Wednesday, January 31, 2018

Britain will suffer after Brexit govt report says - but doubters remain

Brexit is less than 14 months away and yet still no post-Brexit transitional arrangement or EU-UK trade deal is even under discussion, let alone agreed.

And hardly a day goes by when another negative headline emerges concerning Britain's post-Brexit future.

Yet the government and the right-wing press continue to claim that Britain will prosper after it leaves the EU.

Bleak outlook

This week a leaked report suggested that any sort of Brexit, hard or soft, would result in an economic hit ranging from a loss of 1 to 8% of GDP.

However, both the Tory party and the pro-Brexit press dismissed the report claiming that it was unfinished.

The paper, entitled EU Exit Analysis — Cross Whitehall Briefing and dated January 2018, looked at three of the most plausible Brexit scenarios. It was obtained by the online news and entertainment company BuzzFeed. The analysis suggests a "no deal" scenario, under which Britain reverts to World Trade Organization rules, would reduce UK economic growth by 8 percentage points over the next 15 years compared with current forecasts.

But even a so-called soft Brexit would result in a lower growth by 2 percentage points.

According to the leaked government analysis Britain will be left worse off under all economic scenarios after Brexit, with financial services, manufacturing and retailing among the industries worst hit [BBC / FT].

However, many more sectors are likely to be hit by Brexit.

Agricultural concerns

Given that farming is a long-term business and its viability is currently governed by the EU's international trade arrangements, UK farmers face much financial risks and uncertainty.

One example of the difficulties ahead concerns the threat to the UK organic cheese Kingdom Cheddar, which is currently exported to the US.

Kingdom is made from organic milk produced by the 265 UK dairy farmers in the Organic Milk Suppliers Co-operative (OMSCo).

In 2015, under US-EU trade arrangements, OMSCo qualified to export its premium organic cheese to the US. It took OMSCo eight years to develop the Kingdom band, it's dairy farmer members having a substantially altered of their farming practices to meet US standards (including using fewer antibiotics and improving animal welfare).

The arrangement of that allows Kingdom to be sold in the US, however, is between the EU and the US. OMSCo pointed out last October that unless an "equivalence" agreement on organic farming standards was signed between the UK and the US by the end of 2017 it would stop production of Kingdom at the end of December.

"We cannot take the risk of producing a niche market product that, given its 18-month a production cycle may not be able to be sold after brexit," OMSCo Chairman Nicholas sapphire said.

There has been no official announcement either from OMSCo or Kingdom Cheese as to whether they have indeed stopped production. Nonetheless the uncertainty remains.

Bleating about Brexit

OMSCo is unique in the UK in exporting a high-volume premium organic cheese to the US; but given agriculture's long production cycle, all UK food exports face the same risk as disruption as the clock ticks down.

And there are concerns in other quarters such as the meat industry.

Last autumn, for instance, UK sheep farmers had to make the difficult decision about whether to retain millions of ewe lambs for breeding or send them for slaughter as fat lambs.

If kept for breeding, most will not be put to the ram until autumn 2018 and so won't give birth to their first lambs until spring 2019 - just as Britain leaves the EU.

About 40% of all UK lamb production is currently exported to the EU so, unless Britain keeps access to the single market, those exports will face an EU sheep meat tariff of £2,689 a tonne. The price UK farmers receive for their animals will collapse

The risks are similar for cattle farmers, with the production cycle of beef animals even longer than that for lamb; and the same applies to arable crops being shown across the UK this autumn. Kept in store many will not be marketed until after the UK leaves the EU.

No one knows yet what individual farmers will decide to do to minimise the risks as Brexit approaches, but one thing seems sure: the UK's food trade deficit will keep growing. It rose by £800m in the three months to July 2017 and now stands at a staggering £34.7bn for the full year.

Dreams and unicorns

Many voters for Brexit continue to talk of sunny uplands following Britain's departure from the EU.

But there has been little if any good news since the referendum. Indeed the very opposite is true.

Almost immediately after the Brexit vote China stocks fell over 1% [Reuters] and the pound plunged to a 31 year low [Independent / Independent ]

Just a day or so later banks began to move some operations out of Britain [FT] as more than $2 trillion was wiped off markets and Moody lowered the UK credit rating [Guardian].

Soon after the S&P slashed the UK's growth forecast [FT].

At the time such predictions were again dismissed by Brexiters. But UK growth is now at its lowest rate in 4 years.

Slowing growth & rising inflation

UK economic growth is now expected to slow even more in the next few months with high inflation, weak consumer confidence and Brexit further discouraging consumer spending [Guardian].

There has been no recession but only a month after the referendum the Bank of England warned that Brexit risks had begun to crystallise [BBC]. Indeed it was only the BoE governor Mark Carney's interventions that mitigated what might otherwise have been a disaster.

But industry has become increasingly worried with many holding back on investment.

In July 2016 Standard Life suspended trading in UK property funds [BBC], Sainsbury's announced the closure of its Netto stores [BBC] and Siemens put its UK wind power plans on hold in response to Brexit [Renewable Energy Magazine].

As the pound continued to stumble prices began to rise and manufacturing slowed.

Dell increased prices [Register] while UK manufacturing as a whole fell sharply [FT].

But in August the BCC cut the UK growth forecast even further [BBC] as the Brexit secretary David Davis suggested that the UK might crash out of the EU without a deal [Guardian].

There was no good news in September either as the OECD halved the UK growth forecast due to EU referendum vote saying that it expected a 1% GDP growth in 2017, down from the 2% forecast it made in June 2016 [Independent]. 

The figure was slightly up on these forecast but were hardly anything to celebrate.

In January 2018 it was reported that the UK was estimated to have grown by 1.8% in 2017, down from 2016's 1.9% rate and the weakest expansion since 2012 [Independent].

Relocations and job losses

As September ended the London Stock Exchange warned that 100,000 jobs in the city were at risk [Guardian]. But of course such predictions were once again dismissed by Brexiters as more 'project fear'.

