Best of the Week #11 The potential pitfalls of a US-UK trade deal

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Apologies for posting this late, I had to reinstall Mac OS onto my laptop because it wasn’t working. 

Awhile ago, Donald Trump tweeted his enthusiasm for a US-UK trade deal. Inevitably, Brexiteers were ecstatic. Here was irrefutable proof the UK wouldn’t suffer any loss of trade after Brexit. Trade with the US and other countries would replace any losses from leaving the EU. But as usual, the reality is more complex. Partly because the EU and the 45 agreements the EU has with 75 countries around the world account for 60% of our exports, which doesn’t include the abolition of non-tariff barriers that comes with the Single Market. Partly because Trump has made numerous protectionist statements in the past, so the idea that he can be a genuine free trader when it comes to the UK is nonsense. But also because the benefits of a potential US-UK trade deal are mixed at best.

This week’s article comes from George Monbiot in the Guardian https://www.theguardian.com/commentisfree/2017/jul/25/chlorinated-chicken-trade-britain-us-food-standards-globalisation. Monbiot’s argument is that trade deals are not principally about reducing or eliminating tariffs anymore, because WTO rules already disincentivize them. Instead, trade deals are about the harmonisation of standards, which ought to increase prosperity by encouraging trade and promoting competition. This has very few drawbacks to groups of countries with already-similar standards, like the EU member states or Australia and New Zealand. But to countries with different standards, the policy areas covered by a trade deal become more contentious.

So in the instance of the US and the UK, you have two disparities. The first is in economic clout. The US is the world’s largest economy (excluding the EU), that conducts only a small proportion of its trade with the UK. On the other hand, the UK is a relatively small economy that conducts a much larger proportion with the US than vice versa. Moreover, because the UK has chosen to leave the EU with uncertain consequences, it has far more to lose from a deal not coming to fruition. The second disparity is in standards- the UK currently has the EU’s high standards, whereas America’s standards are much lower. In a negotiation where the US has the upper hand, it is very unlikely that the US will change its standards in order to reap a very small reward. It is far more likely that the UK will dramatically lower its standards, due to a Conservative government comfortable with American standards and sheer desperation.

For Monbiot, the infamous example of chlorinated chickens are but one instance of the UK lowering its standards to the detriment of the country’s wellbeing, even if the deal is good for headline economic growth figures. More severe consequences include the degradation of environmental regulations, the opening up of currently nationalised services to American corporations, a slimmed-down welfare state, weaker health and safety standards, and the rights of employees to holidays and sick pay. The point is that it may not be worth sacrificing our EU-level standards for a trade deal with the US, especially as such a deal probably won’t offset the losses of leaving the EU. Monbiot was a voracious critic of the proposed TTIP agreement between the EU and the US. But in my view, TTIP had the potential to be beneficial because the EU and the US were negotiating as equals. No such parity exists if the UK negotiates alone.

Overall I’m more enthusiastic about free trade generally than Monbiot, provided it is accompanied by high standards on the environment and workers’ rights. The prosperity of much of the EU and the prolonged economic growth of countries crippled by the legacy of Communism proves that economic freedom and quality of life need not be antithetical. I certainly don’t believe there is anything to be gained from intentionally reducing an economy’s openness, as Trump has frequently suggested.

However, on this specific issue, Monbiot has my support. Trump has long expressed a zero-sum view of the world, where any gains made by countries like China or Mexico must have come at the expense of the US. He espouses a mercantilist perspective that emphasises trade balances and not being ‘screwed’ by other countries. So when negotiating with the UK, he is likely to try to enrich the US at the UK’s expense. Industries currently owned by UK companies or the British government will be opened up to American corporate takeovers. Our agriculture industry will have to accept lower US standards and/or significantly less revenue due to American competition. It may be that Britain would have to lower the generosity of agriculture subsidies without America lowering theirs. We would probably lose the right to prevent American energy companies from fracking in Britain. Far from ‘taking back control’, we would be handing it over to corporate America. In any case, I don’t believe a UK-US free trade deal would offset the losses of leaving the EU, especially if TTIP goes ahead. The best case scenario is that economic growth would be the same as it would have done had we remained in the EU, but our standards would be lower. None of this is to say that American corporations are necessarily bad, but that we should be regulating them on our own terms, not theirs.

