Such people also tend to be socially conservative and ethnocentric.
Note that this has nothing to do with age, intelligence or education.
How ironic - Remainers will manage better when things really start to change.
Certainly it seems that leading Brextremists are worried about the consequences of what they have started. Some are putting in place their own personal backstop.
The latest is Mr Lawson, who chaired the Vote Leave campaign. He now lives in France and has applied for French residency.
Meanwhile Mr Farage has ensured his two daughters have German passports, though he says he isn't applying for one himself. This may be because he has applied for a job with Mr Trump.
What about Sir James Dyson, our top entrepreneur, worth nearly £10 billion, and a big supporter of a no-deal Brexit? He has just announced he is moving his HQ to Singapore, and is moving production of his electric car there too.
Do they know something that they aren't telling us?
They tested 332 UK citizens by giving them a task where the rules changed while they were doing it. The researchers found that Remain voters showed the most flexibility. Leavers also came up as less creative than Remainers.
The scientists found that people with "tight, impermeable mental boundaries" dislike changing their minds when the facts change. Such people also tend to be socially conservative and ethnocentric.
Note that this has nothing to do with age, intelligence or education.
How ironic - Remainers will manage better when things really start to change.
Certainly it seems that leading Brextremists are worried about the consequences of what they have started. Some are putting in place their own personal backstop.
The latest is Mr Lawson, who chaired the Vote Leave campaign. He now lives in France and has applied for French residency.
Meanwhile Mr Farage has ensured his two daughters have German passports, though he says he isn't applying for one himself. This may be because he has applied for a job with Mr Trump.
What about Sir James Dyson, our top entrepreneur, worth nearly £10 billion, and a big supporter of a no-deal Brexit? He has just announced he is moving his HQ to Singapore, and is moving production of his electric car there too.
Do they know something that they aren't telling us?
Sunday, 13 January 2019
Brexit was a vote about who we want to be
The Brexit referendum stirred deep passions. It wasn't a vote about the EU, it was a vote about the UK. It was a vote about who we are and who we want to be. It was about how we as a people want to face the world. Do we hide behind a fortified Trumpian wall, locked in looking out, or do we live as citizens of nowhere, all our doors left open and unguarded, with strangers wandering through at will? Or can we find a middle way?
The best predictors of how someone voted was their view on the death penalty and whether the voter had a degree. It was not about intellect or education, however, it was about where the voter stood on the scale between liberalism and authoritarianism.
Of course Brexit voters want to take back control, but it isn't about bendy bananas and EU regulations, it is about being able to punish criminals properly, including deporting them or imposing the death penalty. Brexit is about immigration, but it isn't about freedom of movement. Brexit voters don't care about freedom of movement, they simply want fewer immigrants, wherever they might come from.
They want sovereignty, blue passports and stronger borders, but they don't really care about the colour of their passports or better security, they simply want a clear and meaningful symbol of British separation from the rest of the world and evidence of the separation being enforced.
Brexit supporters may have marginally won the vote, but they won't get what they actually want - it was never on offer, and in our current society cannot be delivered. Only 17 million people voted for Brexit out of a population of 67 million. This is too small a minority to take back control of what Britain stands for. We are multi-cultural and have been for decades, we lead in many international organisations and have done so for over a century.
Mrs May made the control of immigration her main goal as Home Secretary - and failed. Her 'hostile environment' policy has been reversed due to public pressure. The government itself admits that immigration may even go up after Brexit because that is how Britain has remained near the top of the economic tree. Freedom of movement allowed people to cross borders without a passport, but we always checked passports, we always had the option to send people back. Brexit's implication for immigration is simply that we won't be able to return refugees to the EU, we will have to send them directly to their origin country - if we can.
We will still be subject to the European Court of Human Rights even after a hard Brexit. The ECHR is not part of the EU, it was created before the EU existed. so leaving the EU does not mean we leave the ECHR.
Brexit, of whatever flavour, may only achieve one lasting thing - isolating the UK from our current community of European nations.
It makes sense then to pick a Brexit that will harm us the least. The stock market has already fallen to its lowest point since the financial crisis. Jaguar workers are on a three-day week. Mr Trump's trade war with China has hit £2 billion worth of UK exports, with a further £2 billion at risk. Brexit hasn't even happened yet.
Many of the Brextremist politicians are now shying away from a hard Brexit and are backing Mrs May's deal. It may be a poor one, but it is the best we can do. That or rescind Article 50 and plan our future properly.