And while there was no sign of a mass exodus there were signs that some businesses were rethinking their future. MG ended production in the UK and moved to China [BBC] whilst other firms ceased production altogether [BBC].

By the end of the year there was no Christmas cheer. S&P had predicted a hard Brexit and handed out a fresh downgrade for the UK [Guardian].

The Chancellor meanwhile announced that Brexit would blow a £59 billion hole in public finances [Guardian]. And as he gave this grim news news figures emerged which showed that UK manufacturing was slowing [BBC].

Price hikes

Champagne may well have popped as Britain entered 2017 but while fireworks soared into the sky so did the price of everyday commodities on supermarket shelves [Guardian]. Other manufacturers made other changes to keep prices the same, such as Toblorone which became more gappy [Guardian].

The slow exodus continued into the new year as HSBC and UBS each announced the shift of 1,000 jobs from UK in another Brexit blow to London [Reuters].

Meanwhile UK inflation rose to its highest level since June 2014 [BBC] and there were predictions it could rise to 3% by mid 2017 [FXS].

Again such predictions were dismissed by many in the Brexit camp, though as the year came to an end inflation had hit 3.1%.

Manufacturing slows

Month by month UK manufacturing figures showed declines, companies announced profit losses - due to a weaker sterling, and inflation continued to rise.

In September 2017 UK output once again fell [Reuters].

Companies weren't the only ones beginning to relocate. Seasonal workers from Europe were in short supply in 2017 and food was reportedly rotting in fields with fewer workers to pick them [Guardian]. There were also shortfalls in hospitals as the NHS saw a 96% drop in EU nurses registering to work in Britain since the vote [Guardian].

Reports later in the year pointed to Goldman Sachs setting up two hubs in Europe post Brexit [Reuters].

That was not the only loss to the UK as London then lost two EU agencies to Paris and Amsterdam in another Brexit relocation [Guardian]. 

Again there were few early Christmas presents as late November only brought more bad news with the announcement that Britain was now the 6th largest economy, falling one place behind France [CNN].

Perhaps it was hardly surprising as UK car sales in October showing a seven month decline in October [Reuters] and with Ford's Europe president suggesting the firm could relocate post-Brexit [Verdict].

Indeed the UK economy had gone from top of the G7 leaderboard to almost bottom since the Brexit vote. "We have not done as well in the short term as we would have done if the vote had gone the other way,' Mark Carney said in November 2017 [Independent]

Heading for a fall

And with projections not looking good for 2019 and further downgrades, Britain looks certain to head off a cliff [Independent].  

Whatever type of Brexit is decided upon Britain is heading towards a cliff edge. The only question is how high the cliff is.

As many Remainers persistently maintain there is only one good Brexit, and that is no Brexit. But halting the juggernaut as it careers towards the cliff is easier said than done.

As the hard reality sets in post-Brexit it may be too late to have buyers remorse. Britain may well have burned too many bridges to rejoin the EU and may well find itself out in the cold when it comes to world trade.


tvnewswatch, London, UK  

Tuesday, November 28, 2017

Brexit makes Christmas at least 20% dearer

There are many Brexiters who will insist that there has been no discernible effect on Britain's economy because of the EU referendum vote. It is true to say the Brexit effect has been a slow burn. But nonetheless there have definitely been repercussions. And the repercussions are manifesting themselves with higher shopping bills.

Weak pound & fewer migrant workers

The pound has barely lifted after its dramatic drop the day after the referendum and remains more than 13% down from its pre-Brexit levels.

While there hasn't been a mass exodus from the City or from Britain's ailing manufacturing industry [Reuters] there have been some departures and concerns raised by others  [Verdict]. And while some firms talk of leaving, many migrant workers are failing to turn up in the numbers seen before the EU referendum.

There were many Leave voters driven by the issue of immigration. However the situation that has resulted from the vote brings one's mind to focus on that age old adage 'be careful what you wish for'.

An exodus of many EU migrants and a drop in numbers coming to Britain to work has resulted in shortfalls in the NHS and also in Britain's farms where there are reports that vegetables are now rotting in the fields.

Farmers & NHS see shortfall in workers

In June this year it was reported that there had been a 96% drop in EU nurses registering to work in Britain since the Brexit vote. Official figures showed only 46 nurses came to work in the UK in April, down from 1,304 in July the previous year [Guardian / BBC].

The effect in the NHS has yet to be seen. But a fall in the number of migrant workers in the farming industry is already having a marked effect. One survey conducted for the National Farmers' Union revealed that there was a 29% shortfall in seasonal workers for horticulture businesses in September 2017, raising the average shortfall for the year to 11%.

The survey also showed that the number of returning workers to farms, a critical source of the workforce, fell to 16%, its lowest level all year. The returnee rate had been as high as 65% in January.

"The perception from overseas is we are xenophobic, we're racist, and the pound has plummeted too. We've gone with Brexit and that makes us look unfriendly," says John Hardman, director of Hops Labour Solutions, which supplies about 12,000 workers a year to food-growers, those numbers are dropping fast [FT / EDP24 / Farming UK / Guardian].

Moulding fruit & rotting vegetables

And as the numbers of workers drop, so the yield from British farms drops too. And there are reportedly already shortages of main staples in the shops.

According to some reports there are already shortages of traditional festive items such as parsnips, Brussels sprouts and even potatoes [Daily Star].

Last year some papers joked over the price of chocolate coins that are often bought as stocking fillers [Mirror / Coventry Telegraph].

However a year on the low value in sterling and a decline in seasonal workers within the agricultural industry has brought less amusing anecdotes.

Inflation & prices rising

Inflation is now running at 3% and shoppers are beginning to notice. Official figures show prices were up by 4.2% in October compared to a the previous year [Guardian].

But this is far from a true picture. In fact some products have increased by around 30% with butter having increased some 40% [Guardian].

A comparison of prices on a selection of products at a Sainsbury's supermarket over the course of a year is just one small indicator as to how much prices have risen.

President butter has increased from £1.50 to £2.00, a 30% increase since October 2016. Meanwhile, fish has significantly increased in price. Even home produced Scottish salmon has jumped from around £3.50 to £4.50 for a 2 fillet pack. That's a 28% hike.

