As Brexit Negotiations Lag: Are Europeans Missing Opportunities as Big as the Sky?

Only 221 days to go until the official Brexit date of March 29, 2019, and only microscopic progress has been made on crafting a ‘Win-Win’ divorce deal.

Such is the state of affairs that exists (1) within the UK, (2) within the EU, and (3) between the two countries. It is to weep.

But whether the United Kingdom or the European Union are ready for Brexit or not, the Brexit baby will be born — therefore, it’s imperative that both sides stop posturing and get on with creating a deal that works for citizens and industry on both sides of the English Channel.


What Else Is There Besides Brexit?

Although it may be difficult for Europeans to see, there are bigger issues in the world than Brexit which is why a deal needs to get done properly and quickly as there are other, more pressing, and more important matters for European politicians to attend to.

If we liken the geopolitical world to an auto race (a Formula One race) while all the other teams are busy prepping for the race and getting to their startup positions, the UK and the EU have found a muddy part of the infield and are playing ‘bumper cars’ with each other like a couple of overly-exuberant teenagers — getting mud all over their sponsor’s brand names and on their respective drivers’ goggles, they’re damaging the tires and composite body of their race cars, and they’re burning up precious fuel reserved for racing against the ‘big boy teams’ of America, China, Japan, India, Brazil and others.

Either the UK and the EU governments already have a deal and just haven’t announced it to the public, or they don’t realize that other more important geopolitical matters will soon bypass the ‘tempest in a teapot’ happening in Europe.

New and important things sometimes start small. Don’t believe it?

The first streetlights were installed in Cleveland, Ohio in 1879 when electric lights (Brush arc lamps) were placed along major roadways. Thomas Edison (who spent most of his day napping in his workshop only to become extremely productive afterward) was a person who toiled away for years inventing and designing a reliable light bulb, manufacturing one bulb at a time. Yet, the lighting industry in its entirety is a multi-trillion dollar business in our day.

George Eastman, right under everyone’s noses created a company in 1888 (Kodak) that eventually made so much money they weren’t always able to count it. New machines had to be built (computers) to keep track of the astronomical number of transactions happening all over the world, every minute of every day. Over the decades Kodak contributed more than a trillion dollars to the global economy and made the company and its shareholders unbelievably wealthy. Kodak’s patents and knowledge are still with us today.

The Wright Brothers ultralight aircraft first flew on December 17, 1903 near Kitty Hawk, North Carolina. At that time, the two men were thought of as odd, even eccentric people with fantastical ideas wasting precious days that could’ve been better spent. Yet, look at what their great invention has created — a multi-trillion dollar civilian airline industry and military aircraft industry.

From tiny beginnings, the first Model T automobile rolled off the assembly line on October 1, 1908 and see the changes the auto industry has brought to the world. Henry Ford is widely credited with the creation of the American middle class, something that propelled America far ahead of its competitors. Today, the world’s auto industry is also a multi-trillion dollar business, yet everyone thought old Henry was a bit of a dreamer.

King George VI united the modern Commonwealth of Nations under the banner, “Leaders agree that Commonwealth members are free and equal members of the Commonwealth of Nations, freely co-operating in the pursuit of peace, liberty and progress.” The Commonwealth now have 53 members with a total population of over 2.5 billion citizens and ranks near the United States, China, or Japan in GDP and PPP.

Steve Jobs created a company that in relatively few years became a trillion-dollar company, designing a computer operating system that was ahead of his competitors, and designed an astonishing number of world-class products, services and apps that allowed users capabilities they’d never imagined.

All of these great advances slipped completely under the radar at the time of their creation. Governments, industry, and citizens were completely oblivious as to what would follow.

The first flight at Kitty Hawk was seen as a sort of carnival ride item that made you wish you’d live long enough to see it come to your hometown, while Henry Ford famously said, “If I had asked people what they wanted, they would have said faster horses.” Yes, Henry was that far ahead of his contemporaries.

