Friday, November 21, 2014

UKIP: Rochester ruminations

I think the political quote of the week comes from the anonymous pundit who reported of Rochester and Strood: "Labour suffer crushing defeat by losing safe Conservative seat to Ukip". But he only just caps Mr Eugenides, who tweets: "Stupid woman tweets photo of white van and flags, resigns. Stupid man calls for compulsory repatriation of legal EU residents, is elected".

Turnout is reported at 50.67 percent, against 51.13 percent at Clacton. Reckless thus came in with 16,867 votes, representing 22.5 percent of the electorate - one in five of the voting public. This is significantly down on Clacton where Carswell took 30.5 percent of the popular vote. We are seeing  yet another failure of the Angry Party to set the election on fire.

That Ukip was going to win, though, has not been in doubt for some time, which means "death camp" Reckless the Repatriater is briefly returned as MP - albeit the indications are that the margin will not be as great as some expect. 

His tenure will perhaps last only until the general election. But his move to Ukip will bring no tears from Peter Oborne. He describes the Repatriater as "a brutish and low-grade specimen who ought not have been permitted to stand in the Conservative interest". His defection to Ukip nearly two months ago, Oborne adds, "reflected well on David Cameron's Conservative Party, making it a better place".

Interestingly, Reckless will be addressing the Bruges Group annual conference in London on Saturday. He was invited while he was still a Conservative MP and, if he turns up, will be able to put his views on his change of heart to a discerning audience. 

By coincidence, this will be followed on the Monday by Owen Paterson, who is planning a major speech on the EU. Oborne expects Mr Paterson "to develop the argument that Britain's future lies outside Europe", and that may well be the case. 

If Mr Paterson goes further and outlines details of how we should go about leaving the EU, he will be ramping up the pressure on UKIP which, after 20 years of existence, is still unable to deliver a coherent (or any) EU exit plan. 

And, trailing in the wake of the Guardian, which led the fray in noting the great UKIP policy vacuum, we now see the Telegraph picking up the same thread. "The party can no longer get away with simply behaving like the outsiders of British politics", the paper says, "free to dish out criticism but outraged when it is directed towards them". It adds: "Over the next few months, their policies on every issue should be subjected to the closest possible scrutiny".

This is an interesting observation. We have been known to remark the Ukip supporters, uniquely, seem to believe that their party should be immune from criticism. Now, the Telegraph lends its way to a counter view. 

Meanwhile, we are being regaled with rumours of additional Conservative MPs deserting to the policy-free UKIP, maybe attracted by the relief of not having to remember what your party's policies actually are. 

However, we are now past the six month cut-off, which means there will be no more by-elections this side of the general. Any MPs who do jump ship and follow the Carswell-Reckless model in resigning their seats are likely to be out in the cold until May – or even longer – reduced to burning their rosettes. 

At least, now, we are spared the sight of prancing politicians and prattling pundits giving us the benefit of their ignorance. Instead, we can revel in Mr Kelner's claim that other parties haven't a clue how to beat Ukip – until Monday, that is, when we may get an illustration of how policy trumps vacuum.

Thursday, November 20, 2014

UKIP: more foot-in-mouth from Reckless

The fun started when ITV's Meridian asked Mark Reckless what would happen to EU migrants already living and working in Britain if the UK chose to leave the EU in a future referendum. His answers made it to the front page of the Telegraph and most of the other legacy media, after his comments were interpreted as an intention to deport EU migrants once we had left the EU.

Complete Bastard rightly posits that this is what happens when a political party goes public without having worked out its policies in advance. Then, without an established "line to take" and message discipline, it is easy for a motor-mouth candidate like Reckless to go off the rails – as he did with Libya, making unforced errors which then dominate the headlines. 

And this really is UKIP's problem which, compounded by the profound ignorance displayed by spokespeople and candidates alike, means that they are constantly suffering from foot-in-mouth disease. 

From the outset, the very idea of repatriating migrants who had exercised their rights of freedom of movement or establishment, under the EU treaties, is a clear breach of the international law doctrine of "acquired rights".

This is dealt with admirably in a Parliamentary briefing note and is so well established - having been formally evaluated by the International Law Commission in 1959 – that it has now taken on the status of customary law. 

No one who had made any serious attempt to inform themselves of the state of art could possibly have made such fools of themselves. It is the rank amateurism of the man that rankles– a man at the cutting edge of the debate who is so ill-informed that he can offer in the name of his party a clear breach of international law as a serious policy suggestion. 