Other big price jumps have been seen in breakfast cereals. A 600g pack of Cheerios has risen from £2.95 to £3.50, an 18% price increase. Meanwhile a jar of Sainsbury's own brand olives £0.85 in October 2016, is now £1.00, a 17.6% increase. A pack of tagliatelle has only edged up from £0.75 to £0.85, but is still a 13% increase. Broccoli was £1.10 in October 2016 and is now £1.30 a kilo, an 18% increase.

Some increases have been less dramatic. For example Andrex 16 pack toilet rolls were £6.00 in 2016 and are now £6.50, an 8% increase.

Main staples have either remained the same or only risen slightly. Eggs have increased with a 15 pack edging up some 2.5% from £2 to £2.05. Meanwhile a 2.272 litre bottle of milk is still a pound as is a 500g carton of Sainsbury's own brand Greek style yoghurt.

Family shop £1,000 more per year

But overall, prices have risen between 10% and 30%. A few pennies here and there may not be immediately noticeable. However, for weekly shops that were once £100 consumers are now spending anywhere between £440 and £520 a month. Over the course of a year that could equate to between £480 and £1,440 extra being spent by families just on shopping.

For more well off families the cut backs will simply be less bottles of wine and chocolate treats. But for those already struggling the fall in Sterling is going to bite, and bite hard.

This is only the beginning as many retailers have held back on passing on costs to consumers. Brexit, and particularly a hard Brexit, will bite very hard indeed in the months to come.

Perhaps the only advice is to stock up on the non-perishables whenever there's a good offer.

A bleak Christmas & a bleaker new year

But even good offers have failed to excite consumers. This year's Black Friday was still a bonanza for retailers, but early indications appeared to show consumers were far more savvy. Online retailers also did better than the traditional high street stores [BBC / Bloomberg].

As purse strings tighten more and more people will begin to question the so-called bargains they are being offered [Independent].

Christmas 2017 is certain to be at least 20-30% more expensive. The annual yuletide food survey by Good Housekeeping magazine found that the cost of the cheapest set-piece meal on Christmas Day – for 8 people and including 11 ingredients from turkey to fresh vegetables and cranberry sauce – had risen from £19.82 to £23.53, or from £2.48 a head to £2.94.

The Good Housekeeping basket comprises of a whole turkey weighing at least 3.5kg, at least 880g each of potatoes, sprouts, carrots and parsnips; stuffing mix; a jar of cranberry sauce; at least 900g of Christmas pudding, Christmas cake, at least eight mince pies and a jar of brandy butter [Guardian].

There might be some savings to be made by hitting Lidl or Aldi over Sainsbury, Waitrose or M&S, but even the budget stores have increased their prices.

This week the Brexit secretary David Davis finally handed over heavily redacted Brexit assessment papers to the select committee which drew ire and condemnation from MPs who suggest the government was attempting to cover up the impending disaster that is to come with Brexit [Guardian / BBC].

However, one does not need to see the impact assessments to get a indication of how disastrous Brexit will be. One only needs to check one's shopping receipts.

tvnewswatch, London, UK

Wednesday, November 22, 2017

The pros & cons of the electric vehicle's future

Pictured: A Renault Twizy, a Renault Zoe and a UK charging point

The war on petrol and diesel cars has been simmering for some time. Diesel vehicles in particular have been singled out with some cities around the world restricting their use.

But whilst few would argue that vehicles running on petrol or diesel are polluting, the electric vehicle alternative has yet to tick all the boxes as far as those wanting to buy a new car.

The biggest issue for many is the range of the vehicle and the perceived inconvenience of charging up their vehicle. Technology is certainly improving and some electric vehicles, or EVs, can cover more than 400 km. But there are still many drawbacks. 

Drawbacks & cost

The first major issue for many people is one of initial cost. There are very few second hand electric vehicles on the market and thus the only real option is to buy new.

The Renault Twizy [pictured above] is probably not what most people envisage themselves driving in. While it is certainly nicely designed it only has capacity to carry two people, and the passenger will find themselves rather squashed behind the driver. The vehicle has a range of 100 km though this can drop to around half in some conditions. With a top speed of 80 km/h [50 mph] the vehicle is perhaps best suited to urban driving though the cost, ranging from £6,990 to £7,400 is likely to put off many [Renault].

Due to the very small luggage space the vehicle certainly wouldn't be much good for to take a weekend or summer break unless one is travelling very light indeed. In fact there's no boot to speak of. Instead a 31-litre lockable storage cubby exists under the rear seat that's large enough to carry some small bags, a laptop or a modest amount of shopping.

Another off-putting factor is the fact the price does not include the battery pack. Instead owners have to lease the battery from Renault for a £45 monthly fee, although it does include roadside assistance and a battery replacement guarantee.

Perhaps a more practical EV is the Renault Zoe [picture above] which retails at £18,045 up to £23,645, although currently UK buyers get a so-call Plug-in Car Grant or PiCG which reduces the cost.

However, the PiCG which gives buyers up to £4,500 towards the cleanest new cars, will only run until March 2018 [Guardian].

The Zoe has a range of over 210 km [130 miles] but like Twizy owners, one still has to lease the battery which costs between £49 and £110 per month depending on the length of the agreement and annual mileage [Top 5 EVs].

Inconvenience

Recharging takes 3 to 4 hours which could prove inconvenient for long journeys. In fact aside the issues of cost and leasing batteries, charging times and range is the crucial issue for most people.

Short hops around town is not an issue. It's those journeys to the airport or the weekend trip to the coast or the drive to France on a camping trek which create the challenges.

From one side of London to the other via the M25 is around 100 km [60 miles]. So a return trip from the Essex border to Heathrow Airport could be achieved in a Renault Zoe with 16 km [10 miles] to spare. But ideally one would really want to top up before that return journey.

There are only 4 electric car charging points available at Heathrow Airport Terminal 5 Short Stay Car Park and herein lies another issue. There are some compatibility issues, but the biggest issue here is numbers. If there is no free space one could very well be left stranded on the M25 without juice. Given there are only 4 charging points, finding them might also prove to be a challenge.