The best predictors of how someone voted was their view on the death penalty and whether the voter had a degree. It was not about intellect or education, however, it was about where the voter stood on the scale between liberalism and authoritarianism.
Of course Brexit voters want to take back control, but it isn't about bendy bananas and EU regulations, it is about being able to punish criminals properly, including deporting them or imposing the death penalty. Brexit is about immigration, but it isn't about freedom of movement. Brexit voters don't care about freedom of movement, they simply want fewer immigrants, wherever they might come from.
They want sovereignty, blue passports and stronger borders, but they don't really care about the colour of their passports or better security, they simply want a clear and meaningful symbol of British separation from the rest of the world and evidence of the separation being enforced.
Brexit supporters may have marginally won the vote, but they won't get what they actually want - it was never on offer, and in our current society cannot be delivered. Only 17 million people voted for Brexit out of a population of 67 million. This is too small a minority to take back control of what Britain stands for. We are multi-cultural and have been for decades, we lead in many international organisations and have done so for over a century.
Mrs May made the control of immigration her main goal as Home Secretary - and failed. Her 'hostile environment' policy has been reversed due to public pressure. The government itself admits that immigration may even go up after Brexit because that is how Britain has remained near the top of the economic tree. Freedom of movement allowed people to cross borders without a passport, but we always checked passports, we always had the option to send people back. Brexit's implication for immigration is simply that we won't be able to return refugees to the EU, we will have to send them directly to their origin country - if we can.
We will still be subject to the European Court of Human Rights even after a hard Brexit. The ECHR is not part of the EU, it was created before the EU existed. so leaving the EU does not mean we leave the ECHR.
Brexit, of whatever flavour, may only achieve one lasting thing - isolating the UK from our current community of European nations.
It makes sense then to pick a Brexit that will harm us the least. The stock market has already fallen to its lowest point since the financial crisis. Jaguar workers are on a three-day week. Mr Trump's trade war with China has hit £2 billion worth of UK exports, with a further £2 billion at risk. Brexit hasn't even happened yet.
Many of the Brextremist politicians are now shying away from a hard Brexit and are backing Mrs May's deal. It may be a poor one, but it is the best we can do. That or rescind Article 50 and plan our future properly.
Monday, 7 January 2019
Hedge funds banking on Brexit
Some of the biggest backers of Leave were the managers of multi-billion pound hedge funds, such as Sir Paul Marshall and Sir Michael Hintze. Why should they be so keen to cut our links with Europe?
Leaving the EU will mean losing financial 'passporting'. These allow financial services to be freely traded across borders. Brexit means losing these rights, so surely fund managers should have supported Remain just like banks did?
Fund managers are clear that leaving will put the UK in a very difficult economic position, unlike many high-profile Brexit supporters. We face losing our friction-free trade with Europe (around 50% of our exports go there) without yet having any compensating trade deals sorted out elsewhere.
Of course, our Brexit secretary, Mr Barclay at time of writing, promises that we will soon strike those trade deals, and even if things are not as simple as Mr Davis made out when he had first go at the job we will certainly recover a lot of lost ground over time.
So, essentially, we will have period where UK businesses will struggle as they are cut off from their markets and quite a number will go under. This will mean their creditors selling up them and their assets at fire sale prices. Given that they are sound businesses, once other trade deals are made they should build their value back up soon enough. Whoever snaps them up when they are cheap stands to make a pretty penny.
Coincidentally, that is what hedge funds do.
Surely the leaders of our financial industry wouldn't mess with the British economy just to make a few more billion quid?
Ever heard of Libor?
Leaving the EU will mean losing financial 'passporting'. These allow financial services to be freely traded across borders. Brexit means losing these rights, so surely fund managers should have supported Remain just like banks did?
Fund managers are clear that leaving will put the UK in a very difficult economic position, unlike many high-profile Brexit supporters. We face losing our friction-free trade with Europe (around 50% of our exports go there) without yet having any compensating trade deals sorted out elsewhere.
Of course, our Brexit secretary, Mr Barclay at time of writing, promises that we will soon strike those trade deals, and even if things are not as simple as Mr Davis made out when he had first go at the job we will certainly recover a lot of lost ground over time.
So, essentially, we will have period where UK businesses will struggle as they are cut off from their markets and quite a number will go under. This will mean their creditors selling up them and their assets at fire sale prices. Given that they are sound businesses, once other trade deals are made they should build their value back up soon enough. Whoever snaps them up when they are cheap stands to make a pretty penny.
Coincidentally, that is what hedge funds do.
Surely the leaders of our financial industry wouldn't mess with the British economy just to make a few more billion quid?
