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Saturday 11th November 2017
Hi Friend,
Looking for a solution ... as deadlines approach ...
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Michel Barnier has set the deadline. The British government has two weeks to give "vital" clarification on the financial commitments it is prepared to make. There can be no talks on trade before bills have been paid.
The Prime Minister has set the deadline. Britain will leave the EU on the 29th March 2019. There can be no obfuscation. We are leaving at 23:00 hours on the last Friday in the month. Just a few details to be sorted out along the way. Well, quite a few actually. For now, the money is important.
The settlement figure acceptable in Brussels, will be unpalatable on the back benches. David Davis may have a figure in mind. For the moment Davis is loathe to release the "quantum of solace" for the EU. Any amount over £350 million per week will cause turmoil in the Tory ranks. Any amount offered may well be rejected by the Barnier band in any case.
Then of course, the Irish question is of problematic importance. Hard or soft border? Assuming the UK stays inside the free market and the customs union, the border issue will melt away. Theresa May has made it clear, we are leaving the EU, the single market and the customs union. What then is the solution for Ireland? Unification or the creation of a "Free State" akin to Hong Kong or Macau? An interesting debate to follow within the DUP and the thin Conservative majority.
For the moment the question of EU citizenship subject to ECJ regulation has moved to the sidelines. David Davis is looking to a wider audience for solutions. Meanwhile, John Lewis has launched the Christmas ad featuring Moz the monster. No one appears to have realised this is outrageous campaign propaganda to stay within the European Market.
Moz the Monster is clearly the threat of leaving Europe, troubling the child like David Davis, with difficulty sleeping at night. Finally the solution appears in the form of a night light. The darkness of departure can be switched on or off. This week, Lord Kerr delivered the night light. There is nothing inevitable about the Article 50 process, Lord Kerr explains. We can simply change our minds, turn the night light on and stay within the enlightened zone of Europe .... Yep and you thought it was just a TV ad about the "holiday season" ...
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Economics news this week ... Trade and Output ...
Looking for a solution? The ONS released the latest data on trade and output this week. Manufacturing output increased by 2.7% in September and by 2.7% in the quarter as a whole. The figures are in line with the preliminary estimate of GDP for the quarter. So no real excitement there. Output remains some 3% below the peak registered in February 2008. It has been a long slow recovery, still to achieve prior peaks of performance.
World trade increased by over 5% in the quarter. Strong performance in China with recovery in the USA and Europe is assisting growth. The UK will benefit from world trade expansion. The uncertainty about Brexit and investment will inhibit growth generally. The problems in the motor trade will inhibit growth specifically. We expect manufacturing output to increase by just over 2% for the year as a whole.
The trade figures for September were also released this week. In the three months to September 2017, the total UK trade (goods and services) deficit widened by £3.0 billion to £9.5 billion. The deficit (trade in goods) was £35.7 billion in the quarter, offset by a service sector surplus of £26.3 billion. The figures were slightly better than expected. For the year as a whole we would now expect a deficit (goods) of £137 billion offset by a £103 billion surplus on services.
And what of the external deficit? In 2016, the current account deficit was almost 7% off GDP. A record for UK data. In 2017, the current account deficit will narrow to around 4.5% of GDP. An improvement of course but a level incompatible with base rates at just 0.5% ...
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| West Wing WTF ... "I can play that tune ..."
"I can play that tune" the President demonstrated on his visit to China this week.
But could he hold a note for the whole of the tour? Trump was on his best behaviour. On a long trip in South East Asia, the lure of 280 characters on Twitter was resisted for the most part.
He played golf with Shinzō Abe. Diplomatically looking the other way when the Prime Minister of Japan fell back into a bunker. A surprise visit to the DMZ in Korea was abandoned, avoiding bad weather and a snipers bullet in the process.
He received the full treatment in China. Marching bands, dinner in the Forbidden City. The event was carefully choreographed and scripted. No questions allowed at the press conference, at the request of the hosts! No comments on civil rights. Trump cast no blame on China for the burgeoning trade deficit at home, predecessors were at fault for allowing the problems to materialize in the first place.
"I don't blame China. I blame the incompetence of past administrations for allowing China to take advantage of the U.S. How can you blame China for taking advantage of people that had no clue?" Trump twittered.
Trump condemned U.S. leaders of the past. He was effusive about the Chinese leader of the present. "My meetings with President Xi Jinping were very productive on trade and the subject of North Korea. He is a highly respected and powerful representative of his people."
"Thank you for such an incredible welcome ceremony." Trump twittered on. "It was a truly memorable and impressive display". I look forward to building an even stronger relationship between the United States and China" in the years ahead.
Yep and I look forward to building a chain of Trump hotels across China, he could have added. But some ambitions are in the small print and a handshake.
Then Trump was off to Vietnam for the APEC meeting and an encounter with Putin. Melania stayed on in China to visit a zoo and the Great Wall of China. Fair trade at last! Trump was off the leash.
"We can no longer tolerate chronic trade abuses" Trump lashed out at China and leaders in the Asia Pacific zone. Not for the US the multilateral deals. We will negotiate one on one for fair and equitable solutions. Trump was waving the flag and making the call. APEC pondered and continued to work on the Trans Pacific Partnership agreement. President Xi was in the room. No one was really listening to an ageing Uncle Sam ...
That's all from the West Wing WTF this week.
Have a great week-end,
J
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