The EU and the border

Our text for today is Graham Gudgeon’s piece in the Irish Times, which makes a number of questionable claims.

First, he argues that

An accurate version of Ireland’s economic history is important. This is because, contrary to what we are continually told, EU membership does not seem to have had a noticeably beneficial impact on Ireland’s economic growth, even if this seemed to be the case during the great construction boom occasioned by overly low interest rates inside the euro zone.

I don’t think any economic historian or economist believes that the EU has not been massively good for Ireland’s economic growth: just compare our experiences pre- and post-1973.

Maddison’s numbers show per capita growth of 3% p.a. 1950-73, and 4.1% p.a. 1973-2008. 4.3% p.a. 1973-2000, in case you want to strip out the Celtic Bubble years and the first year of the crash. That’s before we even get into the important issue of what was happening to the number of capitas. GDP grew by 3.2% p.a. 1950-73, and by 5.1% p.a. 1973-2000. 5.0% 1973-2008. And there is an even more important point to be made. The period from 1950-73 saw extremely rapid growth throughout Western Europe: our growth rates then were disappointing in that context. Growth slowed everywhere after 1973: our growth rates since then have been very strong in that context.

Our whole development strategy has been to serve as an export platform for multinationals selling into the EU market. You might think that we should be diversifying, and I might agree, but everyone accepts that the strategy has worked, massively, to date.

From the text, it seems that Gudgin may be confusing EU and Eurozone membership. I’m one of those who thinks that the Euro has been a damaging failure, but let’s not confuse the EU, and the Single Market’s four freedoms that have worked so well for us, with a flawed monetary union.

Gudgeon then goes on to say that

Ireland should ally with Germany and the Netherlands in arguing for continued free trade between the UK and the EU. This will greatly ease any pressures for Border controls in Ireland.

In fact, as Ben Kelly has usefully reminded us, unless the British decide to stay in the EU customs union either permanently or as an interim measure (or, most implausibly, succeed in negotiating a free trade agreement with the EU within two years of Article 50 being triggered) there will have to be tariffs between Ireland and the UK. There will be no choice in the matter: for the EU not to impose tariffs on UK exports would leave it in breach of its WTO obligations. And unless the UK has zero tariffs on everything from everyone, WTO rules would similarly oblige it to impose tariffs on EU exports.

Unfortunately for us, it seems likely that the British are intent on leaving the customs union, as Robert Peston points out here. There is therefore a fairly strong possibility that we will see tariff barriers between the Republic and Northern Ireland in the not too distant future (unless the North can get a special dispensation to stay in the customs union, and the tariffs are imposed across the Irish Sea instead).

There are those who would like to see Ireland leave the EU. Expect them to argue in the years ahead that any border controls between the Republic and the North are arising because of “pressure” from the Continent. Expect them to further argue that this shows that our true friends are in London rather than the European mainland. On the contrary: any border controls that arise will be as a result of British decisions, and British decisions alone. And to date there is no indication whatsoever that those decisions are taking any heed of Irish interests.



57 thoughts on “The EU and the border”

  1. Brexit and it’s proponents are factfree areas. There’s no factual argument that will penetrate the self imposed fug of ignorance
    Ally to that a degree of dogmatic certitude that if one repeats a statement often enough it becomes reified and you’ve got articles like this.
    Wilful ignorance has a huge price we will all pay

    1. The FT had a shocking quote yesterday. The UK cabinet is divided between gung ho ministers who want to plough ahead with Brexit regardless of the consequences and those who want to think issues through. Johnson is the exact same with women. F##k and deal with the fallout after.
      They will make a dog’s Brexit of it. It is even more insane than the Bank Guarantee.

    2. Brexit is an ideology. Its adherents don’t do logic.
      One banker said that pro-Brexit ministers like Mr Fox and Mr Davis had yet to engage with the City. “If you try to discuss detail with them, you are dismissed as questioning the merits of Brexit.”

  2. I’m not sure that lamenting the fact that Irish concerns might not be high in the Tories’ list of priorities when it comes to dealing with the Brexit mess is going to achieve very much. It appears that Theresa May was keen to keep Theresa Villiers, one the arch-brexiteers, in post in Northern Ireland to clean part of the mess to which she had contributed. But Ms. Villiers bottled it and retreated to the backbenches. (Alternatively, it may be that she was offered and refused the poison chalice of Health.) In any event one of Theresa May’s former lackeys in the Home Office and one of her boosters, James Brokenshire, now has the job.

