John Bruton

Opinions & Ideas

BREXIT

THE MECHANICS OF BREXIT AND ITS EFFECT ON IRELAND

 

cropped-irish-flag.jpgI am deeply honoured to have been invited to speak here today in the company of your President, John Comer, and of the Minister for Agriculture , Michael Creed.

I worked with the Minster’s father, Donal Creed, when Donal was spokesman on Agriculture for Fine Gael, and I was the then secretary of the Party’s Agriculture Committee. That was 1969, long before we joined the Common Market.

I remember many meetings with ICMSA at that time, and was always impressed by the seriousness and realism of the way in which your organisation represents its members and agriculture more generally. The fact that your President, John Comer, comes from Co Mayo is evidence of the broad national reach of ICMSA.

I have been asked to talk about Brexit. Everything I say will be a personal opinion, not representing anyone else.

Everyone would like to know what form Brexit will take, and how it will affect Irish farmers, and the rest of the country too. Unfortunately, it is next to impossible even to begin to answer that question until we first see what the UK will actually look for. Only then can we begin to speculate in an informed way about how the negotiation might go.

In what I say today, I will try to describe the mechanics of the three negotiations that will probably take place

  • the negotiation of a Withdrawal Treaty.
  • the negotiation of Treaty covering the Future Framework of relations between the EU and the UK and, possibly
  • the negotiation of an Interim Agreement, to apply after the UK has left the EU, but before a full Future Framework Treaty has been finalised and ratified

TWO NEGOTIATIONS….ONE ABOUT WITHDRAWING, THE OTHER ABOUT THE FUTURE

Article 50 of the EU Treaty says

Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union.”

AGREEING GUIDELINES ON THE EU SIDE

It is important to note here that it will be the Commission that will do the actual negotiation with the UK, but it will do so under guidelines agreed by the Heads of Government of the 27 Member states meeting in the European Council. It will also have to bear in mind that the final deal will have to approved by the European Parliament  too.

Given that the European Council operates by unanimity, and that its members are heads of government and each of them have countries to run at home, agreeing these guidelines will take time and be difficult.

Any one country can object to any part of the guidelines.

There are wide differences between EU member states in their sensitivity to developments in the UK. It is to be expected that

  • some will emphasise a continuing right for their citizens to live and work in the UK,
  • others will emphasise trade with the UK, and yet
  • others will emphasise how the make gains for their businesses from the exclusion of UK competition(for example in financial services).

THE FUTURE FRAMEWORK FOR EU/UK RELATIONS

It is also important to note that Article 50 says that the proposed Withdrawal Treaty shall take account of the” framework” of the withdrawing states” future relationship” with the Union.

There is no guidance in the Treaty as to what this “framework” document might say.

In their Referendum, UK voters were asked if they wanted to leave the EU, but their views were not sought on the sort of framework for future relations they would approve.

Nothing appeared on the ballot paper about

  • access to the EU market for UK produced goods or services, about leaving the European Economic Area (which includes several non EU countries) or about what UK voters would want the agreement with EU to say about
  • the status of UK citizens already living in EU countries after the UK has left
  • the status of EU citizens already living in the UK or about
  • the future rights of EU or UK citizens to live and work in one another’s  jurisdictions or to avail of social services while there

DIFFERENT PROCEDURES FOR CONCLUDING THESE NEGOTIATIONS

Article 50 continues

“ That agreement  (for the withdrawal of a state) shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.”

So while the Council guidelines for the negotiation require unanimity, the actual approval of the final withdrawal Treaty can be done by qualified majority.

But there is a time limit because Article 50 goes on to say

“ The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period. “

This two year time limit applies to the Withdrawal Treaty, but there is no time limit for the negotiation the Framework for future relations.

If , within two years of the sending by the UK of its article 50 letter seeking to withdraw from the EU, a Withdrawal Treaty has not been agreed by the UK on one side, and a qualified majority  on the EU side, the UK is simply out of the EU, with no rights at all on the EU market beyond those enjoyed  by any state anywhere in the world.

This is a real doomsday scenario, but it is a realistic possibility, because the gaps in the negotiating positions between the UK and a potential blocking minority of EU states (26.3% of weighted votes representing at least 35% of the EU population) are very wide.

