After a week of turmoil on the currency exchanges, with the anti-EU press losing their cool and lashing out at anyone of dissenting view, came The Hard Reality, as Nissan CEO Carlos Ghosn arrived in Downing Street to meet our not-at-all-unelected Prime Minister Theresa May. His chosen mode of transport was a Nissan Qashqai, built at the plant near Sunderland whose future may be in doubt. The heaviness of the hint was unmistakable.
The numbers are straightforward: Nissan’s plant is responsible for a third of UK car production. If Britain were to leave the Single Market and then fall back on World Trade Organisation (WTO) trading rules, those cars exported to the EU would attract a tariff of 10%. For a volume car manufacturer, that would make their products instantly uncompetitive. And the alternative would be brutally clear.
That alternative, for a company like Nissan which is part-owned by French automotive giant Renault, would be to up sticks and move its UK production to a location still in the EU. The Sunderland plant employs 7,000 directly, with another 21,000 in the supply chain. Tens of thousands more are dependent on Nissan remaining in the North East. This was a very high stakes poker game. And we now have a winner.
Who might that be? Well, it isn’t Theresa May. She blinked first, chickened out.
The first paragraph of the BBC report tells you all you need to know: “The boss of Japanese car giant Nissan says he is ‘confident’ the government will keep the UK a competitive place to do business after it leaves the EU”. That means one of two things - either companies like Nissan will be compensated for any tariffs imposed on leaving the Single Market, or that Britain will not leave the Single Market at all.
Other explanations are being floated, such as having manufacturers like Nissan and Airbus technically still inside the EU Customs Union, but if that had been acceptable to other member states, it would have been tried by other countries before now. The Government is effectively boxed in. Worse, Theresa May has let the cat out of the bag on her negotiating strategy - she’s prepared to subsidise Nissan to keep them here.
That would impose an extra cost on other taxpayers. And if Nissan gets such a guarantee, then you can be sure Honda, Toyota, Jaguar Land Rover, General Motors, BMW (Mini and Rolls Royce) and VW (Bentley) will want the same. So will Airbus and BAe. So will any and every significantly-sized manufacturer with an EU customer base.
Where will the billions in subsidy payments come from? What pot of money do we have which can be raided for years into the future? There isn’t one; had there been one, it would have been exploited before now. Theresa May is making this up as she goes along, and it shows. Carlos Ghosn has shown her just how much control she has taken.
We now know the price of choking off inward migration to appease the bigots and ranters. The problem is that they will not be the ones who suffer. But the rest of us will. Big time.
If we're stuck with WTO rules at any point, temporarily or permanently, we'll have to offer the same tariff structure to everybody, and lots of countries will be interested in any "compensation" (subsidy) system we adopt. Sector by sector or, better, company by company arrangements would be even more fun.
"Where will the billions in subsidy payments come from? What pot of money do we have which can be raided for years into the future? There isn’t one; had there been one, it would have been exploited before now."
I am afraid there is a 'pot' it's called a state issued currency (FIAT if you like) and from time to time it does get exploited, usually that is during a war. The Govt isn't revenue constrained. Nothing controversial there even mainstream economists would agree but they think there is a better way through technocratic control of the money supply via an 'independent' Central Bank, they don't trust politicians, it's a 'Nobel lie'.
The lie revealed by James Buchanan & Paul Samuelson https://youtu.be/4_pasHodJ-8
Question is does May & Hammond know it.
"Where will the billions in subsidy payments come from?" From the £350m a week I saw mentioned on the side of a bus. The NHS will just have to without.
And in completely unrelated news ...
@andy blatchford. What you've referred to isn't a pot of money, it's creating money out of nothing.
Do you remember Nigel Lawson bailing out a sinking Pound by buying sales on the Futures Market with money he didn't have? Well, that was a temporary run on sterling - Major trading problems with nations are not 3 day blips.
"Creating money out of nothing"
Quite and how it is done (and when it receives it back via the tax system it destroys it) easier to say Government doesn't have or need 'money' as it isn't a 'thing'(in fact better off not using the word money as it's very vague) What matters are real resources. Whether you like it or not Govt can 'afford' anything for sale in it's own currency. No pots needed.
@andy blatchford. So, post-Berxit, for how long can the Government subsidise manufacturers in the UK who wish to export goods and services to the EU by creating money out of nothing?
How will the UK Government get enough money from the tax system to pay for all the usual expenditure and make up for the money it has handed out to businesses? Bear in mind that the subsidies will be year on year on year and each time they create money from nothing the Pound will take a hit on exchange rates? Also, take into account the losses in spending power will mean less spending and therefore less revenue from VAT?
The 3 Berxiteers (Johnson, Davis, Fox) and Farage (NF reminds me of a monkey on the Rock of Gibraltar wandering around, making eeking noises, and stopping occasionally for a wank) ought to be held to account for the massive con trick that they pulled.
May will expose herself to anti-dumping proceedings in the EU and elsewhere.
I'm sure the head of Nissan has explained how difficult and expensive it is for the likes of Subaru and Suzuki to trade with the EU. These Japanese companies can't move production. Nissan can and could move to a French Renault plant in a few short years.
May exposing herself will certainly increase the NF man's eeking and wanking I would imagine........
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