international trade – Page 2

Where’s prudence gone?

While reading Simmon Hannah’s “A party with socialists in it”, I made a note to talk about Corbynism and Modern Monetary Theory. I am writing an omnibus, review of that book, but think that a further note on MMT and its role in Corbynism, and the insights and weaknesses it brings to today's crisis might be appropriate. In 2015, Corbyn flirted with MMT but by 2017, McDonnel, Meadway and Wren Lewis had won control of the Party’s economic agenda. The rest of this article looks at the bond market disruptions, FX and the balance of trade, the threat to pension funds, and the extent to which MMT has some useful insights. For more, check out overleaf behind the "Read More" button. ...

A short note on FX & UK Trade

Like many, I am considering the macro drivers of the cost of living crisis and I listened to the AEIP podcast with Gary Stevenson. He has an interesting view and argues that the QE funded furlough scheme was in fact a subsidy to the rich and that the fundamental imbalance in the country is the shift of wealth from poor to rich. It’s a version of the argument that the problem is insufficient demand being caused by the continued pressure on medium and low incomes.

He also argues that the massive QE efforts are an effective devaluation which given the relative stickiness of prices with wages being the slowest to change and everything that wages need to buy increasing will exacerbate the squeeze on spending. He also argues that given the choice between working and starving, people will work. The use of the word devaluation led me to look at the following charts

The pound has been falling against the dollar all year, this makes imports, particularly of Oil, but also of Gas and food more expensive.

Here we see the balance of trade figures, a more traditional cause of devaluations. With the exception of two months, the UK has been in deficit for the last five years. There are those who contest the the balance of trade causes currency price movements and Sterling in particular is impacted by speculative currency flows. The key drivers of speculation are expected rate of return, which for fixed income assets is driven by the bank rate, and animal spirits about which I think it best not to comment. …

The time has come …

If you follow this blog, you'll see that I am concerned with the line that Labour is taking on Brexit and the post-Brexit deal. I have written this motion which I believe will get some broad support; it might not be insufficiently assertive on rejoining the single market, I think its clear but others may want some stronger words. The words of the motion are now behind the 'read more' button ...

A better Brexit?

Another Europe (AEIP) have issued a pamphlet, called “The fundamental problems in the UK-EU trade deal and how it can be reformed”, it’s release is announced on the AEIP blog and commented on in the Guardian, Labour group urges Keir Starmer to back better Brexit deal

Report: Don’t accept this terrible Brexit deal, the case for reform

Luke, its author has started a thread on twitter which I have unrolled here. Central is the argument that the negotiated sovereignty is bogus and that it would be more efficient even in liberal terms to synchronise some laws and regulation. It catalogues what it sees as the weaknesses of the agreement and the demands are summarised as,

Harmonisation with EU standards, with a no-downgrading principle written into future deals
A review and weeding out of regulatory duplication
Re-joining EU programmes on the basis of common interest e.g. Erasmus and Erasmus+
A mutual rights agreement for UK and EU citizens to reinstate free movement rights
Promoting a democratic economy, with state investment and industrial strategy sitting alongside strong protections against cronyism
The creation of a forum in which to cooperate on human security and foreign policy

I am disappointed that he doesn’t talk about the customs union, as this is key remedying the collapse of the SME import/export industry and part of the threat to the Good Friday Agreement.

I am also disappointed that he doesn’t talk about Parliament and while I understand why, I think it’s a mistake, but I am equally disappointed with the apolitical nature of UK trade and business commiussion and the support it has won in the PLP. Its a lack of a political defence of the EU and its internationalist future that has led to us being where we are today. …

Let’s see the Brexit deal risk assessment

While thinking about how to make waves around the Tories Brexshite mess, I have come to the conclusion that the fact they’ve turned off parliamentary scrutiny is a big problem; we have no effective politicians to engage with. They are also treating us to mushroom therapy by withholding the impact analysis on the future relationship treaty. It’s clear that small businesses are having difficulty exporting, jobs in finance and distribution are moving to continental Europe, there are stirrings of border fetishism rising in Northern Ireland and the settled status programme will lead to massive hardship although in the latter case it’s as much be design as by accident. Let’s see the Impact Assessment, we’ve paid for it.

Why won't they publish it? Here's the parliamentary petition site - Petition: Publish an Impact Assessment of the new UK-EU relationship https://t.co/6wiQkjsk5g #brexit #BrexitReality
— Dave Levy (@DaveLevy) February 18, 2021

…

Brexit, the next trade deadlines

Brexit is not yet done, this, from the Institute of Govt., shows the upcoming deadlines for further agreement. most importantly in the short term, financial services equivalence and data adequacy. Slightly later in the year, is the new definition for food safety documentation required to export British food to the EU and Northern Ireland.