But, at least, the withdrawal Treaty can be approved on the EU side by a qualified majority (73.9% of the weighted votes  representing 65% of the EU population).

Agreeing the terms of the Framework agreement with the UK, of which the Withdrawal Treaty must “take account ” will be even more difficult, because this Future Framework Agreement will probably have to be unanimously agreed by ALL 27 EU states and their parliaments, unless it is a very narrow agreement covering only trade in goods.

If it is wider than this, it is likely to be deemed a so called “mixed agreement”, which is an agreement that includes matters where the competence is shared between the EU and the member states.

A ROCKY PATH TO RATIFICATION FOR A FUTURE UK/EU FRAMEWORK DEAL

In this case, every member state parliament, as well as every member state government, will have to approve the Framework agreement with the UK.

This is what happened with the recently concluded EU Agreement with Canada, which, as you will remember, was threatened with a veto by Belgium, because under internal Belgian constitutional arrangements, all five subsidiary parliaments in Belgium must agree to any international treaty signed by Belgium, and two of them did not agree.

A similar threat to an Agreement with the UK could come from a decision to call referendum  in a member state.

For example, the future of an EU Agreement with Ukraine has been put in doubt by its defeat in a referendum in the Netherlands, requisitioned by a petition of only 300,000 signatories out of a total population of 17 million, and on a turnout of slightly above the minimum required 30%.

It is easier nowadays to organise petitions online, so this could be another threat to a Framework Agreement with the UK, not just in the Netherlands, but in any other countries with similar petition/referendum provisions.

The UK could not really object to this happening because the UK itself, on 23 June, used a national referendum to make a decision affecting the whole of Europe in a profound way.

COULD THE UK CHANGE ITS MIND?

Could the UK change its mind, when it discovers that things are not turning out as its voters, and those politicians who favoured leaving the EU, hoped they would?

Article 50 says

“ If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.”

Article 49 requires the unanimous agreement of all existing member states, and of the European Parliament, to the readmission to the European Union of a member state, just as it would to a state applying to join for the first time.

In other words, the UK, seeking to rejoin the EU after having left, would be in exactly the same position as Serbia, Montenegro or Turkey is today.

A more interesting question is whether the UK, having written its Article 50 letter in March 2017, could decide, say in late 2018, just before the two year time limit  would expire in March 2019, that it wanted to withdraw the letter, and stay in the EU after all , on the existing terms?

This is not an easy question to answer.

Article 50 doesn’t say that notification once given can be withdrawn, but nor does it say that notification can’t be withdrawn.

The prevalent view is, perhaps, that notice can be withdrawn prior to actual withdrawal from the EU but the position is not clear. If revocation of an article 50 notice was not accepted by all other EU members, the Court of Justice of the European Union would have to decide the point.

This may all sound a little fanciful  at this point, but it is possible that, by late 2018, the UK might have a different view on EU membership to the one it had on 23 June 2016.

It would certainly have to organise another referendum, which could be difficult given the rigid two year deadline for complete exclusion, in the absence of an agreed Withdrawal Treaty.

But if the discussions on the Framework Agreement were going really badly, or if  the economic costs of separation were just proving greater than expected, and if prospects did not look like improving, a majority of MPs might decide to consult the voters on the possibility of taking back the Article 50 letter.

Already there is some sign that UK opinion has shifted slightly since the 23 June Referendum.

Asked in a Eurobarometer  poll last September, three months after the Referendum, whether they thought the  UK benefitted from being in the EU

  • 56%  in the UK said they thought the UK had benefitted, an increase of  5 percentage points on the previous poll and
  • only 34% said they thought it had not, a drop of 2 points on the previous poll

If that trend were to continue, things could look different in the late 2018 or early 2019.

But it would be very difficult politically to change course. National pride would be hurt.  Telling voters they made a mistake is rarely a winning political strategy……even though voters do sometimes make mistakes

CONTENT OF WITHDRAWAL TREATY

Let me now turn to what I think will be the content of the two negotiations

First ,the Withdrawal Treaty negotiation and

Second, the Framework of Future Relations negotiation

My understanding is that the Withdrawal negotiation itself is likely to cover quite a narrow, but very contentious, range of issues.