There is also the cost. While charging is often free, or very cheap, parking at Heathrow for 2 or 3 hours in order to charge up one's car would likely set one back around £14.

Costs and benefits

That said, £14 is considerably cheaper than the cost of petrol or diesel which would have been burned up in a conventional vehicle.

Currently there is no VED [Vehicle Excise Duty] payable on pure EVs worth less than £40,000. So that's a potential saving of anything up to £300 a year.

But of course even EV owners have to pay out for an MoT and insurance and withe monthly cost of battery easing with many EVs the running cost per year can easily soar towards £1,000 before driving anywhere.

This cost is similar for most vehicle owners however. But unlike conventional car owners, EV drivers do get some perks. Many areas offer discounted parking, such as Westminster in central London where EV drivers need only pay for just 10 minutes on street pay-to-park bays and park for the maximum prescribed period. In some areas a free resident's parking permit for residents is offered for owners of an eco or electric vehicle. And EV drivers do not have to pay London's congestion charge.

An EV for everyone

So there are some advantages and disadvantages. And there is an EV for pretty much for everyone.

There is the tiny Twizy which is great as a little city runabout. There is the Renault Zoe and the arguably better Nissan Leaf which both offer comfort and space, and could be considered small family cars.

And there are even electric SUVs in the pipeline in the coming years [Business Insider / Autocar]. 

Currently there are few electric SUVs, but the Kia Soul EV is certainly a vehicle that makes the idea of driving an electric vehicle a little more cool. However with a range of only 150 km [93 miles] in optimum conditions there are serious issues to be considered as regards charging.

Charging & Range

Indeed, it is charging that is the biggest problem when it comes to EVs. Whether a vehicle has a 600 km range or a 150 km range there needs to be an improved infrastructure, not just across Britain but across Europe and around the globe.

Not everyone wants or can afford a second vehicle. So in order to persuade new car buyers to buy an all electric vehicle the infrastructure needs to improve.

Payment issues

Whilst there are many charging points across the country not all are rapid chargers. Some are free, some require registration and others require payment through an app or via an online account. So without preplanning one can encounter issues concerning payment even before plugging in. In fact this, and non-working machines, is perhaps one of the biggest problems [YouTube].

Anyone with a regular gas guzzler can drive into a service station, fill up and pay with cash, debit or credit card, or even Apple or Android Pay in many UK locations. But for many EV charging stations one has register, purchase special cards and top-up online.

The issue could be solved simply giving users the option to pay with a debit or credit card with perhaps the offer of benefits to those who sign-up to the specific scheme.

Plug compatibility & Infrastructure

Then there's plug compatibility though for the most part this is not really a major issue since most charging stations offer the two main types [YouTube / EVObsession].

For those with the extra cash for a second vehicle an EV is definitely the way to go. But for a primary vehicle there are, at present, too many drawbacks.

Fast charging stations need to be at every petrol station, supermarket and town centre car parks as well as on-street parking locations. And this roll out needs to be Europe wide.

A London to Bournemouth trip might be feasible at present, but it would be a brave soul attempting a European tour with an EV.

While there are some EV charging stations dotted across France, they are few and far between. The same is true of Spain and Portugal where one can easily find oneself travelling for hundreds of kilometres without seeing even a petrol station let alone an electric charging station [Charging points map]

A greener future

Today the Chancellor of the Exchequer announced new efforts to clean up the air with further  measures targeting diesel vehicles whilst putting forward financial incentives and pledges to build an increased EV charging infrastructure with a promised £400 million fund [Business Green / Huffington Post].

But there are two major challenges that have yet to be properly addressed when it comes to electric vehicles. The first is the drain on the national grid as more people adopt the new technology.

Electric vehicles are here; and they are here to stay.  But by 2050 there could be anything from 7 to 26 million on the road. And the National Grid in the UK has already questioned whether it will be able to cope with demand [National Grid PDF / Guardian]  

The grid recently warned that, by 2030, electric cars could require 3.5-8GW of additional capacity, on top of the current peak demand of 60GW [Guardian].

When the lithium runs out

But there's another perhaps far more pressing issue, and that concerns the battery that powers the vehicle itself.

Currently most EVs use Lithium Ion batteries. However, there are only finite Lithium resources.

It has been estimated that should EVs really take off there is only enough lithium to supply the market for around 17 years.

Back in 2015 the US Geological Survey produced a reserves estimate of lithium which concluded that the world has enough known reserves for about 365 years of current global production of about 37,000 tonnes per year [USGS PDF]. 

But of course, that did not take into account possible future use [Green Tech Media / Bloomberg].

There is a revolution taking place already in that many people are beginning to accept the new technology. No longer are are electric vehicles geeky, the Twizy perhaps being only one exception. The range is improving and along with it the charging station infrastructure, if a little slowly. But there needs to be a another revolution in battery technology otherwise the the electric car will soon come to a grinding halt [Guardian].

tvnewswatch, London, UK

Saturday, November 18, 2017

After microbeads is it time to ban glitter & straws?

This week it was reported that a nursery in the UK had banned glitter - on environmental grounds. While glitter is only a small part of the microplastic load getting into watercourses and the sea, such efforts have surely to be commended.

There is far too much wastefulness in our modern life, and Christmas doubly so. A small step has been made in banning microbeads or persuading manufacturers to stop using them. But there are far too many non-biodegradable and readily disposable items used in our everyday lives.

Glitter is not necessary to make Christmas a joy. Furthermore it is potentially dangerous should it be ingested and especially if it gets in one's eyes. It also creates a mess which makes for constant vacuum cleaning. And of course there are environmental considerations.

Tops Day Nurseries - a chain of 19 day care centres across southern England - is outlawing the sparkly substance [BBC / Sky News / Guardian]. That's highly commendable. But today I, like I'm sure many parents did, received a leaflet from my child's school directly encouraging pupils use glitter and tinsel in some decorations they've requested the children design and make for Christmas.