The point is, all these advances and others haven’t stopped at any time during the 20th century — technological advances are happening right now, right under our noses, just as in the time of Henry Ford — and the next Steve Jobs or Henry Ford aren’t going to stop and wait a few years for the UK and the EU to get their Brexit act together.

For all we know, the next trillion-dollar company or multi-trillion dollar industry might be deciding (this week!) where to set-up their ground-breaking operation and such entrepreneurs are likely to avoid regions of the world where economic instability appears or where regulations aren’t finalized. Dragging-out Brexit = European instability.

It’s not against the UK or the EU… it’s against both.

Both will suffer if a stabilized economy and a finalized regulatory environment are seen to be ‘aspirational’ — which is a word entrepreneurs sometimes encounter in developing nations.


Missed Opportunities?

UK and EU leaders should rethink their negotiating ‘strategy’ and factor-in the potential for losing the next start-up, disruptive technology, or multi-trillion dollar industry to a different region of the world, whenever they next meet to discuss Brexit.

Imagine if Europe would’ve ‘had it’s act together’ in previous decades… perhaps Thomas Edison, George Eastman, Orville and Wilbur Wright, Henry Ford or Steve Jobs would’ve started their businesses in Europe instead of America.

Put that in your pipe and smoke it, negotiators.

With financing and instant communications available almost everywhere, the global playing field has levelled since the 19th century, so ‘ease of doing business’ and ‘a transparent regulatory environment’ can make all the difference when today’s entrepreneurs meet to choose a location for the next trillion-dollar business.

We’ll soon know if any of this registers with British and European leaders…


Written by John Brian Shannon | Reposted from LetterToBritain.com

Brexit: The Summer of Concession

In the land of Brexit some has been lost while much has been gained in this, the summer of concession.

Thus far, UK Prime Minister Theresa May has passed the EU Withdrawal Bill, held a firm but fair meeting at Chequers where she stopped prevaricating and demanded a ‘For’ or ‘Against’ decision from her Cabinet on her Chequers Brexit plan — which resulted in the day-after resignations of two of her most powerful ministers and four others — and she has since met European officials where she received cool support for her super-diplomatic, uber-polite and overly soft Brexit proposal.


How Very British!

In some ways those recently resigned MP’s (who will now sit as Conservative backbenchers) might as well be sitting on the opposition side because they possess deep knowledge of May’s inner circle and have the inside scoop on how Brexit is to proceed.

Yet, it was a polite affair with Boris Johnson making a gentle resignation speech in the House of Commons while still urging the Prime Minister to pursue the kind of Brexit UK citizens want. Boris Johnson never looked so principled or gentlemanly in his life (struggling to sound almost deferential to May) and good on him for doing so. Of course emotions were high, and no doubt, he was extremely disappointed that (in his mind) the Chequers Brexit plan surrendered some amount of UK sovereignty to the EU politburo. Five stars for Boris.

David Davis, who is more of a moderate Brexiteer than Boris, tried hard to contain his deep disappointment and published a polite and informative resignation letter outlining his position. As Brexit Secretary (but Brexit-lite when compared to Boris Johnson or Jacob Rees-Mogg, for example) it appears he thought he could convince May to move to a slightly more robust Brexit plan only to have his hopes dashed. If she was going to be swayed by anyone it would’ve been him. We understand his disappointment too, but that’s politics. Well done, David Davis!

The problem with forcing Cabinet members to declare support or non-support of her Chequers Brexit plan is that she has lost some of them who now sit as backbenchers and are free to hold the government to account.

Theresa May imagines herself to be an experienced operator but if they choose to make her look bad, they could. Therefore, she should not be looking for a fight with them nor should the Prime Minister default to her previous ‘slapping-down’ behaviors or she will get tossed around in a 30-month-long-storm completely of her own making. (Approx. 9 months to go until the official Brexit date of March 29, 2019 plus the 21-month implementation period, equals 30 months of potential hell for Theresa May if she handles her former Cabinet ministers harshly)

Even with all of that said, it’s better to head into the final Brexit stage with a unified team who are fully committed to her overly soft Brexit plan instead of a team that’s pursuing several different Brexit versions at once.