These will probably include five broad topics

  • What the UK will have to pay to leave,  what will be the UK share of any remaining financial commitments dating from its time as a member, covering matters such as pensions of EU officials , other obligations outstanding, less the UK ‘s share in EU assets
  • The mechanics and costs of moving EU institutions, like the Banking Authority and the Medicines Agency, out of the UK and into an EU country (perhaps Ireland)
  • The Rights of EU citizens already living in the UK, and UK citizens already living in an EU country. The rights of future migrants from the UK to the EU, and vice versa, will be for the Future Framework negotiation
  • The relationship of the UK with the WTO after it has left the EU

+ Special situations concerning the land boundary between the UK and the EU, as in Ireland and at Gibraltar. It is good that this being dealt with upfront, and not just buried in the wider Framework negotiations. But, obviously, the content of the final Framework deal, if there is one, is bound to affect what happens on the Irish border.

While these five issues are, on their face, straight forward, the UK contribution to the EU budget was elevated into a big issue in UK politics over the past few years. False statements were made before the referendum about the amount the UK would get back by leaving,  and a gain of £350 million a week was promised by some who now hold high office in the UK government.

So this could become a very difficult discussion.

CONTENT OF FUTURE FRAMEWORK TREATY

The Future Framework negotiation will be a much wider one and will take in matters of direct relevance to ICMSA members, such as

  • whether the EU Common External Tariff will have to be levied on agricultural products coming into Ireland from the UK, or Northern Ireland
  • how the origin of imports from the UK will be verified to ensure that they are not dumping third country products on our market,
  • how veterinary and food safety standards will be verified, and how and by whom smuggling will be suppressed.
  • whether geographic indicators will be recognised
  • if there will be a tariff free quota to allow existing trade levels to continue or if all trade will bear the appropriate tariff

The tariff issue will be particularly difficult in the food sector, because this is the sector in which the EU has the highest tariffs, and restrictions, on third country imports in order to protect the incomes of EU farmers.

Everything depends on what sort of food and agriculture policy the UK decides to follow outside the EU. Will they go for a “cheap food” policy like they had before they joined the EU 40 years ago or will they retain current supports for farmers and rural life?

There is no indication so far as the what choice they will make, at least after 2020.

Negotiations about product  safety, rules of origin, and related issues will arise with all products and services, even those to which no tariff applies, because once it has left the EU, the UK will be free to depart from recognised EU standards.

If the UK rejects the jurisdiction of the European Court of Justice, as Prime Minister May says she will, there will no longer be a referee to interpret the rules of the shared market, and all markets need a referee.

If one wants to assess the likely complexity of a Future Framework Agreement the UK and the EU will have to negotiate with one another, one has only to look at the content of the Agreement the EU has concluded  with Canada.

As well as tariffs and trade, that agreement had to cover

  • product testing and standards….would each side recognise the other side’s tests for every product or would there be duplication?
  • mutual recognition of professional qualifications….a huge field
  • the right of EU and UK firms to sell goods and services to government entities in one another’s jurisdictions
  • protection from discrimination against EU investors in the UK and vice versa
  • access to fishing grounds

The EU and the UK negotiators will not only have to reach agreement on the substance of how these matters are to be handled, but  they will also have to agree a procedure for settling disputes about interpretation, because the UK, outside the EU, will not accept the rulings of the European Court of Justice (ECJ)

But probably the most contentious issue in the Future Framework negotiation will be right of people to emigrate to the UK from the EU, and vice versa.

Control of Immigration was not, initially, one of the UK’s complaints about the EU.

The Blair government actually opened the UK to  central and east European EU immigrants, in 2004, before it was obliged to under the Accession Treaties for those countries.

But, during the Referendum campaign, immigration became the central debating point ,and leaving the EU was presented as the way of “taking back control” of immigration.

The case was over stated.

Of all immigrants moving to the UK in 2014,

  • 13% were UK citizens returning home.  
  • 42% were EU nationals emigrating to the UK. But the biggest number,
  • 45%, were non EU nationals moving to the UK.

