QuestionĂ¡rio

Wednesday 27 September 2017

Bombardier: Another reminder about crony capitalism

The USA threatens to impose a 219% tariff on imports of airplanes, at the request of Boeing who accuses Bombardier of selling at prices below cost, due to subsidies received in Northern Ireland and Canada. This is a brutal reminder about the dangers of politicians trying to “do deals” on behalf of their national companies.

The airplane industry is one the industries more rigged by protectionism of all kinds, and no company (including Boeing) is clean in the game. Likewise, with governments. The UK, despite its free trade rhetoric, is now threatening to retaliate by reducing its defence contracts with Boeing.

The risk of protectionism spiralling again out of control in the Western World is a consequence of the hypocrisy of politicians and the Trump advocacy of America First and “doing deals” approach to international trade arrangements.

The job of politicians it is not “to do deals”, their only job is exactly the opposite – to secure a level playing field for all.



Friday 22 September 2017

Brexit: Theresa May speech a difficult balancing act

It seems that British Prime Minister, has finally decided to endorse a soft Brexit.

Basically, she proposes a future agreement somewhere between the current European Economic Area (EEA) model and the Canadian Trade Agreement (CETA) plus a new security treaty, to be implemented after a two-year transition period, when everything would remain the same, expiring before the UK general election in 2022.

It seems a moderate approach, but it risks being contested by both sides of her party, and leaves open the question of whether she will survive long enough as Prime Minister.

From a European perspective, it is important to ascertain whether the UK wishes to be closer to Norway or Canada, before the EU can accept a pick-and-choose approach to the benefits of the single market.

For instance, will the UK wish to remain in the single market for financial services, but not in other sectors? These and many other issues have to be addressed as soon as possible, and the broader the agreement the better.

However, even if the UK opts for an agreement closer to the EEA, my previous estimate (Mendes 2017) that Brexit may cost the UK a long-term slowdown in GDP growth of approximately 20% is not significantly reduced.

In the end, Brexit is still a bad “deal” for Britain.