Thursday 2 July 2020

Brexit: Business will bear the costs

A tweet by an international trade specialist, Anna Jerzewska, an associate fellow at the Trade Policy Observatory at the University of Sussex, was certainly popular on Twitter yesterday. I think all the people I follow must also follow her because I lost count of the number of times I saw it retweeted. She essentially called for more honesty in the debate about trade, especially concerning the ongoing talks with the EU and the so-called 'shock and awe' campaign coming up between now an Christmas - more on that below.

Ms Jerzewska tweeted:

And in the ensuing thread she continues, speaking as if she was the government and addressing British industry,:

"As of 1 Jan 2021, you will bear the full responsibility for your goods moving across the new border the UK erected with its main trading partner.  You will also be required to deal with the new barriers to trade with 3rd countries that result from us leaving the EU. This means all areas of international trade: customs, trade finance, meeting regulatory and testing requirements etc – it’s all on you now. 

"You will bear the additional costs as well as the legal liability. 

"Here is what we can do to help you navigate this…”

When she says the additional costs will be borne by 'you' she really means the consumer. Business is not going to reduce its profit or dividends, and if it did, we would suffer anyway through our pension funds and savings.

If what she says is true, and it self-evidently is, it should give us heart that Brexit will be its own failure. The government needs to show some upsides to the biggest upheaval in our constitutional arrangements for centuries, but it cannot and will never be able to because there aren't any.

When choice or quality is reduced and price rises feed through and retailers justify them on increased trading costs and the barriers raised by Brexit with no apparent advantage gained I think the polls will turn and turn decisively towards 60 per cent or more being in favour of rejoining.

The coming shock and awe campaign will help to focus minds. Business is far from ready. Jurgen Maier, former CEO of Siemens UK has organised a letter signed by 110 entrepreneurs, business organisations and small to medium sized manufacturers, and sent to Boris Johnson.  It calls for a close trade deal with the EU and says no-deal or a bad deal will "create a further economic shock and cost people’s jobs."

"In addition, businesses simply do not have time or capacity to prepare for big changes in trading rules by the end of the year – especially given that we are already grappling with the upheaval caused by coronavirus. Securing deals that match the current arrangements as closely as possible is therefore even more essential to make those adjustments easier."

And:

"To minimise the downsides, it is vital that the UK achieves the best possible trading arrangements with the EU and other countries. We are calling for these trading arrangements to uphold the common high standards currently applicable on both sides in the areas of state aid, social and employment standards, environment, climate change and tax."

When the government has finished explaining what British Business has to do to be prepared the public will indeed be shocked - and probably in awe of the stupidity that led us here.  The advertising campaign will be fascinating to see since it must ipso facto, be an anti-Brexit one.  In other words here are all the new barriers to trade that Britain must now climb every time we trade with the EU27 and that we have erected deliberately on your behalf.   Not so easy is it?

Business will also have to bear the costs of the coronavirus pandemic - with huge debts of their own, smaller markets, fewer employees and increased cost of the welfare state plus all the grand infrastructure plans of Cummings. Coming on top of all that, Brexit of any sort is starting to look like the straw that breaks the camels back.

Upholding the high standards we have at the moment is one of the big sticking points in the talks. The UK does not want to sign up to a level playing field, despite agreeing to do so in the political declaration. The farming industry is crying out for some indication that food standards will not be eroded and is supported by 80 per cent of the public.

One begins to wonder who Johnson is negotiating on behalf of. I don't buy the 'disaster capitalist' conspiracy theory where men like Crispin Odey are shorting sterling or British FTSE 100 businesses in the hope of making money, although I don't doubt that is going on.  I think Johnson and Cummings (for it is only those two) genuinely think that threatening a no-deal outcome will get a better deal.

Johnson himself has said as much in the past.

No, this is all a negotiating ploy, one that only desperate men would use. If we had some clear advantage at the table it would have been obvious from the start when Cameron tried to renegotiate the terms of our EU membership and got very little.

Brexiteers thought he wasn't hard or tough enough and when he stepped down, Theresa may stepped up with the 'bloody difficult woman' label given by Ken Clarke and Malcom Rifkind. She failed.  Johnson replaced her and he failed but sold his failure as success - and found a willing buyer in the Tory party and among many leave voters.  The price of that failure becomes clearer in Northern Ireland every day and when the full extent of his betrayal becomes clear the whole question of Irish unity will surface once again.

Now Johnson is attempting for a fourth time to get a better deal than the one we had in 2015 and he will fail again. In these negotiations size matters and it is inescapable that the EU is much bigger than we are.

But I am as certain as I can be that in the end the EU need only stand firm and sooner or later we will capitulate. The government has left itself no alternative.

Incidentally, I think what started this whole thing off is a tweet from Tom Hayed at the BEERG Blog:

This was always the delusion at the heart of Brexit.
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