This is proof that while the message gets through to some that some things are bad for the environment, not everyone takes notice or is even aware.

Thus it is surely up to government and industry to find natural, biodegradable and safe alternatives and ban materials and methods that are harmful to our planet. Some have already called for a ban of all glitter and other microplastics. "I think all glitter should be banned, because it's microplastic," says Dr Trisia Farrelly, an environmental anthropologist at Massey University [Independent].

Most glitter is made of aluminium and a plastic called PET.  Dr Farrelly has investigated how PET can break down to release chemicals that disrupt hormones in the bodies of animals and humans. Such chemicals have been linked with the onset of cancers and neurological diseases.

Some eight million tonnes of waste plastic ends up in the sea each year and while only an estimated 86 tonnes of microplastics are released into the environment every year in the UK alone, every effort to reduce such waste helps.

Plastic straws are another problem which is only now being addressed. Over 500 million plastic straws are produced in the US alone every single day, only to be used for a few minutes before being thrown in the bin or littered. But slowly there is an effort to reduce this waste too.

Cornwall could become the first county in Britain to ban plastic straws in an attempt to protect its coastline according to recent reports [Independent]. And the pub chain Wetherspoons is to only hand out plastic straws if requested with a complete ban from January 2018 when they will make the switch to biodegradable paper straws instead [Sun / Independent].

Many of us can make our own decisions and act. But sometimes the choices are forced upon us. Unnecessary supermarket packaging for fruit and vegetables is a case in point.

The consumer can only do so much. While few of us like an interfering nanny state, it is only by implementing bans on these environmentally damaging substances, packaging and products that real change will be made.

The chancellor, Philip Hammond, is set to announce possible taxes on single use plastics [Guardian].  However, such measures are only likely to lead to increased pricing of products which will be passed on to consumers. What is really needed is a total ban on such use.

tvnewswatch, London, UK

Friday, November 10, 2017

Brexit turning into a Fawlty Towers farce

For many looking on at the farcical Brexit negotiations and surrounding chaos that appears to developing since the EU referendum it is more akin to a sitcom than a serious attempt to take back control and build a better Britain.

Indeed the whole fiasco has come to have stark similarities of the infamous sitcom Fawlty Towers.

Theresa May is much like the beleaguered wife of Basil Fawlty, trying to keep things in order whilst those around her become embroiled in one fiasco after another.

The bumbling Foreign Secretary is surely not too far removed from the Major and Basil rolled into one as he makes inappropriate remarks and insults.

Life imitated art earlier in the year when Johnson urged the French president not to "administer punishment beatings" on Britain for choosing to escape the EU "rather in the manner of some World War Two movie" [BBC]. This was very much like Basil Fawlty's faux pas when he kept making inappropriate references to the war to some German guests while late claiming that he might have "got away with it.

Johnson, just like Basil Fawlty, hasn't confined his comments to one group of foreigners, though he hasn't yet begun to lash out at Spanish waiters and tell them they are a "waste of space".

Many are bewildered why Britons should have voted Brexit at all and wrench themselves from one of the world's biggest trading blocks. Foreigners, not only in Europe but around the globe are puzzled why Britain would go through such painful negotiations and create such uncertainty for its own manufacturing industry as well as those who might wish to invest in Britain.

The same puzzlement is reflected in Fawlty Towers as a psychiatrist staying at the hotel exclaims that there existed "enough material for a whole conference" given the farcical events taking place.

It is perhaps no wonder that outside Britain's walls media commentators are making similar analogies.

The New York Times columnist Steven Erlanger recently said that no one knows what Britain was anymore and that it had become nearly unrecognizable to its European allies.

The party led by May has itself become more and more shambolic by the month [Reuters]. After staggering through a disastrous and unnecesssary election May has had to make deals with DUP to prop up her minority government. The Tory party conference was itself a comedy of errors as a comedian delivered a fake P45, May spluttered and coughed through her speech and letters fell off the backdrop display, a reminder once again of Fawlty Towers where the sign at the hotel entrance is displayed with missing or rearranged letters.

"Like the sign outside Fawlty Towers, the missing letters behind Theresa May are an emblem of a tragicomic farce. Who needs Basil's hotel? We now have the Tory Party," The Sun said in an editorial.

Some months ago Boris Johnson was ridiculed after he exclaimed that Brexit would "be a Titanic success", an unfortunate comparison given the fate of the ocean going liner.

The boat analogies have not gone away however. In his article published in early November 2017, Erlanger described Britain as being like "a modest-size ship on the global ocean" heading towards uncharted territory if not the rocks.

The ship, Erlanger suggests is "unmoored, heading to nowhere, while on deck, fire has broken out and the captain — poor Theresa May — is lashed to the mast, without the authority to decide whether to turn to port or to starboard, let alone do what one imagines she knows would be best, which is to turn around and head back to shore."

But making such a U-turn would, many claim, be undemocratic and betray the will of the people.

In one episode of Fawlty Towers Basil makes a disastrous mistake in telling some guests to leave after misconstruing things he overheard. On informing his wife Sybil. "Oh my God," Basil exclaims, "What have I done" before asking what am I going to do?"

"Tell them you've made a mistake," Sybil suggests. "Oh, brilliant! Brilliant. Is that what made Britain great?" Basil retorts, before storming up to the guests to apologize, but blaming the fiasco on his wife.

The line "Is that what made Britain great?" reflects very much attitudes that still prevail in Britain today. Many people still have difficulty in forgetting the glory days when Britain traded internationally across an empire over which "the sun never set".

The colonialist Britain is very much in the past and Britain's relevance is not as significant in today's globalised world [SMH].

In fact rather than a vote for a global Britain and economic liberalism, Brexit was a vote for protectionism, and its political system nowis deeply provincial and introverted at a time when Britain is supposed to be heading out into the world.

The architect of Article 50, Lord Kerr, has declared that the letter can be torn up at any point until 29th March 2017 [Guardian].

Despite concerns Britain is heading for a no deal scenario the Theresa May seems adamant that the Good Ship Brexit is on the right course.