Now that May has asserted herself she seems to be gathering respect from all sides, resignations notwithstanding. Since Chequers, she’s twice the Prime Minister than when she first took the job. Theresa May marque une victoire!


Notes on Theresa May’s Chequers Brexit Plan

  1. The Prime Minister’s plan suggests a ‘common rule book’ with the EU so that trade in goods and agricultural products won’t be impeded by conflicting sets of rules. ‘Red tape is the eternal productivity killer and the less of it the better’ said every business person ever. Of course, adopting EU standards could make it more difficult to export UK goods to non-EU countries with their different standards, or so the argument goes. Yet, every other country seems to master this, so why not Britain?
  2. The Chequers plan suggests a common rule book on state aid for industry, and harmonized environmental and climate-change standards, social policy parity, and protection for employees and consumers.
  3. Formerly one of the PM’s “red lines” was the jurisdiction of the European Court of Justice (ECJ) which will end after Brexit although UK courts would consider ECJ rulings and/or even consult with the ECJ in certain cases. Which seems a wise idea for any country to consider.
  4. An FCA (a Facilitated Customs Agreement) where the UK and the EU would operate as a combined customs area — which some might call a customs union of sorts — where the UK would collect tariffs on goods shipped from outside the two countries destined for Europe, and presumably the EU would do the same for Britain.
  5. A mobility framework agreement to formally end the free movement of people between the continent and the UK. Unregulated immigration from the EU caused the number of EU nationals in the UK to rise to 3.8 million in only a few years, which was a significant contributor to the Leave victory. The mobility framework would allow freedom of movement for persons — such as students that are actually enrolled in college, for retired persons that can afford to live in the UK, for workers who have a guaranteed job waiting for them in the UK and streamlined entry for tourists from any non-terrorist country. One would hope the EU would reciprocate on all of this.

The problem with the common rule book approach is that MP’s of any party may see it as a ‘BRINO’ (Brexit In Name Only) and consequently lower their level of support for Brexit — at least Theresa May’s version of Brexit. And if BRINO fears take root, Conservative MP’s could decide to vote for a different leader should a leadership contest arise.

Parliamentarians have very long memories… so the caution flag is out for Theresa until the UK crosses the Brexit finish line.


Summary

Although progress on Brexit seems agonizingly slow Theresa May is an accomplished bureaucrat who realizes she can move forward only as fast as the other participants in the race, and if she moves too fast her government may lose support in Parliament, in the public space, and in Brussels (where she has precious little support to begin with and doesn’t want to suddenly find she has even less) and if she moves too slow, even worse may happen to Britain and to her political career.

Therefore, the race she’s really in is an OJ Simpson-style slow vehicle police chase to the official Brexit date with every camera rolling and catching every step and misstep.

Not very exciting to be sure, but if she gets a reasonable Brexit all should be forgiven.

At worst, the next British Prime Minister will have a firm foundation upon which to Build a Better Britain. Let us hope!


  • View or download (PDF) the Chequers cabinet meeting Statement from HM Government here.
  • Iain Mansfield: May’s new plan isn’t perfect, but it’s practicable. However, it can only work if treated as her bottom line. (ConservativeHome.com)

Written by John Brian Shannon | Reposted from LetterToBritain.com

Theresa May Spurned in Austria After Making Sweetest Brexit Offer Yet

By now, we all know Theresa May, Britain’s Prime Minister since July of 2016.

‘Articulate deal-seeker who vocalizes well-written speeches on behalf of the UK and a Prime Minister offering the sweetest divorce deal in history.’

And yet in Austria on Friday among the friendliest of European allies, Theresa May couldn’t buy a friend.