I might say more when I have studied it, but I have written recently about financial services, and extensively on the need for & likelihood of a data adequacy agreement. …

Finance in the City

I made a blog on linkedin; a lot of money left the City on the 4th Jan, the first day of trading after the end of the UK’s brexit transition period. The article has a bit of explanation and a bit of prediction; more could follow and some of the market infrastructure companies and lawyers may need to do so too. While non European finance will likely remain in London, and provide both volume and gravity, the death of LIFFE showed that things can change.

Bloomberg are not so equanimous, and express their views in an article behind a “please pay us” splash screen; it’s a review of the leading merchant bank’s economists talking about the investment opportunities in the UK now that we have an idea of the new framework defining the terms of Trade. Many are neutral, the headline quotes the ‘bear’.

I am not sure, I suspect that the gravitational effect of world trade in non-Euro shares and the trade in currencies will maintain a critical mass giving the skills and infrastructure the reason to stay in London. What’s gone is gone but we need the Government to get on top of the negotiations on “equivalence”, which will determine the banks’ ability to serve both the EU market and EU citizens in the UK. …

Happy Fish

Who’d have thought it? After threatening a no-deal Brexit to protect Britiain’s fishing industry, we discover that the goal would seem to have been to make Britain’s fish happy! FFS! The inconvenient truth is that most of the fish caught in British waters are sold in the EU and given the need for more paperwork at the border, the industry is having such severe difficulty in getting their fish to market that they are keeping the boats in port to save the quota until a time when they can sell what they catch. It seems, however, we still have time and resources to chase the Irish away from Rockall. It may not just be fishing, the LSE predicts that UK Exports to the EU will fall by ⅓, total trade by 13% and GNI by 6%.

There is a murmur of evidence that, what economists call, increased friction at the border is causing supply chain disruption for the super-markets and there are coming shortages in the shops, it could of course just be as people enter the new lockdown they stock up to minimise their visits to the shops but if it’s a customs check thing, then we should note that the UK imports half it’s food. In the words of Corporal Jones from Dad’s Army, “Don’t panic!”.

I am shocked at how fast it seems to be falling apart but can’t deny myself a bit of schadenfreude about the fish but any lost job is shame and will impact the workers and their families and I remember that offshore fishing is the most dangerous job in the country. I wonder when Richard Corbett and Seb Dance will be calling for us to rejoin and whether real industry will join them.

But Labour’s front bench have hitched their fortunes to making the Brexit deal work. Too late to do any good electorally, and too early to avoid the coming shit storm. We are telling our remaining core vote to once again, concede political and moral space to people who don’t support us; given a choice between blue labour and red clydeside, Starmer’s Labour has made its choice and we’ll have to see if it’s the right one. …

The danger of a false nostalgia

In the FT, “Britain will do a Brexit deal on Europe’s terms“, looks at the asymmetry of negotiating power and the role of khaki tinted nostalgia in shaping the Brexiteer’s negotiating position. I particularity like the line, “More broadly, Britain’s Leavers were guilty of swallowing their own propaganda.” and the article finishes with a skewering truth, that Britain “won” the second world war only with and solely because of the help of the USA and in this dispute, they will be on the side of the EU; whether all of this will make Johnson’s government agree a deal on Europe’s terms is another question. They might be too stupid and too proud and too frightened of the Tory party’s cleansed backbenches. …

Where’s Labour on the future deal with the EU.

While most attention is on the Govt’s response to the pandemic, and while expecting a reimposition of the lockdown, the second part of the the triple whammy is the looming end of the Brexit Transition agreement. What are Labour doing? Certainly not making so much noise. Here’s the FT on Kier Starmer’s response, which it headlines as “Getting Brexit Done!” on the basis of his speech to the TUC. Labour’s front bench spokesperson on Brexit is Rachel Reeves, who now it seems doesn’t really want to speak about it. While Starmer seems keen to ensure a visibly effective performance in Parliament, which seems to be paying off in the polls, as Labour draws even at 40%, it requires the acquiescence of the press to break through and both Reeves and Starmer were outshone by Ed Miliband in opposing the 2nd reading of the Internal Market Bill. Too much of Labour’s parliamentary attack position is based on competence, the failure of the Tories to meet their own goals without even addressing the issues of cronyism and accountability or more importantly of a vision of how things could be better.

But then the Remain campaign has disappeared, (or the Guardian’s view if you prefer), giving some on Labour’s Left, the evidence they always wanted that the Remain campaign was an anti-corbyn trojan horse. Not for me! But Parliament has voted to allow the Govt. to negotiate the trade deals without asking Parliament to agree, and the Govt. refused to ask for a transition extension despite the CV19 pandemic. These are both opportunities missed.

If we get a deal, it’s going to be pretty shit. …