Ever heard of Libor?
Saturday, 5 January 2019
Breaking our (supply) chains
UK business investment is grim. It is only 5% up on pre-financial crisis levels, while we would expect to see an increase of over 30% at this stage.
Two-thirds of EU businesses with UK suppliers are going to drop them and change to EU suppliers due to Brexit. 40% of UK businesses will replace their EU suppliers with UK ones. It isn't just tariffs that are the problem - it is also VAT. After Brexit, UK businesses will have to pay VAT on EU imports up front, with enormous cash flow implications. Many UK businesses expect to terminate any EU sales operation they have, in order to avoid the red tape that soon will be involved.
The UK car industry isn't doing so well either. This year's 12% drop in UK car sales has hit UK manufacturers hardest, with production down 14%. Post-Brexit they may have even bigger worries. A hard Brexit will mean high tariffs, but the industry relies on complex supply chains where components are moved between continental Europe and the UK numerous times. If we don't have a trade agreement then at each crossing they will have a levy imposed of up to 10%. This would make production in Britain uneconomic.
Even imported cars will suffer. Imported German vehicles will have a 10% tariff imposed under WTO rules. We buy a million of them a year. Post-Brexit prices will be around £1,500 higher while choice will be reduced as overseas makers don't bother to certify their vehicles in the UK.
Overseas investment in the UK is still strong, with the 10% drop in sterling making every rouble or dollar go further. Already 200 UK businesses have been bought out by foreign investors. However the rise in overseas investment in the rest of Europe was double that in the UK (14% up compared to 7%), and investor sentiments are changing as they see Britain becoming less attractive on a series of fronts including education, infrastructure, skills, political stability, and - of course - access to the EU.
Our own research and development spending is also low compared to the EU average - successful countries such as Germany spend almost 3% of GDP on R&D. We spend half that.
R&D investment correlates strongly with productivity growth, so it is no surprise that the UK has poor productivity. Even worse, if we are going to be relying on exports then we need to be making stuff people want to buy at prices they can afford, and we need access to their markets.
The transition deal is vital, but industry needs to look beyond it, readying itself for the final divorce and the hard times ahead.
Two-thirds of EU businesses with UK suppliers are going to drop them and change to EU suppliers due to Brexit. 40% of UK businesses will replace their EU suppliers with UK ones. It isn't just tariffs that are the problem - it is also VAT. After Brexit, UK businesses will have to pay VAT on EU imports up front, with enormous cash flow implications. Many UK businesses expect to terminate any EU sales operation they have, in order to avoid the red tape that soon will be involved.
The UK car industry isn't doing so well either. This year's 12% drop in UK car sales has hit UK manufacturers hardest, with production down 14%. Post-Brexit they may have even bigger worries. A hard Brexit will mean high tariffs, but the industry relies on complex supply chains where components are moved between continental Europe and the UK numerous times. If we don't have a trade agreement then at each crossing they will have a levy imposed of up to 10%. This would make production in Britain uneconomic.
Even imported cars will suffer. Imported German vehicles will have a 10% tariff imposed under WTO rules. We buy a million of them a year. Post-Brexit prices will be around £1,500 higher while choice will be reduced as overseas makers don't bother to certify their vehicles in the UK.
Overseas investment in the UK is still strong, with the 10% drop in sterling making every rouble or dollar go further. Already 200 UK businesses have been bought out by foreign investors. However the rise in overseas investment in the rest of Europe was double that in the UK (14% up compared to 7%), and investor sentiments are changing as they see Britain becoming less attractive on a series of fronts including education, infrastructure, skills, political stability, and - of course - access to the EU.
Our own research and development spending is also low compared to the EU average - successful countries such as Germany spend almost 3% of GDP on R&D. We spend half that.
R&D investment correlates strongly with productivity growth, so it is no surprise that the UK has poor productivity. Even worse, if we are going to be relying on exports then we need to be making stuff people want to buy at prices they can afford, and we need access to their markets.
The transition deal is vital, but industry needs to look beyond it, readying itself for the final divorce and the hard times ahead.
Friday, 4 January 2019
The Cod Wars and sovereignty
The Cod Wars were 'fought' between the UK and Iceland over fishing rights in the North Atlantic. Iceland won every time. We lost access to prime fishing areas and thousands of fishermen lost their livelihood.
Why did we lose? We are much bigger than Iceland in every way - our GDP, our population, our armed forces.