Only later, via the Guardian, amongst others, do we get the official line from a "Ukip spokesman", disowning their own candidate, having to admit on the eve of the Rochester by-election that the 2.8million EU nationals living and working in Britain would be given the right to stay in the UK after an EU exit. 

"Ukip's position on migration is entirely clear", says the spokesman. "We need to sort out our borders, and we cannot do so whilst we remain in the European Union. Those who are in this country lawfully, such as those from EU nations, would have the right to remain".

However, even now, Reckless doesn't seem to have a grip on the issue, apparently saying that people already in Britain "would be issued with work permits and nobody would be deported". Thereby, he seems unaware that even issuing "permits" would be a breach of law, making an absolute "right" conditional on an administrative procedure. 

That brought Farage into play, telling the BBC, "When we invoke Article 50 of the Lisbon Treaty which sets us off on a two-year negotiation to leave the EU, part of that renegotiations is what happens to retired people from Britain living on the Costa del Sol and what happens to people from Warsaw living in London".

"Let me make this clear", he added, "during our divorce negotiations, even if the EU was to behave badly and say [British] people living in Spain were to be threatened with not being there, we would maintain the line that we believe in the rule of law, we believe in British justice and we believe that anyone who has come to Britain legally has the right to remain".

 Nevertheless, this does not even begin to address the fatuity of the broader Ukip response. The ritualistic offering that we cannot "sort out our borders" whilst we remain in the EU is getting to sound a little tired, although none of the media seem to asking whether leaving the EU, per sewould be enough to solve the problem.

This is the distinction between necessary and sufficient, with Ukip failing to appreciate the difference. On the other hand, implementing controls already permitted by EU law, addressing ECHR issues, dealing with drivers of migration, in terms of reducing "push" and "pull" factors, and then improving the lamentably poor administration of migration control, would doubtless yield greater dividends than the incoherence of a party which, to this day, can't even get its act together on an EU exit plan. 

The point, of course, is that dealing with immigration in a post-EU Britain demands a considered policy response. So far, all UKIP have been able to do is play around with the idea of an Australian points-based quota system.

This, as an intelligent policy response, does not qualify. Britain is so different is so many ways from Australia that only a leap of imagination into the abyss could suggest it is of any utility. This country with its larger, more diverse economy, on the edge of a continental land mass, demands an entirely different response to a huge, under-populated land mass. Not least, this country has to deal with nearly 33 million visitors, against Australia's seven million, the greater number making the tracking of illegal immigrants that much harder.

All that UKIP has managed to achieve from this imbroglio, therefore, is to tell the voters that there is nothing it can do about the migrants already in place, with nothing to suggest that they know how to deal with migrants yet to come.

Unsurprisingly, therefore, the controversy lasted long enough for the BBC evening news remarking on the 6pm news that the policy gap is showing once more. But then, as Complete Bastard points out, this is UKIP. The only way there isn't going to be a policy gap is to rebuild the party from scratch.

Wednesday, November 19, 2014

World trade: a catalogue of failure

000a cars-019 trade.jpg

Following on from Siemens propaganda over the weekend, where the happy Mr Maier was telling us how good the EU was for business, the European Commission has issued a press release telling us exactly the opposite.

This mea culpa, however, isn't exactly transparent – one has to read into the title which hides its light under a substantial bushel: "the 11th report on potentially trade-restrictive measures identified in the context of the financial and economic crisis". What it conceals is the catalogue of failure of the entire global trading system. 

In the 13 months covered by the report, we are told, G20 members and other key EU trading partners adopted a total of 170 new trade-unfriendly measures. The countries that have adopted the most such measures, by the way, were Russia, China, India and Indonesia. 

At the same time, only 12 pre-existing trade barriers have been removed. This means that hundreds of protectionist measures adopted since the beginning of the economic downturn continue to hamper world trade, despite the G20 commitment to easing barriers. 

This is very much a hidden failure, though. Twenty years ago, at the inception of the WTO, replacing the GATT, tariffs were still very much the issue. Then European levels typically at 20 percent. But now, with levels in the order of five percent, one might think that the problem was over (or diminishing). 

Indeed, while the process of reducing tariffs globally has been considered a successes, it has also been described as like draining a swamp. The lower water level has revealed all the snags and stumps of non-tariff barriers that still have to be cleared away. 