Johnson for his part seems just as unlikely to turn around and say he's made a mistake. His recent blunder with facts that landed a woman held by Iran in even hotter water seems to indicate that whatever the evidence May, Johnson and the Tory government are unlikely to change course [Guardian].

Only when the ship is dashed against the rocks will the people and politicians perhaps realise their folly. But unlike Fawlty Towers no one will be laughing as the end credits roll.

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Wednesday, October 18, 2017

Xi Jinping's 33 year plan for China's future

In a speech that ran for more than three hours China's President Xi Jinping has said the country has entered a "new era" where it should "take centre stage in the world" [BBC].

In a wide ranging speech, Xi declared victory over "many difficult, long overdue problems" since he took power in 2012 and that China would continue opening its doors to foreign businesses, defend against systemic risks, deepen state-run enterprise reform, strengthen financial sector regulation and better coordinate fiscal and monetary policy.

Communist Party Congress conferences take place every five years and are known for their long speeches, declarations of future plans for the country and a platform to set out party priorities. And this party conference was no different. 

Xi Jinping spoke for 3 hours and 20 minutes, reading from a tome entitled, "Secure a decisive victory in building a moderately prosperous society in all respects and strive for the great success of socialism with Chinese characteristics for a new era"

He spoke of a China dream and a "new era" for China, a phrase repeated no less than 36 times. This was also a platform to declare Xi Jinping's success in tackling corruption and of preparing the way to make China great.

Indeed some media commentators were likening many messages coming from the 19th CPC as being very similar to those of Donald Trump.

At the Tory party conference Theresa May borrowed from America as she talked about a "British Dream". And Xi appeared also appeared to be using similar language with references to a "Chinese Dream" [Bloomberg]. 

Unlike Theresa May, the Chinese president managed to get through his 210 minute address without coughing, being accosted by pranksters or having the props disintegrating about him.

After all, this was, as Xi declared, a "great modern socialist country" which within the next 30 years would become a "beautiful China". In short Xi seemed to be flying the banner espousing the slogan "Make China Great Again" [Guardian].

But this conference was also seen as one which helps to lay the groundwork to secure power for much longer than the usual 10 year period.

After five years defeating political rivals, silencing critics and developing public support built on rejuvenation and fighting graft, Mr Xi is on firm ground to oversee a major reshuffle of China's leadership stacked with those loyal to him [Telegraph].

As recently as April 2016 western commentators were already discussing the so-called 'Cult of Xi' and suggesting he was attempting to establish himself as the the next Mao Zedong [Economist].

State controlled media is often filled with fawning over "Uncle Xi" and his wife, Peng Liyuan, a folk-singer whom flatterers call "Mama Peng".

Xi Jinping has accumulated more authority than any of his predecessors since Mao Zedong, the founder of the communist People's Republic of China. Xi has taken personal control of policy making on everything from the economy, national security and foreign affairs to the Internet, the environment and maritime disputes. Now the 62-year-old scion of Chinese Communist Party [CCP] royalty stands at the centre of a personality cult not seen in the People's Republic since the days when frenzied Red Guards cheered Chairman Mao's launch of the Cultural Revolution.

Xi repeats the mantra of Mao and rails against "hostile foreign forces" which he and hard liners within the party believe are intent on weakening a resurgent China.

"Like Mao, Xi thinks if China succumbs to Western values, these forces will destroy not only China's exceptionalism but also the stability of the Chinese Communist Party," says Roderick MacFarquhar, a Harvard expert on Chinese politics [Time].

Whilst Xi certainly appears to be establishing himself as an autocratic ruler, he does nonetheless appear far more stable than his western counterparts.

Xi has sought to portray himself as a strong and stable international statesman. And he is far stronger and clearly more stable than a certain British prime minister who ran her election campaign under that very slogan [Guardian].

Since last year's election of Donald Trump. Xi has also painted China as a far more responsible global power that is committed to tackling shared dangers such as climate change.

Indeed, whilst Trump seems intent on turning the clock back half a century and restart the American coal industry, Xi's China it accelerating towards a green future with significant plans to be more reliant on renewable energy [Guardian / CNN / Washington Post].

Xi certainly isn't popular with everyone in his home country. Xi's crackdowns have divided opinion and his firm grip on power brings retorts of 'fascist' from some who are brave enough to express their views. Most of his critics come from the ranks of liberal intellectuals and human rights activists who claim Xi's first term has proved calamitous.

Some had hoped he would prove a political reformer. Instead China's authoritarian leader has waged war on dissent with unexpected ferocity, throwing some opponents in jail and forcing others overseas. Some even refer to him as "Xitler" [Guardian].

However, some experts say that many of China's 1.4 billion citizens see Xi Jinping in a far more favourable light.

"Whatever people may have to say about Xi Jinping, he has actually been a popular leader," said Steve Tsang, head of the China Institute at the School of Oriental and African Studies in London. "The economy remains strong … corruption has been contained … China is internationally much more accepted as being in the top league and is calling the shots … In Trumpian terms, he's managed to make China look great again." [Bloomberg]

Most western media reports have focused on Xi's plans for the economy, energy and the  environment. However, China is also trying to improve its military standing.

It is "time to take centre stage" Xi declared. And his vision is one where China can defend itself against military threats.

"We must build a powerful and modernised army, navy, air force, rocket force, and strategic support force; develop strong and efficient joint operations commanding institutions for theatre commands; and create a modern combat system with distinctive Chinese characteristics," Xi told the hundreds of CCP members who had gathered in the Great all of the People in Beijing [SCMP].

With many believing Xi is poised to seize "absolute power", it is perhaps no wonder the world is watching China [ABCWashington Post].

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Saturday, October 14, 2017

UK risks going over the cliff edge with WTO option

There has been much discussion in the last week over where the Brexit talks are going with some espousing the view that Britain should prepare for a so-called "no deal" option.

The no-deal option has been described as a hard Brexit or a WTO option. It is perceived to be by many Brexiteers as an easy option and that Britain could simply fall back on WTO rules when it comes to trade.

But falling back on WTO regulations and tariffs is not as simple as many might think.