    I would be very surprised if he and his officials are not exploring all of the angles at the moment. But we can be sure that nothing of this, other than platitudes and the usual bumph, will be revealed publicly. And we can also be sure that Mr. Borkenshire will obey his mistress’s voice – whatever she might say. This twaddle in the IT is irrelevant.

  3. The UK economy isn’t strong enough to digest Brexit. Productivity is stagnant. ZIRP and deflation have hammered oil and finance, 2 of the main providers of productivity growth. Subsidising low wage employment through tax credits has encouraged low wage, low skill businesses, and sucked in low skill workers. This explains the UK’s good performance on employment, its relatively higher growth rate (but not per capita), its dreadful productivity and the failure of migration targets . Hammond gave up on the budget deficit. The trade deficit is chronic. RBS is on long term disability. The City will probably lose Euro clearing.

    And the DUP supported Leave.

  4. This comment reflects an unfortunate reality i.e. that Brexit makes little or no sense to those that engineered it UNLESS the UK leaves the Customs Union. The one saving grace is that some technical solutions may be possible with regard to the Border through cooperation between the customs authorities. (Viewing it as a major risk by way of access to – largely continental – internal market in terms of fiddling rules of origin is a bit of a stretch). It is also worth noting that whether the UK is in or out of the internal market, aka the Single Market, agriculture and fisheries will not be covered.

    The danger is that, as KOR points out, many will fall for the twaddle peddled in the IT article. A blunt way of putting it would be to say that Ireland gained entry to the EU on the UK’s coattails and the reverse could well hold true when it comes to the UK’s exit. Were Ireland not in the Euro Area, the risk would be existential.

      1. Nick Clegg’s 12 questions

        1. Is it government policy that the UK will leave the EU Customs Union?
        2. Is it the government’s intention to seek membership of the Single Market?
        3. Will the government come clean about the increase in red tape which awaits exporters who want to continue selling their goods into the EU post-Brexit?
        4. How will the UK negotiate new WTO schedules of commitments in a reasonable timescale, given that this will require consensus of all WTO members, some of whom are likely to object?
        5. How long does the government expect it will take to negotiate a Free Trade Agreement with the EU? Does it believe it can be achieved in the 2-year time frame of the article 50 negotiations?
        6. What is the government’s plan to prevent a highly damaging hiatus between the end of the article 50 process and the commencement of an EU FTA?
        7. What will the government do to protect UK interests against the risk that ratification of the EU FTA is blocked by EU Member States?
        8. Will the government confirm its determination to avoid the so-called ‘WTO option’, given its unworkability and the Treasury’s estimate that it would reduce GDP by some 7.5%? $
        9. How will the government address the fact that third countries cannot enter into meaningful negotiations with the UK until the UK’s future relationship with the EU is clear and its WTO schedule of concessions agreed? What will happen to UK export markets during the hiatus in between?
        10.What is the government’s estimate of the increase in food prices that would result from applying EU tariff levels to imports from the EU and losing access to preferential food imports under EU agreements with third countries?
        11.Does the government intend to pursue an interim agreement which preserves the UK’s access to the Single Market while a comprehensive FTA is negotiated?
        12.How many external trade negotiators and consultants does the government intend to recruit over the next two years, and at what projected cost?

  5. This IT article is replete with all the arrogance, willful misrepresentation of economic facts, and incipient disregard for the consequences of one’s actions, both for oneself and others, of those who prefer to cling like barnacles to a bad policy choice rather than admit their judgement might have been wrong in the first place.

    Assuming Brexit as a reality begins to gather pace from early next year, Ireland will need to be well-positioned to deal with the challenges it poses to our own political and economic interests. This applies to whatever ‘divorce’ deal begins to take shape between the UK and the EU but also to our own long-term development and evolution, as a society and an economy.

    Perhaps this is the hardest aspect of what Brexit may mean for us to get our heads around. We’ve spent the best part of a century asserting our political independence from the UK. But institutional, cultural, social and economic ties run deep. From the late 1950s, the motivation for joining the then European Economic Community was in part driven by a desire to diminish economic and trade dependencies on Britain contingent, among other things, on the inescapable reality of geography. Inevitably, economic ties have remained strong in respect of indigenous industry, agri-trade and services. Are we now, finally, faced with making a commitment to our future development along a very different trajectory than what we might have hitherto envisaged? Will Brexit force us to finalise our own ‘divorce’ from the UK?