The UK already had full “control” over 45% of all immigration which came from non EU countries, and the Minister who exercised that control then, the Home secretary, is now the Prime Minister.

But in politics, perception is sometimes more important than reality, and immigration from the EU is perceived to be a problem by UK voters.

The EU side has taken a firm line on this. There will be no participation of the UK in the EU Single market without free movement of people to work. If capital is free to move, people should be free to move too. No Single market without free movement. Discrimination on the basis of nationality is excluded within the EU, and a state should not be able to leave the EU, introduce such discrimination, but still have all the other benefits of access to the EU market. If that option were the open, others EU members would be inclined to follow the UK out of the EU.

The fact that there must be unanimous agreement, by all 27 EU countries, to the Future Framework is relevant here. Countries like Poland will not be keen on a breach of the free movement principle.

WILL AN INTERIM DEAL BE NEEDED IN 2019?

I think it should be clear, from all I have said, that finalising a Framework Agreement with the UK within the two year time frame will be so difficult as to be almost impossible.

The Agreement with Canada took six years to negotiate and it was much less complex than any agreement with the UK would be.

So what happens, in late March 2019, when the 2 year deadline is reached, if the Withdrawal Treaty has been agreed, but  if the Future Framework negotiations are still going on, with no certainty whether they are going to succeed or not?

In this case, some form of interim agreement with the UK might have to be reached. This might involve the UK leaving the EU, losing its voting rights, but still retaining full access to the EU market until a final Framework Agreement was reached.

There will be almost as many knotty questions to answer about  that sort of an Interim Agreement as there would be about a Final Agreement.

For example, what contribution would the UK  then continue to make to the EU budget?

Would there be a time limit on the Interim Agreement, and could it be extended?

Would the UK accept the jurisdiction of the ECJ during the Interim?

Would an Interim Agreement have to be approved by the parliaments of all 27 member states?

Does the EU Treaty allow for such an Interim Agreement?

CONCLUSION

My conclusion from all of this is that the decision of the UK Conservative Party to have a referendum on EU membership, without a clear alternative being known, was unwise because it will lead to a huge diversion of time and talent away from more constructive purposes.

Since the Referendum, the UK government has, retrospectively, interpreted the vote to mean a decision to leave the EEA, and leaving the European Customs Union, things that were not on the ballot paper, and are not required by its wording at all. That is undemocratic.

Brexit poses disproportionately great challenges to Ireland. It will require us to build new and stronger alliances in every EU country, and to do that we will need to understand the interests of other countries almost as well as we understand our own. We must not make the mistake David Cameron made of thinking that an understanding with Germany will deliver what we want from the EU. In the EU, every country counts.

………………………………………………………………………………………

Speech  by John Bruton,  at the AGM of the ICMSA at 4pm on Monday 28 November in the Castletroy Park Hotel, Limerick

 

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euflags

DIFFERING OPINIONS ABOUT THE EU

eurobarometerThe recent Eurobarometer poll (taken in September/October 2016) gives a good insight into the problems European Union leaders will face in crafting a unified response to the multiplicity of challenges it now faces.

It tells us that voters, in the different EU countries, see the EU very differently.

IS IT GOOD TO BE IN THE EU?

On the question of whether membership of the EU is a good thing,

  • 81% of Luxemburgers,
  • 74% of Irish, and
  • 72% of the Dutch agree.

But at the other end of the scale, only

  • 31% of Greeks,
  • 33% of Italians, and
  • 32% of Czechs agree.

Interestingly 47% of British voters said they thought it was good for the UK to be in the EU, which is a better score than 8 other EU states.

The finding in regard to opinions in Italy about the value of being in the EU is very worrying, in light of the forthcoming referendum there, and the huge debt problems Italy faces, for which it may need help from the rest of the EU.

If Italians have such a low opinion of the EU, are they likely to accept EU terms for help?

It would appear that Italian voters blame the EU for the fact that their economy is growing more slowly, for a longer time, than almost any other EU state.

Before the euro, Italy was able to adjust to a loss of competitiveness by devaluing its currency . Now Italy and its banks owe money in a hard currency and they no longer have the option of devaluing some of their debts away.