What is the WTO option?

The WTO option involves trading solely under rules set by the World Trade Organisation [WTO], which govern things like tariffs and quotas.

The WTO Option is an approach to Brexit much favoured by some groupings. It is an approach where the UK leaves the EU without having negotiated any trade agreements with the EU, either within the framework of Article 50 negotiations, or on the margins. Instead, it relies entirely on multilateral WTO agreements covering trade-related matters.

The general thrust of the WTO Option argument is that, "Were the UK to leave the EU, it would continue to have access to the EU's markets, as World Trade Organisation rules prevent the EU from imposing unfair, punitive tariffs on UK exports". In reality, the WTO rules only afford very limited protection against discrimination, and then only in respect of tariffs - which are no longer central to trade matters.

Could the UK simply go ahead and trade under WTO terms as soon as it leaves the EU? The short answer is no. In practice, the UK would have to detach itself from the EU and regularise its position within the WTO before it could sign its own trade agreements, including with the EU. As Roberto Azevêdo, the WTO's director-general, said soon after the Brexit vote, there is no precedent for a WTO member extricating itself from an economic union while inside the organisation.

The process would not be easy and would likely take years before the UK's WTO position was settled, not least because all other member states would have to agree. Indeed decisions amongst the other WTO members has to be unanimous and there are currently 164 WTO members.

Complicated matters

Matters are even more complicated than many might realise. The WTO site points to both short and long term issues Britain might face.

There are Regional Trade Agreements which are "by their very nature ... discriminatory". Under WTO rules, an amount of discrimination against third countries [and that would include the UK] is permitted. But the WTO observes modern RTAs, and not exclusively those linking the most developed economies, tend to go far beyond tariff-cutting exercises. They provide for increasingly complex regulations governing intra-trade [e.g. with respect to standards, safeguard provisions, customs administration, etc.] and they often also provide for a preferential regulatory framework for mutual services trade. Indeed the most sophisticated RTAs go beyond traditional trade policy mechanisms, to include regional rules on investment, competition, environment and labour.

Regulatory frameworks

The crunch issue is the "preferential regulatory framework". Unless goods seeking entrance to the EU Single Market [i.e. British exports] conform to the regulations which comprise the framework, they are not permitted entry. Thus, the assertion that, if the UK left the EU, "it would continue to have access to the EU's markets …", is simply not true. And ,  to spell it out,  if it's not true, it's false.

It would be under such conditions that might well create situations as envisaged by some of long lines of lorries queueing up to get into Europe.

Tariffs in themselves do not prevent access to a market. They might make products more expensive but the biggest issue is one of regulatory conformity.

Tariffs simply impose a tax on entry. Regulatory conformity,  generally as a non-tariff barrier [NTB] or, sometimes, as technical barrier to trade [TBT] is the bigger hurdle.

It is generally recognised that, in order to access the Single Market, goods must comply with EU rules. Conformity is the way of overcoming the NTB. But what advocates of the WTO option have not realised is that there is more to it than that . Potential exporters not only have to ensure their goods conform, they must provide evidence of their so doing. This requires putting the goods through a recognised system of what is known as "conformity assessment".

The point about the Single Market is that border checks have essentially been eliminated. The common rules are monitored by relevant national authorities and there is mutual recognition of standards. Thus one can load a truck with grommets in Glasgow and ship them all the way to Alexandroupoli on the Turkish border, with just the occasional document check.

Delays & costs

But the moment the UK leaves the EU, this stops. The component manufacturer may still comply with exactly the same standards, but if the product requires independent testing , any testing houses and the regulatory agencies are no longer recognised. Thus the consignment would have no valid paperwork. And, without it, it must be subject to border checks, visual inspection and physical testing.

What that means in practice is that the customs inspector detains the shipment and takes samples to send to an approved testing house - one for the inspector, one for the office pool, one for the stevedores and one for the lab is often the case. While estimates vary the cost of a container inspection, detention costs for anything up to ten days and testing fees could result in extra £2,000 to deliver a container into the EU.

Aside from the costs, the delays would be highly damaging. Many European industries have highly integrated supply chains, relying on components shipped from multiple countries right across Europe, working to a "just in time" regime. If even a small number of consignments are delayed, the whole system starts to snarl up.

Then, as European ports start having to deal with the unexpected burden of thousands of inspections, and a backlog of testing as a huge range of products sit at the ports awaiting results, the system will grind to a halt. It won't just slow down. It will stop. Trucks waiting to cross the Channel at Dover could conceivably be backed up the motorway all the way to London.

For animal products exported to the EU, the situation could be worse . Products from third countries, which post Brexit would include the UK, are permitted entry only through Border Inspection Posts [BIPs]. Only at these can they be inspected and, if necessary, detained for testing. But, for trade between the UK and EU member states, the capacity of BIP is entirely inadequate. Until more capacity has been provided, trade in these products post Brexit would essentially stop dead . This would be disastrous for the UK since it accounts for some £9 billion in Britain's export trade.

Two way streets

Of course Brexiteers quickly point out that it would be in the EU's interest to negotiate and come to an agreement on these issues.

If the way out of the UK becomes blocked, the return route and incoming trade from the EU would also suffer. Goods from the EU might be delayed or even stop being delivered. Manufacturers which depend on imported components would struggle and may even be forced to close. The resultant job losses could run into millions.

But other countries use WTO rules, don't they?

WTO option advocates will often say that countries such as China, the United States and Australia all trade with the EU without formal trade agreements, and therefore operate under WTO rules. So why would the UK encounter any problems? The answer is remarkably simple. These countries don't rely solely on WTO rules.

Both WTO option advocates and even many critics have focused obsessively with tariffs, but failed to address the issue of non-tariff barriers.

One of the most important types of trade agreement is the Mutual Recognition Agreement [MRA] on conformity assessment. This gets round the problem of border checks, as the EU will then recognise the paperwork on product testing and conformity certification. Agreements on Customs cooperation to ensure that official paperwork and systems mesh  and trouble-free border crossings may possibly proceed.