    For sure, it appears that a lot of good work has already been done by the ESRI and others on the implications of Brexit for our economy, and specifically in the areas of higher education, FDI, agricultural production and free movement of people, not to mention possible impacts on the still fragile Northern Ireland peace process. Perhaps it’s now time to consider having our own ‘Ministry for Brexit’, plus an all-party parliamentary committee, to co-ordinate our response, define areas of key national interest, and keep abreast of the issues as the Brexit process unfolds?

    1. Brexit is going to cause a lot of economic damage to the UK if it goes ahead. A coherent Irish reponse could be very lucrative.

    2. Before we get stuck in along the lines you rightly suggest, Veronica, I think we can indulge in a little schadenfreude observing the Brits, having established an empire on which the sun never set nor in which the blood ever dried – and then dismantled it, seeking independence from the perceived malign Brussels empire.

      Theresa May was long a closet Eurosceptic and I am pretty sure is happy with the decision a majority of voters made – though I suspect she would prefer a softer Brexit to a harder one. Jeremy Corbyn has always been opposed to the Common Market, the EEC, the EU irrespective of the form it took. Mrs. May would probably prefer to secure her own mandate, but she is restrained by the Fixed Term Parliament Act. Taking advantage of Labour’s death-wish is very enticing. But she can’t force a dissolution of the Commons. The only option would be that 100 Labour MPs would offer to support a Tory motion to dissolve the Commons so that they could put the Labour party out of its current agony, seek to avoid the even more bloody annihilation it will experience if things are dragged out to 2020 and give the party a chance to provide an effective opposition and a government-in-waiting. (The risk, of course, is that Corbyn would retain the support of the believers in him as a Messiah and hang on a sleader, even if Labout lost half its current seats.)

      The odds are that she will try to stay the course and, as Michael Hennigan points out below, accept a hard Brexit to preserve party unity – and the support of the DUP. Ireland’s interests will count for little in the context of these imperatives.

  6. Theresa May appointed 3 leading Brexiters to handle negotiations with the EU as if she wanted to have them take the blame for adverse outcomes but maybe she should have put aside her hatred of George Osborne and kept him on the team — after all, he did have 6 years of personal relations with key EU decision makers.

    The English rulers are unlikely to agree to special terms for Scotland and NI while the Unionists of course would resist any impression that the link with the mainland was weakening.

    A hard Brexit appears inevitable and irrespective of the economics, May will avoid disharmony among the Tories and the attitude is “Damn the torpedoes, full speed ahead!”

    The transformation of the Labour Party into a protest movement also ensures that politics will trump economics.

  7. Meanwhile,
    “A BMG opinion poll released today reveals 43 per cent of voters agree that a reduction in trade with the EU is a “price worth paying” for getting back control of immigration.

    Just 26 per cent disagreed.”
    So, 75% of UK voters do not disagree that there are too many poles, latvians, czechs, and so on. But, we cant call them racist as that might offend, and we dont want to think that there are that many racists in the neighbouring house.
    They are at very best xenophobes of the deepest stripe. If not downright racist, and in the worst imperialist kind “oh, im not racist as I am ok with our commonwealth migrants, just not them new ‘uns”
    Be worried folks. All over the world genii are popping out of bottles long stoppered.

    1. The Polish man down the road is the enemy rather than Mike Ashley. Immigration not payrises as the issue . Well done right wing media

  8. It would seem that the populist genie now out of the bottle in th UK is, indeed, impossible to stop, at least in the short to the medium term. Contrasting the Greek and the Irish experiences, however, suggests that the experience may be more than survivable by Ireland.

    In a curious way, the optically weak Irish political system reflects much better the essential level of social cohesiveness required to deal with politically unpopular decisions than that of the UK. The upcoming budget will be the real test.

  9. @KoR

    Peston is drawing conclusions from Liam Fox’s new empire. He is however the most likely of the three Brexiteers to attempt to levitate using the rope he has been given by May. Other figures (not necessarily on the front bench) are more pivotal than Fox, who I won’t characterise here for reasons of taste.

    There is a long game to be played but it can only be done so subtly – the first element of which was preventing the juveniles like JCT and Farage didn’t get a quick Article 50 invocation. The return of Grammar schools was the first foreseeable consequence of the Brexit vote that occurred to me (I’m not joking), and things like that are on a chessboard – but the game will not be played if it is hurried.

    Friends of both the UK and the EU should be ensuring nothing is done quickly, hostile language is avoided, and waking BOTH sides up to the fact that compromise is necessary all-round.

    @Brian L

    For decades in the UK people who thought immigration levels were too high were talked down to and derided as “racist”, and a sensible debate was avoided using that device. That dam has cracked over recent years and burst spectacularly in the summer.

