574. [2/2] The Rick Thompson Report: Brexit Q&A (January 2019)

My dad answers some questions from listeners about Brexit. Includes conversation about Theresa May’s deal, the prospect of a ‘no-deal’ Brexit, Parliamentary democracy, the possible reactions to revoking Article 50 and cancelling Brexit altogether, chances of a second referendum, Scottish independence, the sensitive Northern Ireland situation, consequences for EU nationals in the UK and the question of trading on WTO rules.

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Introduction Transcript

Hello listeners around the world, this is part 2 of a double episode of The Rick Thompson Report on Luke’s English Podcast in which I am talking to my dad about Brexit. We recorded this conversation on Thursday 24 January 2019.

As I said, this is part 2. You should listen to part 1 before you listen to this. In part 1 we chatted about the current Brexit situation, talking specifically about what happened with Theresa May’s Brexit deal, why MPs in Parliament rejected it, what’s going on now in Parliament and with Brexit generally, and what might happen next.

We talked about the possibility of a no-deal Brexit (aka “crashing out of the EU”) and what that might look like. We talked about the possibility of Brexit being postponed or even cancelled completely and we talked about the possibility of a 2nd referendum happening.

We also went into some detail about the Northern Ireland backstop – aka the Northern Ireland border problem and various other aspects of this complicated issue.

This brings us to part 2 and In this part we’re going to respond to some questions from my listeners, and there are a few times when we refer to things we said in part 1. So this will all make a bit more sense to you if you listen to part 1 first, that’s episode 573.

So, assuming that you’ve heard part 1 of this conversation, let’s now listen to my dad’s responses to a few questions from my audience. So here is part 2 of this episode of The Rick Thompson Report on Luke’s English Podcast.


Questions from Listeners

Hiro (twitter)
I was expecting you to have another episode about Brexit with your dad. Thank you in advance.
I have three questions.

1: The result of the referendum in 2016 was 52:48. Do you think the ratio has changed recently?

Luke: The ratio has changed because people who were too young to vote in the previous one have now reached the legal age, and some older people who voted leave in 2016 have died.

TheWeek.co.uk 21 Jan
Britain has seen a “Brexit crossover” where the number of younger Remain supporters who have reached voting age combined with older Leave voters who have died since the referendum has wiped out the 1.3 million majority that voted in favour of leaving the EU.

2: Theresa May’s deal was rejected several days ago, but she survived the no-confidence vote. It seems to me that she was left with a heavy burden and no one else wants to be in her position. Do you think there is any possibility that she will get angry and leave?

3: The British parliament is in a very difficult and complicated situation. I guess it’s showing the worst side of democracy.( It reminds me of the final days of ancient Athens. )
What do you think about it, especially in relation to the dictatorships of other countries?

Mits (twitter)
Hi Luke! I always enjoy the episodes with your dad:) Especially on Brexit. Here are my questions.
What would be the ideal situation for UK?
Would you like a second national referendum?
I am very worried about the current situation and the future..

Lysak_Michael (Twitter)
Hello, Luke! In case of Brexit how will England deal with Scotland, which is going to realize its right to independence?
And, of course, the border between NI and Ireland.
Could your dad share his feelings about actions of IRA in 1972, 1974, 1982? Thank you!

Ladislav (Facebook)
I’m so looking forward to this episode. I was wondering whether you was going to record one. I must say that the The Rick Thompson Report episodes are the best alongside ones with Amber and Paul!
Question: how long will it take to decide what the next step (new government, new general election, referendum etc) is going to be?

Ivan (FB)
What surprises me about Brexit is some “split” of the picture that I am receiving.
Never in my life, have I heard anything positive about Brexit from articles/podcasts/media.
And at the very same time whenever I speak privately with a UK citizen I ask them whether they support Brexit and keep getting answers “it’s complicated but yes”.

Luke: Which media are you consuming? Which people are you talking to?

Ju (maybe Julie or Julia) (FB)
I’ve been waiting for a new episode of the Rick Thompson Report! I’m worried about a no-deal and the consequences for EU citizens who want to stay in the UK…
Do you think that there will be a Brexit without a deal or will they postpone it?
BTW, I’ve been listening your podcast for about a year and I just love it! 👏👏👏

Aritz (FB)
Hi Rick! I’m from Spain, working in London.
What’s going to happen with the pound-euro exchange?
Shall I send my savings in pounds to Spain buying euros?
Cheers!

Igor (Twitter)
Could you talk about the Irish border and the backstop?
And also about Jeremy Corbyn, whether he’s the right person or not to lead the Labour Party in this important issue? Thanks, I always listen to LEP.

Zdenek (FB)

If article 50 is revoked or extended to buy more time for Brexit, isn’t there a huge danger of people losing faith in politics and people wanting to take matters into their own hands, riot risks etc?