We lost because all wars are about alliances. In this case Iceland threatened to withdraw from NATO if we didn't concede to their demands. This would have prevented NATO access to a critical submarine route. The other members of NATO decided that would be worse than some British job losses, and we had to concede to Iceland's demands.
Gibraltar
Another case to consider is what happened the last time things became strained over Gibraltar. In 2013 Spain imposed very strict border controls, causing a lot of problems for Gibraltar residents (many of whom work in Spain). We asked the European Commission to arbitrate, and threatened to go to the European Court of Justice. This time it was the Spanish who capitulated.
Brexit has given Spain the opportunity to try again. Once we are not part of the EU then any dispute over Gibraltar has to be settled by Spain and ourselves. It may end up being settled using political force with a dressing of armed force ("to show we mean business" as one politician put it). We may well lose this time, as Spain has the EU and we will have no-one.
Sovereignty
The point of both these cases is that the nations concerned gave up sovereignty.
In the first case our membership of an international organisation meant we had to take an economic hit for the good of the whole group. If we had not been part of NATO then Iceland could not have used the threat of withdrawal.
In the second case our membership of an international organisation meant we could go to arbitration over a dispute with another member. However, to do this we had to agree to abide by the decision whether we liked it or not - we had to give up sovereignty.
Giving up sovereignty has both costs and benefits. Our withdrawal from the EU has the benefit of letting us make our own trade deals, however this is at the cost of losing the deals we already have, losing the backing of the EU in trade and border disputes and losing the their expertise in making trade deals.
WTO rules
Ironically, the core Brexiteer trade strategy is for the UK to trade on WTO rules. This is an international organisation, to join them you have to agree to follow their rules. So right from the start we are giving up our sovereignty over trade to another group.
Worse, the WTO is in crisis. The US under Mr Trump is doing its best to emasculate the organisation by preventing it from doing its basic job - sorting out arguments. The WTO has a panel of judges who rule on trade disputes. A number of the judges are retiring, but the US trade representative has prevented any new judges being appointed to this panel.
Right now there are only three judges left - the minimum required for a panel. Two of the judges will be stepping down this year. If the US continues to block new appointments then the WTO will be unable to arbitrate in disputes - meaning that "WTO rules" will become "WTO suggestions". Rules which are not enforced are no longer rules.
So we are abandoning the biggest trade bloc on Earth, our biggest trading partner, with not a single trade agreement in place, just when the two most powerful countries in the world are gearing up for a trade war - and we hope to rely on WTO rules which can't be enforced.
This isn't what we were promised by the Leave campaign.
Why did we lose? We are much bigger than Iceland in every way - our GDP, our population, our armed forces.
We lost because all wars are about alliances. In this case Iceland threatened to withdraw from NATO if we didn't concede to their demands. This would have prevented NATO access to a critical submarine route. The other members of NATO decided that would be worse than some British job losses, and we had to concede to Iceland's demands.
Gibraltar
Another case to consider is what happened the last time things became strained over Gibraltar. In 2013 Spain imposed very strict border controls, causing a lot of problems for Gibraltar residents (many of whom work in Spain). We asked the European Commission to arbitrate, and threatened to go to the European Court of Justice. This time it was the Spanish who capitulated.
Brexit has given Spain the opportunity to try again. Once we are not part of the EU then any dispute over Gibraltar has to be settled by Spain and ourselves. It may end up being settled using political force with a dressing of armed force ("to show we mean business" as one politician put it). We may well lose this time, as Spain has the EU and we will have no-one.
The point of both these cases is that the nations concerned gave up sovereignty.
In the first case our membership of an international organisation meant we had to take an economic hit for the good of the whole group. If we had not been part of NATO then Iceland could not have used the threat of withdrawal.
In the second case our membership of an international organisation meant we could go to arbitration over a dispute with another member. However, to do this we had to agree to abide by the decision whether we liked it or not - we had to give up sovereignty.
Giving up sovereignty has both costs and benefits. Our withdrawal from the EU has the benefit of letting us make our own trade deals, however this is at the cost of losing the deals we already have, losing the backing of the EU in trade and border disputes and losing the their expertise in making trade deals.
WTO rules
Ironically, the core Brexiteer trade strategy is for the UK to trade on WTO rules. This is an international organisation, to join them you have to agree to follow their rules. So right from the start we are giving up our sovereignty over trade to another group.
Worse, the WTO is in crisis. The US under Mr Trump is doing its best to emasculate the organisation by preventing it from doing its basic job - sorting out arguments. The WTO has a panel of judges who rule on trade disputes. A number of the judges are retiring, but the US trade representative has prevented any new judges being appointed to this panel.