    Here is the part of that Huffpost article you left out:

    “Today’s opinion poll findings come as an increasing number of Labour figures admit that scrapping freedom of movement is preferable to the UK staying in the Single Market.

    Last week, Rachel Reeves, Emma Reynolds and Stephen Kinnock all backed calls for free movement of EU citizens to the UK to be abolished, while in an interview with the HuffPost UK Jonathan Reynolds said some voters had “genuine emotional concerns” over high levels of immigration.

    Even Chuka Umunna – a prominent Remain campaigner and chair of Vote Leave Watch – admitted he would sacrifice Single Market membership in exchange for ending current rules on free movement.

    Umunna told HuffPost UK last week: “If continuation of the free movement we have is the price of Single Market membership then clearly we couldn’t remain in the Single Market, but we are not at that point yet.”

    1. Entirely possible they were racist then, are racist now and will find a target (Hello Jock!) For the racism tomorrow.
      Neither of us can prove our contention.
      As for Red UKIP….less said the better.

      1. MLK once said “Darkness cannot drive out darkness: only light can do that. Hate cannot drive out hate: only love can do that.” Was he wrong? Calling a whole country racist doesn’t bring any light, it just shuts down the conversation. Nothing gets resolved that way.

          1. Nevertheless – you put a whole group of people beyond the pale, and beyond dialogue when you label them racist. It stops the conversation just when we need to start it. Elites all over the world are struggling with this – the need to engage with what they loath the most. MLK also said “There is some good in the worst of us and some evil in the best of us. When we discover this, we are less prone to hate our enemies.”

  10. Here is a rather telling CER paper and its accompanying tweetstorm.
    Paper :

    The UK has economic strengths, such as a flexible labour market, which ensures that unemployment is low even in many of its economically struggling regions. But contrary to much of the received wisdom, Britain has not been one of Europe’s economic stars over the last 15 years. And Brexit is set to exacerbate the economy’s underlying weaknesses.
    In terms of economic growth per head, Britain’s performance has been in line with France, a country now synonymous in the UK with economic failure. The British are no richer relative to the EU-15 average than they were 15 years ago, and the average Briton has to work more hours than the EU-15 average to achieve that income.
    Sustainable increases in living standards require economies to combine land, labour, capital and technology in ever-more efficient ways; Britain has made a poor job of this. The UK’s productivity performance has been woeful, falling to just 90 per cent of the EU-15 average. This helps explain why Britons’ wages have risen by much less than their French and German counterparts over the last 15 years.
    Moreover, the UK is highly dependent on London and its environs. Apart from London, just one British region – the south-east of England – has a GDP per capita in excess of the EU-15 average, meaning that just 27 per cent of the UK population live in regions wealthier than that EU average.
    Far from catching-up with the richer parts of the EU – as one might expect as they adopt technologies and working practices developed elsewhere – the UK’s poor regions have fallen further behind.
    Britain’s problems lie mainly on the supply-side and in the structure of public spending. Three key issues stand out: poor skills among a sizeable chunk of the workforce; weak infrastructure and a lack of affordable housing; and the centralisation of political and commercial power in London.
    Unfortunately, Brexit risks aggravating most, if not all, of these problems. And Britain’s already startling regional imbalances are likely to worsen further, leaving much of the country’s population living in areas considerably poorer than the EU-15 average.
    The Conservatives will provide some fiscal stimulus to counter the weakening of growth caused by Brexit, but will not make the long-term investments in infrastructure and skills needed by the UK. They have few MPs in the poorer regions that would benefit most from such spending, while the resulting higher borrowing and/or taxation would be unpopular with their core vote in England’s wealthy South.

    Taking Back Control ….

    1. Many thanks for this link. The paper seems to have captured perfectly the economics (and, more importantly, the political economy) of mainland Britain. It’ll take a while before the penny will drop for a sufficient plurality of the voters – mainly because the Labour party is in its death throes, but it will drop eventually. Then it will get interesting.

      1. Actually I am not so sure that Labour is in its death throes. John McDonnell produced a very interesting paper on how to run the UK economy going forward. Thatcherism is incoherent. Productivity has been stagnant for 10 years. The last growth spurt was based on driving down wages via migration. Brexit was the result.