What are the chances Scotland will leave the UK and instead join the EU if Brexit happens? In their Independence referendum they decided to stay in the UK, but nobody told them they would have to leave Europe.

Can your Dad give his predictions in percentages of the following happening? New referendum (people’s vote), general election, No deal Brexit, Theresa May’s deal, civil war (just a bad joke- I am actually heartbroken about what is happening in the UK)

Do you think Jeremy Corbyn is playing his cards right? It seems to me that he is lately behaving a bit like Boris Johnson, speculating too much and thinking about his own career rather than the future of the UK? Shouldn’t he just get over himself and campaign for remain?

A lot of people are angry at the prospect of Brexit not happening. They say it would be undemocratic. Don’t you think that ignoring the people’s voice would not be right? On the other hand parliamentary democracy means parliament is the body that decides. Why should ordinary folks have such power, especially if they clearly have no clue what they are doing?

Kauan (FB)
Is Brexit still a thing that’s gonna happen? I thought it got canceled or smth or whatever. At least I heard it somewhere.
Luke: 🤷‍♂️

Chriss from Mexico (FB)
Will we (foreigners) need a visa to enter?

Marcio (FB)
Why did the UK government itself create this bad situation that has stopped the entire country?
(originally written: Why the own English government have created this bed situation that stopped all country?)
Luke: Ask David Cameron

Video
Danny Dyer talks about David Cameron. “Where is the geezer!” “He’s in Europe. He’s in Nice with his trotters up!” “Twat!” (cockney accent) – a very strange moment in television as both Pamela Anderson and  Jeremy Corbyn are also present in the studio.

Stavtsev (FB)
Does it mean that Northern Ireland will be able to reunite with Ireland?

Farshid (website)
What advantages does it give to Britain and most importantly what effects it will have on other countries?


Ending

Thank you again to Dad for his contribution.

Thank you also to listeners for sending your questions. I didn’t manage to use all the questions that I received, so apologies to anyone who I missed out.

Now there are loads of other things I’d like to talk about on this subject but there isn’t really time. I might go back into it at some point.

“Trading on WTO rules” and What are tariffs anyway?

But before we go, I would like to revisit this subject of trading on WTO rules, because this is something you will hear from Brexiters when they talk about the prospect of us crashing out of the EU without a deal. They usually say “We can simply trade with the rest of the world using WTO rules.” I think it’s worth looking at what that really means, and how it’s actually a very dangerous step to take.

I mentioned in part 1 a Twitter user who I have been following. In fact I’ve noticed lots of very well-informed users of Twitter who have been tweeting various information, backed up by genuine understandings of all the technical details of things like the World Trade Organisation.

So, this guy on Twitter is called Edwin Hayward, and this is what he wrote about trading on WTO terms. It’s actually very interesting because not only can you learn about the reality of what that means, you can learn a thing or two about international trade and what tariffs are. This is what he wrote recently. You can find links to this on the page for this episode.

Debunking WTO and what “trading on WTO terms” really means… By Edwin Hayward

@uk_domain_names on Twitter

twitter.com/uk_domain_names/status/1073221524545363973?lang=en

As EU members, we participate in over 750 international treaties. Many relate to trade, enabling us to trade freely with the EU, the EEA, and 40+ other countries.

Other treaties cover non-trade issues, from air worthiness certificates to drivers licenses, UK and EU citizens’ rights, food safety, environmental protections, workers rights, etc.

On Brexit Day, we leave the EU. That means we lose all the benefits of its treaties. Those treaties are gone in a flash, as if we’d fed them into a shredder. (That’s not the EU being vindictive, it’s just how the Article 50 process works.)

Even IF we have a transition period, the treaties will already be gone, but we will be shielded from the immediate shock by the transition arrangement.

Right now, we share in EU trade deals with 78 countries (22 more pending). These deals cover 60.7% of all our of all our goods imports, and 66.9% of our exports. Overnight, we will lose them all, wave goodbye to the painstaking gains of over forty years of trade negotiations. In the absence of trade deals, we will be reduced to trading on WTO terms. WTO is a complicated system of tariffs and quotas…

Luke’s Note: What are tariffs? Tariffs are import charges, a bit like taxes on imports. A country’s government can set tariffs on goods imported into the country. Who pays the tariff? The company which is sending the products into that country. So, if your country produces tennis balls and you want to sell them in the UK, the UK will probably have set tariffs which you have to pay when you send your tennis balls into the UK. The UK government has set tariffs on those tennis balls in order to protect the tennis ball manufacturers that it has at home. Because, if it’s possible to buy super cheap tennis balls from abroad, then British tennis ball makers will go out of business – they would either not be able to compete with the cheap foreign tennis balls, or they’d have to lower their prices to match the cheap foreign tennis balls – in either case they would go out of business. So the UK government sets tariffs on tennis balls to protect those British tennis ball manufacturers. That’s what tariffs are – they are an import charge which protects local manufacturers from super cheap imports. Back to the article by Edwin Hayward…

In the absence of trade deals, we will be reduced to trading on WTO terms. WTO is a complicated system of tariffs and quotas, plus a baseline set of rules designed to make trade a little less painful and a little smoother than it otherwise would be.

