The EU and Japan have announced (HERE) the biggest EU free trade deal Brussels has ever signed, creating a tariff free trade area of 600 million people and covering a third of world's GDP, an area we will officially and stupidly leave next March. The announcement came on the day that parliament was debating that part of the new trade bill that covers the rolling over of the 40 or so existing FTAs that the EU has at present with third countries. So, the FTAs we are giving up will now include this latest one with Japan. Even before the announcement it was widely recognised that outside the EU we are adding friction to about 65% of our exports (44% to the EU and the rest with countries with whom we enjoy an FTA).
This figure will now be even higher. Which rational country would throw grit into the wheels of trade for perhaps 70% of its exports in order to reduce friction in the other 30%? This is the stupefying logic of the Brexiteers.
And in another curious coincidence, in last week's Sunday Times magazine, there was an article about our new Department of International Trade (DIT). The DIT now employs 3500 with a trade policy team that has grown from 40 to 500 staff. The article shows the DIT as all very optimistic and steeped in fantasy. Everybody is falling over themselves to trade with us apparently, but Fox reads it as them wanting to buy from us but I think they all see us as a soft market for their own goods. And this explains why we have such a trade deficit.
The permanent secretary at DIT is Antonia Romeo who enthused about Jaguar Land Rover (JLR) signing a trade deal with Google for self driving cars, perhaps as many as 20,000 a year. But doesn't seem to register that JLR have said they'll move production out of the UK if we go for a hard Brexit and leave the CU and the SM - i.e. the government's official policy. Another example was a Ford plant in Pretoria, South Africa, which fits Ford engines from Dagenham to Ranger Wildtrak pickups and ships 17,000 a year back to the UK, many for onward distribution into the EU. Outside the CU this trade will end and vehicles destined for the EU will have to go direct to EU ports.
Fox talks of the need for the UK to "earn more money" while Chief Trade Negotiator, Crawford Falconer, says we'll look back in ten years and say, "Oh, why were we so negative about our future".
What is worrying is that they seem to be entirely focused on Britain, with no one who has any experience of foreign, particularly the European companies who will now be our competitors. It's as if a football manager was coaching his squad without any idea of the opposition. He eulogises his players, all slightly overweight and some with asthma or a pronounced limp. It's not until he's accepted a wager and takes to the field that he realises he's up against the Belgian national squad!
On the same day (this is the coincidence) the OBR presented its Fiscal Sustainability Report for July 2018 which, anchored in reality as it is, does not seem to paint such a bright picture:
"As a result, the primary budget deficit – the gap between revenues and non-interest spending – increases from 0.3 per cent of GDP at the end of the medium-term horizon to 8.6 per cent of GDP in 50 years. This would reverse almost all the improvement in the primary balance that we expect between 2009-10 and 2022-23, the period of consolidation following the financial crisis".
And 8.6% of GDP is about £170 billion a year at today's prices. Makes the EU contribution look like small change.
The DIT comes across as a gang of slick salesmen - the sort of people I have spent a working lifetime among - who can talk things up with boundless enthusiasm until confronted with the reality of the product that they have been trying to convince the customer about. In fact John Arlidge, the article's author, says his first interview with Liam Fox was "so bad - he could not come up with a single concrete example of a free trade he'd like to do".
This is I am afraid the rather sad truth of Brexit and the Brexiteers isn't it?