        The private sector is not the only way to decide investment. There has been no infrastructural investment for 40 years. Most of the areas that voted Brexit generate no value. That has to change

        1. Dream on. The collective failings, ineptitude and sense of entitlement of the Labour MPs who, understandably, have no confidence in Corbyn’s leadership should be obvious now even to them. But it will prove impossible to bridge the gap between the form of Marxist-Leninist democratic centralism being practised by the Corbyn cult and these MPs who wish to maintain the party as an effective official opposition and to provide a credible government-in-waiting in a representative parliamentary democracy. The real power now rests with John McDonnell; Jeremy Corbyn is a truly accidental leader. But McDonnell is widely viewed as a truly nasty piece of work – even by some of the Corbynistas. In addition to seeking the election of the shadow cabinet by MPs (as the price for many of them returing to the front bench), many of the disaffected MPs are demanding that McDonnell be sacked. Neither will happen.

          Labour as a potential party of government is finished. The only hope is that the Tories will implode under the pressure of trying to secure an acceptable form of Brexit. But I wouldn’t hold my breath. Irish concerns and interests won’t register in these struggles.

          1. May wants to unite the Tory party under Brexit . Not a hope. Tory economic policy is going to.lose them their reputation for competence a generation after the ERM fiasco. 2 deficits, inflation and productivity are all going in the wrong direction. A house price crash would complete the ensemble.

            McDonnell has the economic answers. Pay repression is not a force of nature. It is political. Same thing in the US.

  11. I agree with Kevin O’Rourke’s comments.

    However, in making comparisons between different eras of economic growth in Ireland, it would be better to use actual GDP (or GNP) growth rather than GDP (or GNP) growth per capita (which the author of the article in the IT does). This is because the rate of economic growth has a big influence on population growth (through changes in net migration). Would 5% GDP growth, resulting in high net immigration, population growth of 3%, and consequently GDP per capita growth of 2%, be really inferior to 1% GDP growth, resulting in high net emigration, population decline of 2%, and consequently GDP per capita growth of 3%?

    So, when comparing GDP growth per capita in different eras, we need to consider that:

    (1) between 1841 and 1922 R. Ireland’s population fell by 65%

    (2) between 1922 and 1972 it was more or less flat

    (3) between 1972 and 2016 ir raise by 60%

  12. Robert Peston takes the formation of Liam Fox’s new Dept of International Trade to a logical politics-free conclusion, far removed from the motivation creating the department, and far removed from real-politik.

    Fox has been been handed a reserve battalion (or less), and told to hide himself until when, or if, war has been declared. But he is clearly not the hiding type, and unless he quiets down, he may find himself a battalion short.

    The real war within the British cabinet has yet to be fought and won.

    Bit it is very difficult to see the UK removing itself from the customs union, in the short term. Such a move would require custom duties, but more importantly, VAT at point of import on all UK exports to the EU, and equally a VAT type tax at point of import on all imports into the UK from the EU.

    The disruption, on all sides, would be enormous, with ROI trade being the worst affected, as it is largelytrade with or through the UK.

    To leave the Customs Union, or to trigger Article 50, without comprehensive trade agreements and administrative formalities in place, the British cabinet would be committing a collective Hari-Kari.

    I doubt it will happen.

  13. There are racists everywhere but cutbacks in public services as immigration rose was also a factor.

    This is from a post-Brexit analysis by the Economist:

    Where foreign-born populations increased by more than 200% between 2001 and 2014, a Leave vote followed in 94% of cases. The proportion of migrants may be relatively low in Leave strongholds such as Boston, in Lincolnshire (where 15.4% of the population are foreign-born). But it has grown precipitously in a short period of time (by 479%, in Boston’s case). High levels of immigration don’t seem to bother Britons; high rates of change do.

    We should be careful about perceptions of racism in working class communities while Nimbies in middle class areas are also in the business of exclusion:

    The FT said today on fears in the City of a hard Brexit:

    Banks that use the UK as a gateway to the EU employ more than 590,000 people, have more than £7.5tn of assets and make annual profits of more than £50bn, according to Companies House data analysed by the FT.

    The 91 UK-incorporated banks that use passporting — which account for 60 per cent of all incorporated banks in the UK but more than 95 per cent of UK banks by assets and staff — do not disclose how much of their business is done across EU borders.

    Nor do the five bank companies that have the “designated firm” status that the Bank of England grants to some parts of large investment banks, including Citi’s global markets business and Merrill Lynch International.

    The proportion varies greatly among them. The big three UK retail banks Lloyds Banking Group, Royal Bank of Scotland and Barclays, whose UK-incorporated banks employ 363,000 people and have assets of almost £3.4tn, have passporting rights to almost all EU countries, but do most of their business domestically.

    But the City’s investment banks use passporting for more than 20 per cent of total UK activities, according to banking insiders. “We reckon that around about a quarter is related to the EU in some way or another,” says John McFarlane, who chairs both The CityUK, a lobby group, and Barclays.