It seems the European Union just doesn’t want a Brexit deal with the United Kingdom. (Which is their right, of course)

We should question the logic of such a stance, however. Surely there must be something to negotiate in the way of a Brexit deal so that politicians on both sides of the English Channel aren’t eaten alive by their own corporations after March 29, 2019 for not paving a way forward for industry.

In the absence of a timely Brexit deal, the day after the official Brexit date is likely to result in very heated exchanges with CEO’s landing in European capitals to vent their fury at their own political class. The UK won’t be exempt from this anger, either.

Perhaps this is one reason why Theresa May has gone far out of her way to offer the EU a sweetheart deal (complete with £40 billion to sweeten the pot and to salve hurt feelings) and trekking all over Europe for the past two years so that powerful corporate CEO’s will appreciate all her hard work in this regard and not take their frustrations out on her.

That’s thinking ahead, Theresa! Because in the event of a no-deal Brexit… it will hit the fan like, well, few times in the postwar era.

As usual, Britain will be on the right side of history. And we’ll all thank Theresa May for her monumental efforts to reach a deal before the cutoff date — even as continental CEO’s are pounding their fists on the desks of EU politicians for not accepting that sweetheart deal.

If so, I hope Theresa May is found having a wonderful luncheon in the White House on March 30, 2019 after formalizing a trend-setting trade deal with President Donald Trump! Because the EU politicians certainly won’t be enjoying their day. To put it mildly.


All is Not Lost

One of the smartest and most experienced politicians on the planet is thinking ahead.

German Chancellor Angela Merkel has called for a meeting with Theresa May at the beginning of September that could kick-start stalled Brexit negotiations into high gear — which until now have been relegated to the British Prime Minister making polite speeches throughout Europe, receiving polite but tepid applause, and hearing the same message countless times, ‘That’s just not something we can do, Theresa.’

The rest of the Prime Minister’s summer seems to be about walking in the Swiss Alps sprinkled with some minor appearances throughout Europe to promote her super-diplomatic, uber-polite and overly soft Brexit proposal based on the Chequers document, that will no doubt continue to be rebuffed by the EU leaders and negotiators she meets. (A disheartening summer for Ms. May)

By September she may be ready for high level meetings with the continent’s most capable and most experienced politician. Let’s hope for Britain’s sake that Theresa May doesn’t feel too ‘beaten down’ on account of her many discouraging summer meetings, or it’s going to go all the EU’s way.


A Desultory Summer for Theresa May, Then a Restive Conservative Party Caucus, Followed by Meetings With Europe’s Most Experienced Leader

What could possibly go wrong?


Whatever your summer plans: Enjoy the summer!

And do take the time to thank God, your parents, your favorite high school teacher or whomever is important or profound to you, that you aren’t Theresa May forced to shuttle around Europe all summer only to be told, ‘No, no, no, and more no’ at each stop for offering the most generous and overly soft divorce settlement in history — one that is practically dripping with Rote Grütze and honey — without receiving a single encouraging word from her hosts all summer, and then having to return to a fractious party ready to toss her overboard on account of her overly generous Brexit proposals.

“Curiouser and curiouser!” cried Alice.

Written by John Brian Shannon | Reposted from Letter to Britain

Brexiteers Davis and Johnson Abandon May’s Soft Brexit

Major Resignations in Theresa May’s Government

Over the past 24-hours two senior officials in Theresa May’s government have resigned due to differences in what kind of Brexit each seeks.

And frankly, it’ll be a blessing. Far less paint will be peeled off the walls each week at 10 Downing Street, if you catch my meaning.

Even though both David Davis and Boris Johnson were and are strong proponents of Brexit (which Prime Minister Theresa May also claims to be) governing the country becomes an impossible task when three people fight each other daily to steer the ship of state.