After thirty years of swamp draining, the stumps have started to grow. Observers are thus notingthat decades of ever tighter regulation of goods - most of which was adopted for purely domestic policy aims - have escalated regulatory protection. 

As a result, these "Non-Tariff Measures" (NTMs) – or, alternatively, technical barriers to trade (TBTs) - have become more important than tariffs. By way of background, we see that in 1995, the WTO received 386 formal notifications (complaints) of TBTs. By 2013, this had risen to 2,137 (see chart below). 

Putting clothes on this, we see the Society of Motor Manufacturers & Traders (SMMT)complaining that non-tariff barriers such as different regulations and standards add over 20 percent to the cost of trading between the EU and US. Trade barriers have replaced tariffs. 

Any which way you look at them, the data suggest that restrictive measures are increasing: trade is still a long way from free and, since the global crisis of 2008, is becoming even less so. The great experiment in "free trade", of which the EU is a central part, has indeed been an almost unremitting failure. 

This puts to bed all this "motherhood and apple pie" rhetoric about free trade. We can waffle all we like about free trade areas, WTO and all the rest. Decades of labour and millions of man-hours (and not a few women hours) have simply changed the nature of the barriers which businesses encounter. 

Interestingly – or perhaps appallingly – we don't even know how to measure trade properly, or assess the impact of trade flows. 

For instance, ONS published the definitive trade statistics for 2013 recently, with much made of the trading deficit with the EU, running at £66 billion. This is out of a total deficit in goods running at £110 billion – a disastrous performance until one adds in services, whence the deficit drops to £33 billion. 

Now here's the thing. Trade in goods is geographically rooted. We can tell where our deficits in goods come from, but that is not the case with services. Much of the foreign currency which is gained from trade which qualifies as "exports" of services is earned in the City. But then international tourism also goes in that bag, so it gets extremely difficult to pin a flag on the money. 

000a WTO-019 TBT.jpg

As long as we keep goods and services in separate boxes, though, we can moan about the imbalance of, say, car sales as between the UK and Germany. But are services and goods so unrelated? It is said of Ford that they make no money out of assembling cars. Their profit comes from financing the sales, selling high-priced loans to eager buyers to let them drive their showroom-fresh dreams out of er… the showrooms.

Cars, in this context, are just the mechanism for selling loans. That makes them part of the financial services industry, at which the UK excels. While the Germans make their money screwing nuts onto bolts, we could be making more by lending their customers the money to buy them. We could, but we just don't know.

Then there is the nature of the automotive industry itself. It accounts for four percent of our GDP (£60.5 billion) and currently provides employment for more than 700,000 people in the UK.

But the thing to appreciate is that it is an automotive industry – it sells components as well as cars. The UK produced 1.6 million cars and commercial vehicles but it sold almost 2.6 million engines in 2013. And about 75 percent of components production is exported to mainland Europe.

Then, according to statistics collected by the SMMT in 2013, 2.3m new cars were registered on UK roads and we built 1.5m cars, of which 1.2m were exported. That left us to import about 2m cars. But that doesn't tell the whole story. We are the second largest premium vehicle manufacturer after Germany, so the average per car came to £20,600, while the average value of imported cars was £13,000. We exported, in value terms £24.4bn and imported £24.7bn - the deficit only £0.3bn.

Now we factor in the components, and here it gets doubly interesting. The European manufacturing industry works at a regional level. For UK-built cars, about 35 percent of components are sourced from other EU countries. But, since about £5bn-worth of UK-produced components are exported – with 75 percent to EU countries - some components come back to us, built into assembled cars. Others are exported to other countries. German cars become vehicles - so to speak - for British exports.

And that's the real reason why the industry is so nervous about the UK leaving the EU. The supply chain is so complex that no one really understands it. And with a totally integrated industry - much of it working on a "just-in-time" basis - disruption of the supply chain engendered by the loss of the single market would bring the industry to a halt, Europe-wide.

What this isn't about, therefore, is relative trading disparity. We don't know how to measure trade, we're not measuring it properly and we don't really know where it is all going. And, in terms of trying to improve trade, we're not really much better off there, either.

It seems to me, in fact, that we have a long way to go before we even begin to understand how the system really works. And as long as we have so many parties churning out their dogmas, we're not even making a start. What we mustn't do, though, is put a dirty great spanner in the works. We must be able to assure industry that, when we leave, the goods will keep flowing.