    The top five US operators have almost £1.5tn of assets and about 21,000 staff in their UK-incorporated banks and designated firms. They also have tens of thousands of additional staff, and significant assets, in branches and other entities which do not file separate financial accounts. For example, the majority of JPMorgan’s 16,000 UK staff — many of whom would not be directly affected by Brexit — work for a London-based branch of its US parent company. The big two Swiss banks employ just over 6,000 in UK incorporated and designated firms, but have about 12,000 UK staff in total.

  14. According to the IMF’s data base the UK’s real GDP per capita rose by 17.5% between 2000 and 2015. The figure for France is 7.6% and for Germany 18.5%.

    Economic growth depends upon labour force growth, productivity growth and technological change. For the UK’s economic performance to deteriorate post Brexit one or all of these factors have to slow relative to the current position.Oddly enough the Treasury paper on Brexit chose to ignore the most plausible impact, via reduced immigration on labour force growth.

    We do not know what the post-Brexit trade relationships will be which argues against silly knee-jerk official responses , designed to garner a few headlines. Similarly, what was the point in meeting Hollande re Brexit as he will be gone in a few months anyway?.A minister or group ‘ to keep abreast of the issues as the Brexit process unfolds’, as outlined by Veronica above, makes sense.

    Finally, no threads of late on the GDP figures.What struck me was the big fall in the GDP deflator in H1; real growth averaged 4% but nominal growth averaged 1%, which with base effects increases the risk that nominal GDP may not rise much at all in 2016. However, the ESRI forecasts a 7.3% rise and it will be interesting to see Finance’s forecasts and the response of IFAC

    1. Dan the 3 drivers of UK productivity recently were finance, oil and utilities. The first 2 are in big trouble. The UK also has a very bad trade deficit on top of a chronic budget deficit. Brexit woukd not help any of these.

    2. “Economic growth depends upon labour force growth, productivity growth and technological change.”

      Possibly – but, what else? Its not as simple or as straightforward as this oft repeated economic mantra might imply.

      Productivity is the economic utilization of changes (improvements or advances) in technology. The latter is a physical process – hence has real, engineering limits. When those marginal limits are attained – that’s it. “Are we there yet?” Yes, I believe so – except you count the robots and drones. But neither of these figure in the employment stats! And does an ATM pay income tax and the USC?

  15. This is all mightily interesting (excluding misplaced references to racism, which have been more than adequately dealt with by John Browne) but misses, it seems to me, the central point i.e. the outcome of the Brexit referendum is irreversible, especially after the victory by Corbyn which turns the Labour party into a minor party of protest. A hard Brexit is the only logical outcome, as persuasively argued by Martin Wolf in a recent FT column (3 tables and 1000 words that says it all). Limiting the damage of this has to be THE policy objective for Ireland. The balance of self interest between London and Dublin is such that this should not be beyond the capacity of both sides. Indeed, the fact that the thinking policy community in the UK is literally aghast at the turn events have taken, because of the actions of the worst PM in the history of the UK (Martin Wolf’s opinion), cannot but be a major positive element. A “bespoke” arrangement for the UK, as May has astutely commented, has to be found.

    It is a bit early to imagine what this might be. However, it is fairly clear that it has to be built around the existing UK opt-outs, in one of which Ireland already participates i.e. control of persons at borders. The question, post-Brexit now becomes; where will these apply?

    For Brexit to make any political sense, the UK must leave the Customs Union, as in the case of Norway. A fudge of some kind will have to be found on the issue of access to the internal market. This is where the shoe really pinches and explains the difficulties of the new UK Cabinet in coming to any decision. The balance of advantage and disadvantage in establishing the relationship between the two is almost impossible to identify. (The Brexiteers did not allow for the fact that the UK is visible from the European mainland on a fine day).

    Whatever the outcome, agriculture (and fisheries) will be excluded. The budgetary effect of the Thatcher “I want my money back” rebate is to neutralise the cost of the CAP to the UK. Brexit, post 2020, can rationalise this arrangement. The problem for the UK will be that it is not operating in the bucaneering days of the 18/19th centuries in the area of standards for trade in agricultural, and fisheries, products.

    It may be evident from the above why the thinking UK policy community is. Aghast.

      1. @Seafóid

        Comments from Labour yesterday indicate that they intend to put any ‘Brexit’ deal to a referendum and to a vote in vote in Parliament. That will change the debate in the Commons. It is unlikely that the cabinet would get away with a ‘Brexit email’ to Brussels in such circumstances. Frankly, I doubt ‘Brexit’, or at least anything other than a very softsoap ‘Brexit’ will happen. The damage to all, including mainland EU, would be very very high. It is in everybody’s interest to play a long game.