The price of privatising airports in the UK

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If you are flying off on holiday the airport is now, in all probability, the worst part of the experience (except the flight!).  Profit is the motivation of the airport management, rather than security. Misery is the result.

1. More than half UK international airports lack free drinking water. Water fountains have been removed, forcing travellers to buy expensive bottled water instead. As people have wised up to the rules and brought empty plastic bottles through security, the airports started to remove or hide their water fountains.  Where water fountains still exist the water barely dribbles out, raising the suspicion that the water pressure has been set deliberately low.

2. So- called  ‘Dutyree’ is a rip- off

A survey this week of retailers in Heathrow by price comparison site PriceSpy found that a Samsung S7 phone in the Samsung store was £559; on Amazon it was £452. A Fitbit selling for £134.99 at Dixons, was £128 in Debenhams. A £319 Sony Camera at its Heathrow shop was £309 at Argos. This should come as no surprise, given the extraordinary rents retailers must pay to be in the airports.

3. The insanely bad currency rates

One airport, Cardiff, is offering just 88 cents for every $1 of a holidaymaker’s cash. Given that the market rate is around €1.11 to £1, it means the exchange bureau is pocketing around a 20% profit. Even the big names, such as Moneycorp and Travelex, will take a 10-12% cut.

4. The VAT trick
When you are forced to show your boarding pass at the till – with the implication that it is a legal requirement – the truth is that it is merely so that the shop can pocket the VAT on purchases made by customers flying to non-EU destinations. Boots and WH Smith now promise to hand the VAT back on purchases over £5-£6, but other retailers carry on regardless.

5. Charging for wifi
Manchester airport actually crows about the fact that it has extended its free wifi from 30 minutes to one hour, before then stinging you for £5 an hour. In Amsterdam, Copenhagen, Dublin, Frankfurt, Istanbul, Munich, Paris, Rome (the list goes on and on), airports give free unlimited access. Not in Britain.

6. Inadequate seating
It is evidently a far more profitable use of the precious floor space for a maze of over-priced shops than giving passengers sufficient seating.

7. The drop-off/pick-up charge
At one airport a brief pause while picking someone up costs £3 for 10 minutes, then £1 a minute thereafter.  All this for foreign owned companies operating airports.  Nothing is now owned by the British taxpayer.  (adapted from an article in The Guardian, 5 August 2017 by Patrick Collinson).

Why do we have to endure all this?  Because the government, which used to run it all, decided to privatise it.  Who benefits?  Well, it is not the travelling citizen.  Could it be associated with any possible corrupt goings-on in the murky world of political funding, or simply neoliberalism run riot?  Is there another government in another country quite so ideological and quite so stupid?  Epicurus, who advocated moderation, would have concluded that we have gone crazy.

 

Poverty and old age

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The New York Times of February 24th carried an article about behavioural economics. The article states that since defined- benefit pensions disappeared in the private sector, only 40% of American families in the bottom half of the income distribution have any form of retirement savings plan. Even among those who do have a plan, their total savings are, on average, $40,000. They don’t save because they have no money to save. Of all the advanced economies, the US had the worst poverty rate and the worst infant mortality, obesity and diabetes rates. The death rate from drug overdoses among young white adults is as high as the death rate used to be of AIDS at its peak. Government savings schemes haven’t worked, nor has making saving simpler.  (Based on a New York Times article)

Epicurus might well judge this situation, in an otherwise rich country, to be a disgrace. There are those who say the government’s role is to reduce dependence on public support, and that the poor should “get on their bikes”, find a proper job , and support their families. The fact is that under current conditions, with wages falling or stagnant,  any incentive to save for old age is overwhelmed by the need for food on the table this week. What is needed is a living wage that gives poor people the opportunity to make choices. One of those choices would be to save for retirement. This is absolutely not the message that resonates with corporations, their political hangers- on, or the heartless religious Right.

