Jeremy Warner in The Telegraph has an article about The City - the golden goose that hasn't yet quacked, so far - and how much it gained from unfettered access to the single market and therefore how much it has to lose, especially if we leave without a trade deal. This is another lever the EU are using against us. Warner's article echoes the findings of the SMF report published at the end of May showing financial services would be one of the hardest hit sectors by a no-deal exit.
The sector produces a huge amount in tax revenues - in 2017 it generated 7.2% of national output and 11% of tax revenues. For all its bad press it truly is the UK's golden goose.
Warner tells Telegraph readers, some of whom must finally be waking up since its circulation figures are falling through the floor, that:
"The UK began with a “cake and eat it” approach to defending the economic interests of the City, aiming for a deal that would preserve as much as possible of the City of London’s role as Europe’s premier financial centre.
"Predictably, the EU refused to play ball. Instead, it argued that the UK should be put on the same footing as other jurisdictions around the world, which meant Brussels unilaterally judging whether British regulations were sufficiently “equivalent” to grant access"
He says submitting to the EU equivalence regime means Britain becoming a rule-taker - surprise, surprise!
What Warner is worried about is Brexiteers setting so much store by gaining control of our waters and having control over fishing, a vanishingly small industry even were we to "take back control" that they may abandon The City altogether.
I don't think this will happen. Fishermen ought to realise that when push comes to shove financial service will always win out. Money talks.
Which makes yesterday's news about the EU being ready to concede on fish slightly strange and Warner thinks this maybe because we have accepted we are not going to get the "consultation and structured processes for the withdrawal of equivalence findings, to facilitate the enduring confidence which underpins trade in financial services” that we are asking for AND control over fisheries.
I don't believe this. It does not make any economic sense but it shows we are now at the point where huge political trade offs are having to be made as we reach the moment of truth - and find we don't hold all the cards as Gove once said.
Warner says, freedom to diverge is an important part of the economic case for Brexit, but it involves costly trade-offs in terms of access to European markets. The more divergence, the thinner the scope of the trade deal. How true.
And he also points out that the government's stance on state aid and resistance to agreeing EU rules on it, is also confused since if we were ever to start pumping money into selected industries the government "would quickly find itself ostracised for unfair competition by some of its most important trading partners" notably the USA.
He finishes:
"Taking back control is a fine ambition in principle; yet there is growing confusion on what the Government plans to do with it. Now more than ever, we need a coherent economic strategy for the future. The faux showmanship of some kind of marginal trade deal is scarcely going to help an economy in apparent, Covid induced meltdown."
And talking of the USA and trade deals I noticed this tweet from Peter Foster
🚨🐷🚨🐷 NEW: how can the U.K. strike a trade deal with USA while protecting U.K. farmers and consumers? Answer they probably can’t. (And don’t be fooled by specious assurances on ‘chlorinated chicken’) Stay with me. 1/thread. https://t.co/LkzjCh1ShW— Peter Foster (@pmdfoster) June 17, 2020
He has been talking to a British pig farmer to find out why UK and EU pork is twice the price of the US equivalent and it is of course EU rules on welfare and food quality.
Foster finds some quotes from the US National Pork Producers Council (NPCC) in their response to the US consultation about a UK trade deal:
"However, for that potential to be realized, it is critically important that the United States use the FTA negotiations to ensure that U.S. pork products enter the United Kingdom duty free and not subject to the many European Union sanitary phytosanitary (SPS) measures that currently restrict U.S. exports to the United Kingdom, a member of the EU."
So what Foster's pig farmer is asking is how will the UK government agree a trade deal with those terms and at the same time protect UK pig farmers who cannot legally produce pork to compete?
The answer is they can't of course, but look out for every conceivable avenue to be pursued including "differential tariffs" and all sorts of things to avoid what another FT correspondent, Robert Shrimsley says is yet another example of "a government that is profoundly queasy about embracing the 'choices' that it professed it so wanted as a result of #Brexit."
It's a great thread, do read it.
Hard choices are ahead.