        John McDonnell did very well yesterday in setting out a public investment strategy and pay rises.

        “The Polish man down the road is the enemy rather than Mike Ashley. Immigration not payrises as the issue . Well done right wing media”

        The right wing media are a bit like the Salafist schools. They have succeeded in turning anger away from where it should be properly directed i.e Mike Ashley sweat-shop economics in the case of the UK, corrupt and kleptocratic regimes in the case of the Salafists.

        1. True. But please also note how the europhile elite in Ireland try to turn anger away from the EU and towards the supposedly dumb Brexit voters (calling populist voters ‘dumb’ or ‘racist’ is really working out well isn’t it?). This whole thread is about the Brits, as though the EU they have just voted to leave is an economic nirvana (if you want popcorn, keep an eye on Deutsche Bank). And as though there is no such thing as a successful economy operating outside the EU. The EU is the anomaly as an organising model for political economy, not the countries outside it.

          In the spirit of Popper it would be good to have some debate about falsifiability. The consensus here seems to be that Brexit was the ‘wrong’ decision (curious how academics still like to judge the outcome of democratic exercises as right or wrong). If that is the case, what would sort of evidence would prove it right? If UK economic growth stays at the same level it has been for the past 5 years, or exceeds it? If the EU suffers yet another fiscal crisis and the euro disappears? If another country decides to leave?

          FWIW I think on balance Brexit was a mistake but I acknowledge it’s just a guess – let’s not pretend prognosticating on macroeconomic issues is any more enlightened than peering into a crystal ball.

          Re Ireland – what do people expect? UK voters are going to vote according to what they think benefits the UK. Do people really believe that voters in other countries including Ireland behave any differently? If you do then ask a Greek what they think of the outcome of German elections.

          1. Popper is not much help in terms of the scientific method but essential reading in terms of how extremes of left and right can come together in an unholy alliance and cause disaster. The simple fact is that, post Brexit, Hibernia will be, in the eyes of the movers and shakers on the Continent, a bit of an historical leftover. On the other hand, “sticking with the programme” by Ireland will have a strong countervailing influence. It will confirm the same movers and shakers in their approach vis-a-vis their own electorates. It is our strongest card, even if both politicians and electorate are largely unaware of it. “The 12.5% tax rate is sacrosanct” is about the limit of the public awareness. Coupled, luckily, with the age-old sentiment that “England’s difficulty is Ireland’s opportunity”.

        2. @JR
          if workers get payrises their pensions will be paid. If they don’t they won’t. Brexit means sweatshops. Flexible labour means deflation in the US too. It means a bond Ponzi. Labour are also looking for collective bargaining. It might be the only way to save capitalism.

          The media are lost. The Tory graph opeds assume Thatcherism is coherent. FT not much better. IT trína chéile. There is a video on YouTube of a Mayo “ditch digger” that speaks truth to power. The difference between now and the 30s is that the hoi polloi have pension schemes. We’ll be singing when we’Re winning.

          BTW no sign of Tull or JF. I would love to discuss the well run UK economy.

  16. George Osborne in a speech in Washington on 22 September.

    “Let me start by examining that European referendum result. You cannot say that the British public were not engaged in the choice they were being offered. More Britons went to the polls on 23rd June than in any general election in British history.

    More voters voted to Remain in the European Union than have ever voted to elect a party of government; and of course, even more – 52% of the total – voted to Leave. Among that 52% were close to 3 million voters who had not voted in our general election a year ago.

    In short, this was a huge exercise in direct democracy. And so, frankly, ignoring the result or thinking that we can simply have a re-run to get a different result is – I believe – fanciful. We can’t behave like the East German government who, when faced with an election result they didn’t like, said it was time to elect a new people.”

    He may not know his Brecht from his elbow but it would be difficult to disagree with this political assessment. The UK is leaving the EU. The focus has to be on the circumstances of its departure, particularly from an Irish perspective.

    1. “In short, this was a huge exercise in direct democracy. And so, frankly, ignoring the result or thinking that we can simply have a re-run to get a different result is – I believe – fanciful.”

      Yes, one can’t imagine a referendum being re-run with an amended proposition – that would be fanciful. You can’t argue with that 😉

      Osborne has been caught on the wrong side of a long awaited and bitter coup in the Tory party and he is faffing about trying to re-define his position. He is right-wing enough to fit in with the large group of Thatcherites, and is trying to, but is too strongly identified as the Mr Nasty of the Posh Boy Gang – and has no electoral appeal. He may have been on the phone to Baron O’Neill of Gatley and Mr Barroso quite a bit.