Every Prime Minister must tolerate some division within the party caucus to be sure. Less so, but still important is to allow a variety of views within Cabinet so that it doesn’t become a sterile place where ideas go to die. But there comes a point when too much division becomes the main issue — instead of the people’s business being the main issue.

Which is why it’s important Theresa May stuck to her guns and didn’t make any last-minute deals (of a kind that a lesser PM might have made) to keep the crew together. Not that Davis and Johnson are going anywhere as they’ll remain Conservative Party backbenchers.

Certainly, Margaret Thatcher would’ve told Davis and Johnson to ‘go fish’ some time ago and probably would have physically evicted them from the room. 😉 (You never knew with Maggie!)


Whether You Agree with Davis and Johnson or Not, this Streamlines Whatever Brexit Modality Theresa May Pursues

While some would like the strongest possible Brexit — Britain’s future will be better with a Brexit agreement that doesn’t ruin relations with the EU, one that includes some kind of reasonable free trade deal, one that allows the UK and the EU to cooperate on a wide range of issues such as, but not limited to; A common rulebook where and when feasible, the Galileo project, the ECJ (where UK courts would include, but not be limited or bound by ECJ rulings and opinions) NATO, and agreeable relations or even membership with other important European institutions.

Theresa May’s sole goal (it seems) is to get a deal with the EU. Which is a noble goal in itself.

The flip side of that is when the agreement Theresa May intends to present is so diluted that her Cabinet walks out the door. Yet, the Prime Minister may still be proven right by events yet to unfold.

It’s obvious to all but the most politically tone-deaf that no matter what agreement is presented to the EU mandarins, it is likely to be swiftly rejected. Including Theresa May’s super-diplomatic, uber-polite and overly-soft Brexit proposals.


But if That’s the Case, Why Try at All?

As an experienced bureaucrat slogging it out in the Home Office for a decade Theresa May knows something that hardcore Brexiteers don’t. And that is, those who get ‘stuck with the bill’ wind up paying many times over.

Let’s look at three scenarios, and let’s see who gets stuck with the bill:

  1. Hard Brexit faction presents an uncompromising Brexit deal to the EU: The European Union declines the deal offered and the blame is on Britain ‘for being so unreasonable’ and from that point on… every single thing that ever goes wrong in Europe, the World, and the Solar System… will be the fault of *those* unreasonable Brexiteers. And it’s not that EU people are evil, it’s just human nature to feel that way when jilted.
  2. Soft Brexit faction presents a soft agreement for signing in Brussels which is accepted by the EU: It’s seen as a ‘Win-Win’ for both sides. But the EU ‘wins’ by a slight margin and when you’ve effectively ‘dumped your partner’ sometimes it’s a good thing to let them ‘win’ a little bit. The worst that can happen in such a case is that the next UK Prime Minister will try to improve the deal and may or may not succeed in that endeavor. Likely, as time rolls on, both sides will arrive at a better agreement and both can claim credit with their respective voters for any future agreements. Not a bad scenario at all.
  3. Soft Brexit faction presents a soft agreement for signing in Brussels which *isn’t* accepted by the EU: At that point, the British can walk away from the table knowing in their hearts and with the whole world as a witness that they ‘tried their best’ to accommodate the concerns of the people in Brussels but they just couldn’t strike a deal. (A sort of ‘no fault’ divorce) And Brexit proceeds on a WTO-style basis with a flurry of à la carte agreements signed following March 29, 2019 allowing EU cars to be sold in the UK and UK airlines to operate over continental Europe, for two examples.

In scenario #1: Britain and the Hard Brexiteers get stuck with the bill for about the next century. Maybe longer. ‘Those intransigent Brits! A bloody difficult people they are!’

In scenario #2: Britain gets stuck with the larger part of the bill and in the following years must work incrementally towards the final Brexit arrangements they were originally seeking. ‘Damn, Theresa, couldn’t you do any better? Oh well, we got a Brexit of sorts, you’re forgiven.’