How can anyone justify this or think it acceptable?   Historically,  one could, not unreasonably, forecast an eventual uprising and violence, given desperation and the obscene number of guns owned by the public.  The reader will probably think this to be alarmist, but the French and Russian revolutions came as a surprise to the super-rich in both countries, spurred by such desperation and a non-responsive elite.   In America? Well, I believe in moderation, and hope Congress, before they vote their backers even more riches, stops and ponders history.  A dystopian point of view, I know, and I apologise, but historians are there partly to point out parallels.  This cannot – will not – go on indefinitely.

Walt Whitman on the Democratic Party

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Nowadays it is the Democrats who are (ahem!) the high- minded crowd, compared with their competition, the Republicans. Times change. This is Whitman ‘s take on the Democratic Party Convention in the US in the 1850s:

“The members who composed it were, seven-eights of them, the meanest kind of bawling and blowing office-holders, office- seekers, pimps, malignants, conspirators, murderers, fancy- men, custom house clerks, contractors, kept-editors, spaniels well-trained to carry and fetch, jobbers, infidels, terrorist, mail-riflers, slave-catchers, duellists, carriers of secret weapons, deaf men, pimpled men, scarr’d inside with vile disease, gaudy outside with gold chains made from people’s money and harlots’ money twisted together; crawling, serpentine men, the lousy combings and born freedom-sellers of the earth. And whence came they? From back yards and bar-rooms; from out of the customs-houses, marshals’ offices, post offices and gambling hells; from the President’s house, the jail, the station-house; from un-named by-places, where devilish disunion was hatch’d at midnight.

“Such, I say, formed…the entire personnel, the atmosphere, nutriment and chyle of our municipal, State, and national politics – substantially. permeating, handling, deciding and wielding everything – legislation, nominations, elections, “public sentiment” etc, while the great mass of the people, farmers, mechanics and traders, were helpless in their gripe”.

Like Epicurus, Whitman seemed to have a thing about politicians.  We no longer have writers who have the command of English that enables them to  pour out such vivid vitriol onto paper. However, were he alive today Whitman might have admitted that Democrats had become a much more respectable lot, if somewhat devoid of effective ideas to regain power, and would turn his attention, shall we say, elsewhere.  American political life has not changed that much.  Lack of lnowledge seems to be power.

Winning by exhausting the opposition

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This has never previously been seen anywhere else, and in any era, and is truly historic: subversion- by- exhaustion.

I refer to the White House strategy of disgusting and exasperating all normal, decent supporters of thoughtful, informed and grown-up government, with the objective of getting them to stop paying attention to the daily, endless, infuriating and stressful American news. The succession of tweets and leaks, ad hominem attacks, bullying and ignorant comments remove all oxygen from public discourse. Responsible opposition is rendered ineffective and falls upon deaf ears. Tweet by tweet people are stopping paying attention, and are reading a book instead. Public servants are already demoralized. The objective? The sidelining of the Constitution, the end of checks and balances and the introduction of a Putinesque grabitariat.

Watch carefully as Trump subverts a whole country, not by military coup or even economic cataclysm, but by sheer disgust. Steve Bannon- no fool – is winning. We are witnesses to a clever and sophisticated strategy.  Only his own Party can stop this. Will they?

Epicureans believe in peace and calm and the reduction of stress. It is for this reason that Epicurus disdained party politics. But is this instance we cannot stand back and shrug our shoulders. We have to hold our noses and keep opposing. Let academics sniff at Epicureans who follow and discuss the political news. So be it.