WTO provides a baseline for trade, but it is the absolute minimum that all rational countries seek to improve on. That’s why everyone’s trying to sign trade deals all the time. The whole point of trade deals is to improve on the basic terms offered by WTO.

In trade terms, WTO can be likened to fourth division football: it’s definitely a step up from a kick-around in the park using jerseys as goalposts, but it’s by no means a high standard.
Let’s talk about tariffs. WTO has an immensely complex schedule of tariffs, running into thousands of categories. Different products attract different tariffs. For example, under WTO, cars are subject to tariffs of 10%.

Tariffs are paid by importers, but of course they then turn around and pass those extra costs onto the consumer.

Right now, UK manufacturers can sell cars to the EU tariff free. But under WTO, those cars will be subject to 10% tariffs, effectively making UK-made cars 10% more expensive for EU consumers.

But all the major car manufacturers have manufacturing facilities elsewhere, including other EU countries. So if we’re reduced to trading on WTO terms, they’ll just shift production to the EU and avoid the 10% tariffs.

WTO gives us the right to control the tariffs on our imports, even reduce them to zero if we want to.

But that’s when the WTO most favoured nation rule kicks in. “Most favoured nation” is possibly the most misleading expression ever invented, because what it really means is that we are not allowed to favour one nation over another in our WTO dealings.

So if for example if we are desperate for cabbages, we can set a tariff of 0% on them. That makes them cheaper, which stimulates demand and encourages more producers to send us their cabbages.

But we can’t set a tariff of 0% for just one country. If we decide to drop the tariff on cabbages to 0%, that becomes our new tariff for every country in the world. So we get flooded with cabbages from the cheapest producers on the planet.

That’s great if you love cabbages, but absolutely devastating if you’re a UK cabbage farmer.
You can’t have it both ways. Either you shelter behind tariffs to protect domestic producers, or you reduce them or cut them to zero to encourage cheap imports – and destroy your local industry in the process. The rules of WTO force that tradeoff for every product sector. But that’s only half the picture. We have no control over other countries’ import tariffs, i.e. the tariffs imposed on the things UK-based producers export to them. If we’re trading with them on WTO terms, both the EU non-EU countries will impose whatever tariffs the WTO demands.

Overnight, our exports will be more expensive. That, combined with the fact that we will no longer share common standards with the markets we export to (also covered by the treaties we will have lost) will make products manufactured in the UK significantly less competitive in the global market.

For instance, why would any overseas consumer buy a UK-made car if they can get exactly the same car from the EU or elsewhere at a lower cost? Short answer: they won’t.

But what if the EU were to drop their tariff on cars to 0%? That would help our car producers, because our cars would no longer incur tariffs. However, “most favoured nation” would kick in. The EU would be forced to offer every country in the world 0% tariffs on cars.

The mere notion is absurd. After all, the EU aren’t going to leave their domestic market unprotected just to help the UK. It would be completely irrational to expect them to.

So, in practice, trading on WTO terms will mean that everything we make in the UK will be more expensive for overseas consumers at a stroke. Some industries may be able to reduce their production costs to offset the tariffs; most will collapse.

And we will be faced with the impossible task of choosing product by-product, industry by industry, which producers to protect by maintaining our own tariffs, and which to throw to the wolves by cutting or eliminating our tariffs.

If all of the above sounds grim, that’s because it is. There are no countries in the world that trade exclusively on WTO terms with other nations. None whatsoever.

Even North Korea has a couple of trade facilitation arrangements. We will have none. Nothing at all. No country has ever torn up all its international arrangements before (quite frankly, none have been crazy enough to). So we will be in a very lonely, exclusive club.

So if somebody tells you the UK will be OK trading on WTO terms, they either:
A) Don’t understand what that means or B) Are lying to you For example, Patrick Minford (of Economists for Brexit) is on record as stating that WTO would destroy the UK car industry, but that it would be a price worth paying for the freedom afforded by Brexit.

In other words, Brexiters see manufacturers as collateral damage, to be swept aside in pursuit of Brexit.

Perhaps you’re not so sanguine? Perhaps you would quite like the UK to keep manufacturing things?

In which case, you need to take heed of just how destructive, how damaging, trading on WTO terms would be. Estimates for the likely damage range from 7%-10% of GDP. Even at the low-end, that’s worse than the 2008 financial crash.

But unlike the crash, we’d be deliberately, willingly inflicting the pain on ourselves. Incredible, but true.

And the result would be the return of austerity, not for a few years, but for decades or generations to come.

WTO: just say no!

Brexiter James Delingpole promotes a no-deal Brexit on WTO terms, but then can’t explain how the WTO actually works