China, for example, has a Mutual Recognition Agreement on Economic Operators, signed in May 2014. The United States has one on conformity assessment which runs to 81 pages, agreed in 1999. Australia also has one on conformity assessment.

All of these are outside the remit of the WTO but they are nonetheless trade agreements, and vital ones at that.

Nonetheless while WTO advocates claim countries like Australia has no trade agreement with the EU, the EU and Australia conduct their trade and economic relations under the EU-Australia Partnership Framework of October 2008. This aims, apart from cooperation on the multilateral trade system and trade in services and investment issues, to facilitate trade in industrial products between the EU and Australia by reducing technical barriers, including conformity assessment procedures.

In fact there are 82 agreements between the EU and Australia, of which 18 are bilateral. There are 65 between the EU and China, of which 13 are bilateral. Between the EU and the United States, there are 135, of which 55 are bilateral.

Such is the importance of agreements such as the MRAs that the UK would have no option but to seek a deal with the EU, for which there is a facility within Article 50. But, the moment it sought such deals, it would no longer be relying exclusively on WTO rules. It would now be seeking bilateral agreements along the lines of the so-called "Swiss option".

This comes with as many problems as the WTO option, if not more, not least the length of time it would take to agree a Swiss-type arrangement. Indeed some estimates suggest up to ten years if not longer. And that's assuming the EU wants another complex Swiss-type arrangement.

Complicated negotiations

Issues concerning the WTO will even shape the Brexit negotiations themselves. The government is desperate to ensure that Britain's big exporters do not suffer from Brexit. It has explicitly assured Nissan, a major car manufacturer, that it will not suffer. But WTO rules can make such sectoral deals hard. If Britain were to agree bilaterally with the EU not to apply tariffs on cars, the WTO's "most-favoured nation" principle might force it to offer tariff-free access to other countries as well. Channelling government money to boost exports is also something of which the WTO would disapprove and Britain may come under fire from the 164 other members.

So what is the realistic short-term prospect for WTO access to European and other markets? "None of this is impossible," says Peter Ungphakorn, a former WTO official, "but it won't be sorted out quickly." [FT]

While the schedules are being agreed, the UK's legal status as a trading nation will be undetermined, with all that implies for uncertainty and business decisions. The speed of the UK being able to trade on WTO terms in its own right will partly depend on political will. Yet even if other governments co-operate and accept London's proposals, the legal processes and paperwork are likely to take years.

The Government says that it plans "to replicate our existing trade regime as far as possible in our new schedules". This is a sensible approach. It involves minimal disruption and so reduces the scope for other WTO members to object to the UK's new schedules. For tariff levels in particular, copying and pasting should be straightforward.

But the copying and pasting approach will not work for all aspects of the schedules. There are some areas, notably on quotas and subsidy limits, where the UK must reach an agreement on what share of the EU figure it takes. This will in truth be a three-way negotiation, between the UK, the EU and other WTO members, because it will also lead to a reduction in the EU's quotas and subsidy limits

Bumpy roads ahead

The WTO option may seem like an easy way out for post-Brexit Britain, but that road is, in reality, covered with bumps. And there are already signs of the problems Britain will encounter should it pursue the WTO option.

As Brexit talks stalled in the last week Britain and the EU formally informed members of the World Trade Organisation how they planned to split up the EU's tariff quotas and farm subsidies after Brexit. But the plans had already been rejected by the White House and several other nations [BBC / Guardian].

WTO chief Roberto Azevêdo has pointed out any post-Brexit trade talks must start from scratch and only after a complete divorce from the EU. Pascal Lamy former WTO Director General has said it would be a long and bumpy ride. Why? Essentially there are some 164 countries with which the UK would need to renegotiate, which could take up to a decade, if not longer.

Once the UK has a draft of its schedules, and once it has left the EU, it can start trading off them. The WTO does have a formal process for approving schedules – known as 'certification' – which requires unanimous approval from every WTO member, i.e. 164 countries.

However, WTO members can still trade off schedules that have not been certified. The EU, for instance, has not certified its schedules since 2004, but in the meantime, has altered its schedules to reflect successive waves of enlargement.

At some point the UK will want to certify its schedules, requiring the consensus of all WTO members. But the certification process does not pose an immediate threat to the UK's ability to trade post-Brexit.

Once the UK has declared its schedules and started trading, other countries in the WTO may object, particularly if they can demonstrate that the UK has in some way reduced the level of market access on offer.

If there are challenges, these could be lengthy and expensive for the UK to contest. However, the disputes are likely to take several years to resolve, during which time the UK would be able to continue trading off its schedules, whether or not they have been certified.

There are three big trading partners in the world, the EU, US and China, and they might be the most difficult partners to reach an agreement with. Brexit is a divorce between the UK and the EU, and there will certainly be some tension after the fact. The other issue in constructing a deal with the EU is that all member states have to agree to the terms, which can lead to a stalemate fairly quickly. President Trump has been very vocal about wanting to invest at the national level, at the expense of international trade, to "make America great again". With his "America first" policy in mind, it is not clear how the Trump administration will approach a trade deal with the UK.

China does not have the political involvement of the other two, and may want to maintain or even increase export volume to the UK by minimising tariffs and remaining competitive on a global scale, but it still could prove difficult to organise a deal quickly.

In summary the WTO option will be a long, arduous and potentially expensive exercise with no guarantees that Britain's trading position will improve. Indeed the evidence seems to point to the fact that Britain could lose billions of pounds in lost trade in the near term and may take years to establish new trading relationships.In October 2016 David Davis, the Secretary of State of Exiting the European Union, admitted that businesses would face a cliff edge should Britain fall back on the WTO regulations [Independent].  "We need to conclude this [the EU negotiations] within the two years to avoid any cliff edge," the Brexit secretary said after being quizzed concerning the risks of reverting to WTO rules.

Brexiteers want to turn the UK into a global trading powerhouse. But until the country has sorted out its legal standing, it risks merely sitting on the sidelines.

Sources and links: Guardian / Institute for Government / CBI / FCO / LeaveHQ / Stowga / Economist / Reuters

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