Right now there are only three judges left - the minimum required for a panel. Two of the judges will be stepping down this year. If the US continues to block new appointments then the WTO will be unable to arbitrate in disputes - meaning that "WTO rules" will become "WTO suggestions". Rules which are not enforced are no longer rules.
So we are abandoning the biggest trade bloc on Earth, our biggest trading partner, with not a single trade agreement in place, just when the two most powerful countries in the world are gearing up for a trade war - and we hope to rely on WTO rules which can't be enforced.
This isn't what we were promised by the Leave campaign.
Tuesday, 1 January 2019
Picking up the pieces
Mr Eisman is known as 'the big short'. He has made millions from betting that company values will go down. Right now he is gearing up for Brexit. He has already bet against the UK banks, no matter the flavour of Brexit, but he is waiting to see if we end up with a hard Brexit. If we do, "the UK stock market's gonna go down."
He says, "You could short anything in the UK at that point. It wouldn't matter. Just throw a dart at it - short it."
Ms Desmond, the chief investment officer at Mondrian Investment Partners' UK operation, manages investments of $60 billion. She has warned that the multimillionaires backing Brexit are all ready to cash in. They made their money in hedge funds and see Brexit as a great opportunity.
As Ms Desmond pointed out, they won't "stick around if things get difficult", and in fact if there is no deal they "will be eagerly waiting out the disaster on the sidelines with their vulture funds ready to pick up the pieces."
Certainly, a hedge fund should be looking after its clients' interests. When Britain hits the rough patch post-Brexit that everyone - Brexiteers included - has predicted, the fund managers have a responsibility to move investment elsewhere, or as Ms Desmond puts it: "the investment management firms will flee."
With big investors pulling out, industry will hit the skids. After the shake out there will plenty of bargains for the funds to snap up.
Not only that, but foreign investors are gearing up to sue us for millions of pounds in lost profits. If we leave the EU single market then they will have the right to sue the UK government for damages.
We have 95 bilateral investment treaties with other countries. These protect investors, promising "fair and equitable" treatment. Case law indicates that a substantial change in the regulatory regime is unfair treatment. Usually this arises in developing countries, where such changes are more common, but when Spain reduced certain subsidies in 2013 investors sued - two British companies have already been awarded over £100 million. Argentia had to pay investors $1.35 billion in a similar situation.
We still have the chance to avoid all this. Mr Eisman's only concern is that Mrs May might get her deal accepted, saying that the stock market would go up and he would have to pay up on the bets he made against UK banks. A managed Brexit will be painful, but not nearly as damaging as no deal.
Already a number of leading Brexiteers have realised this and now support Mrs May's deal. Let us hope the headbangers won't put a spanner in the works.
He says, "You could short anything in the UK at that point. It wouldn't matter. Just throw a dart at it - short it."
Ms Desmond, the chief investment officer at Mondrian Investment Partners' UK operation, manages investments of $60 billion. She has warned that the multimillionaires backing Brexit are all ready to cash in. They made their money in hedge funds and see Brexit as a great opportunity.
As Ms Desmond pointed out, they won't "stick around if things get difficult", and in fact if there is no deal they "will be eagerly waiting out the disaster on the sidelines with their vulture funds ready to pick up the pieces."
Certainly, a hedge fund should be looking after its clients' interests. When Britain hits the rough patch post-Brexit that everyone - Brexiteers included - has predicted, the fund managers have a responsibility to move investment elsewhere, or as Ms Desmond puts it: "the investment management firms will flee."
With big investors pulling out, industry will hit the skids. After the shake out there will plenty of bargains for the funds to snap up.
Not only that, but foreign investors are gearing up to sue us for millions of pounds in lost profits. If we leave the EU single market then they will have the right to sue the UK government for damages.
We have 95 bilateral investment treaties with other countries. These protect investors, promising "fair and equitable" treatment. Case law indicates that a substantial change in the regulatory regime is unfair treatment. Usually this arises in developing countries, where such changes are more common, but when Spain reduced certain subsidies in 2013 investors sued - two British companies have already been awarded over £100 million. Argentia had to pay investors $1.35 billion in a similar situation.
We still have the chance to avoid all this. Mr Eisman's only concern is that Mrs May might get her deal accepted, saying that the stock market would go up and he would have to pay up on the bets he made against UK banks. A managed Brexit will be painful, but not nearly as damaging as no deal.
Already a number of leading Brexiteers have realised this and now support Mrs May's deal. Let us hope the headbangers won't put a spanner in the works.
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