In scenario #3: The EU gets stuck with the bill and the world decrying EU intransigence. And Theresa May *probably* gets re-elected in a landslide.


Summary

The lesson from this story is that when the chips are down and you *must* bring home a win *always* go with the plan that is *guaranteed to work*.

Which in the real world often isn’t the most glorious, most exciting, nor the most popular plan. Unfortunately.

But when a plan works, it’s a win. And beautiful or ugly, if the plan works that’s all that matters.

Written by John Brian Shannon

Will a ‘No Deal’ Brexit Harm UK Manufacturing?

Certain pro-EU commentators paint a picture of either a catastrophic Brexit crash-out (Hard Brexit) or a ‘non-Brexit’ where the UK would retain few of the rights gained by a full Brexit but would still be chained to the responsibilities of EU membership (Soft Brexit) whether via the so-called ‘Norway’ model or the ‘Norway-plus’ model, or via any other model such as the ‘Canada’ model.

Those same commentators excitedly cite potential UK manufacturing job losses in the post-Brexit timeframe even though the UK is primarily a service based economy (80.2% in 2014 and rising) and they forget to factor-in the astonishing changes occurring every day in Britain’s manufacturing sector.


UK Manufacturing = Less Than 10% of GDP

Manufacturing in the UK accounts for less than 10% of GDP (2016) and provides jobs for 3.2 million workers (2016) but a recent PwC report says that by 2030 half of all UK manufacturing jobs could be automated. That’s less than 12-years from now. And it could happen much faster and on a much larger scale than that.

Repeat; Up to half of all UK manufacturing jobs will be lost within 12-years. It’s uncertain whether British workers are aware of these looming changes.

Economic impact of artificial intelligence on the UK economy
The economic impact of artificial intelligence on the UK economy. Image courtesy of PwC. Click on the image to view or download the PDF report.

What’s Great for UK Businesses Won’t be Great for Foreign Workers

In 2018, of the 3.1 million UK manufacturing workers (a stat that falls with each passing year as automation increases) we find that over half of manufacturing workers in the UK are citizens of other countries — primarily from eastern Europe, but also western Europe.

So, expect UK-based eastern European workers to be replaced by automation.

Increasing automation and Artificial Intelligence (AI) will cause UK companies to choose between UK-born workers and eastern European workers, and it’s likely that hundreds of thousands (perhaps millions) of eastern Europeans will be returning home with plenty of UK coin in their pocket. (And why not, they earned it)

I hope you didn’t expect the UK to lay-off its own British-born workers in order to protect the jobs of eastern European-born workers as automation proceeds, did you? Would EU companies show that level of courtesy to UK workers in the European Union, were the situation reversed?

Profits for UK manufacturing companies are projected to rise significantly as automation and AI become one with the system, while UK-born manufacturing workers should find themselves at 100% employment.

What’s not to like?


UK Manufacturing Job Losses Due to Automation – Not Brexit

If you’re one of the EU elites who fear that hundreds of thousands of eastern European workers in Britain will lose their UK manufacturing jobs due to Brexit you couldn’t be more wrong.

Let’s be perfectly clear; Half of all UK manufacturing jobs will be lost to automation by 2030 — and it won’t be on account of Brexit!


Summary

The narrative that says the UK economy will be severely damaged on account of manufacturing job losses due to a Hard Brexit is a complete and utter fantasy.

Every day from now until 2030, automation and AI will replace eastern European workers, Brexit or no Brexit. Meanwhile, British-born manufacturing workers will find themselves at full employment.

It’s all good!

Written by John Brian Shannon


Related Articles:

  • How will artificial intelligence affect the UK economy? (PwC)
  • The economic impact of artificial intelligence on the UK economy (PwC)
  • What would be the cost to the UK of regulation by a foreign power and major competitor? (BrexitCentral.com)
  • Why the UK Needs a Tax on Job-Stealing Robots (kleef.asia)