      Similarly, many Labour Party politicians are experimenting with new positions encouraged by the prevailing wind.

      The referendum asked a very specific question and obtained a specific answer. The True Believers’ know that they have to get a move on or the momentum will wither as reality becomes more widely understood.

      1. Grumpy , I can see Osborne taking over when Brexit is abandoned in a controlled fashion, ERM style. Europhilia will be back.

    2. DOCM didn’t your Eurocrat friends make Ireland vote again on 2 referenda linked to Europe so as to get the right result? Why is the Brexit vote so sacred ???

  17. @DOCM

    “You cannot say that the British public were not engaged in the choice they were being offered. ” Osborne

    So far, the British public have voted on the principle of disengagement from the EU. They have not yet seen the conditions for departure [conditions now being harshly drawn up by the Bash-the-Brits cliques in Europe]. They were also misinformed and misled as to what those conditions might be.

    And Osborne must take his share of blame for the economic conditions he created that gave rise to a large section of the Brexit vote. He was, after all, first mate on the mutinous ship. [Giving the City, or Sir Philip, whatever they wanted was never going to count for a a national economic policy, no more than giving FDI companies whatever they want counts for an Irish economic policy. ]

    Labour’s ‘Brexit’ position is now a far more coherent position than that of the Tories, despite the continued demonisation of Corbyn, and the EU would do better to listen to it.

    If Article 50 is triggered precipitously due to pressure from the EU, without trade agreements and full administrative procedures being in place, then the EU must take its full 100% share of the blame for the subsequent debacle, a debacle capable of driving the EU into a severe economic recession, with Ireland being the worst hit by far.

    In that sense, I think KOR is not fully correct to say
    “any border controls that arise will be as a result of British decisions, and British decisions alone. And to date there is no indication whatsoever that those decisions are taking any heed of Irish interests.”

    Both Britain and the EU have responsibilities to resolve these issues, and both should be held accountable for resolving them.

  18. One further comment, if I may.

    My understanding is that a member leaving the EU has to be approved by a super qualified majority vote (72% of pop).
    See page 4 attached:

    Does this mean that even if Britain decided to leave (hard, soft, or scorched), then a small number of the remaining EU 27 could block exit?

    EU28 pop = 508 million less UK 65 million = EU 27 pop of 443 million.
    72% of the EU 27 population =72% *443 million= 319 million.

    Thus an alliance of Italy (61 m), Spain (46M), Poland (38M), Romania (20M); total 165 million (37% of EU 27) could actually vote down a Brexit?

    It seems odd, but that is what I get from scanning the above document.

    1. Britain leaving is it’s own choice and can’t be stopped by anyone if they press the A50 Big Red Button-o-Doom
      The terms of any future deal are up to the EU to decide.

      1. Not so! It’s a negotiation in which both sides have cards to play cf. in this connection Peter Mandelson in the FT. The case for the UK staying in the Customs Union, and negotiating a “bespoke” bilateral arrangement on the internal market, is growing by the day. In such circumstances, the problems for Ireland would largely boil down to (i) control of free movement (ii) agriculture and (iii) fisheries. Certainly not insurmountable. And mainly bilateral issues between the UK and Ireland, at least in the eyes of the rest of the EU.

        The UK woud, effectively, be in the situation of Turkey (whose effort to join the EU Johnson has, apparently, said the UK would continue to support!).

        It is hard to see how May can avoid clarifying the issue of in or out of the CU ahead of the invocation of Article 50. It is politically toxic in terms of Tory infighting but staying in is the only thing that makes economic sense. Having trucks backed up all the way from Dover to London is the alternative, not to mention checking the entire length of the Eurostar.

  19. To the various comments above, I suggest a campaign on the lines that it is all a bad dream and we will wake up relieved to find that it was just that. Unfortunately this is not the case, as Martin Wolf has underlined in another recent brilliant comment. Step changes occur in history in a manner that is entirely unpredictable.

    Osborne is right. If he is not, quite a few political leaders across Europe are in dreamland.

  20. I was at an investment conference yesterday. One Asset Manager said there is nothing wrong about negative yields . Another spoke about constructing a portfolio to generate an expected yield of 1%. We are being farmed. Brexit is about people rejecting the system. Very few people seem to understand the big picture . I had an interesting chat about DB. That it might collapse was deemed fanciful.

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