HAS YOUR COUNTRY BENEFITTED ECONOMICALLY FROM BEING IN THE EU?

60% of EU voters think their country has benefitted from being in the EU,

But only 38% in Italy think so, only 44% in Greece and Cyprus, and only 48% in Austria.

Remarkably 56% of UK voters said they felt their country benefitted from being in the EU, even though they had just votes to leave it!Obviously non economic factors swayed the vote in the UK referendum.

The countries , where the biggest majorities feel their countries have benefitted from being in the EU, are

  • Lithuania(86%),
  • Luxemburg( 84%) and
  • Ireland (84%).

WHAT IS THE QUALITY OF EUROPEAN DEMOCRACY?

Some argue that there is a crisis in European democracy, in the sense that voters do not feel that their vote counts, in their own country, or in the EU.

Denmark and Sweden are the countries where voters feel their vote counts the most, at both EU and national levels.

The countries where people feel their vote counts the least include Greece, Lithuania, Cyprus, Italy and Spain.

Generally it seems, that if people feel their vote counts (or not) at national level, they also tend to feel that their vote counts at EU level . Ireland comes in the middle of the field on both measures.

These findings would suggest that action to improve voter involvement in decision making need to be taken both by states themselves and at EU level.

WHAT DO YOU THINK OF THE EUROPEAN PARLIAMENT?

Another question asked was about whether voters had a positive view of the European Parliament.

The voters with the least positive view are to be found in France (only 12% of voters have a positive view).

38% of Irish voters have a positive view of the Parliament, which is the 3rd highest score of the 28 countries.

Anti EU feeling in France is a worry, as the French Presidential election nears.

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books

The Euro,  and its threat to the future of Europe

 

euroThe Nobel Prize winning author of “Globalisation and its Discontents” has set his sights on the euro in his latest economic polemic.

He sees the euro as a product of what he calls “neo liberal economics”, which he believes was in the intellectual ascendant in 1992, when the detailed design of the single currency was put in place.

Given that the idea of an Economic and Monetary Union in Europe goes back to the late 1960’s, and that one of the central drivers of the project was a French Socialist, Jacques Delors, this claim is contestable.

The flaws in the design of the euro derive more from poorly thought out compromises between France and Germany, and from wishful thinking, than they do from ideology.

Wishful thinking lay behind the decision to have a single Europe wide money, but to leave the supervision of banks, who create the money in the form of credit, to 17 different national authorities. This happened because Germany wanted a German authority to supervise German banks, and not a Europe wide one.  And it was these poorly supervised German banks who led the way in the mistaken cross border lending to Greece, Spain, Ireland and Portugal.

It is easy to see that mistake now, but the problem at the time was persuading Germany to give up its beloved DM at all, in favour of the euro. The mistake arose from national pride rather than economic ideology.

Obviously, if there was to be a single currency, there had to be common rules for preventing any one country issuing too much of it, and thereby creating inflation and devaluing everyone else’s money. In this case, the mistake was made of assuming that the only risk of this happening was through governments borrowing and spending too much. This lay behind the 3% of GDP limit on government borrowing in the Maastricht Treaty.

But no similar, centrally supervised, limit was placed on private sector money creation through the banks. As we now know, it was cross border private sector credit creation, through banks, that created the problems in Ireland, Spain and Portugal, whereas it was only in Greece that government borrowing was primarily to blame.  Stiglitz argues that this focus on controlling government borrowing, and ignoring private sector banking activity, arose from an ideological bias in favour of the private sector. He has a point.

He also points out that imbalances arising from trade deficits and surpluses within the euro zone were ignored in the original Maastricht rules. Before the crisis, the Irish and Spanish balance of payments deficits, and their counterpart German balance of payments surplus, were signals of the same underlying problem. The excessive private sector borrowing in Ireland and Spain was stimulated by the excess of German savings. Germans were earning more than they were spending, so they sought a return on their money by lending it to the Irish and the Spaniards. The persistence of this imbalance was a warning signal that was ignored. The new EU macroeconomic imbalance procedure belatedly attempts to deal with this, but it remains to be seen whether it will be implemented properly.

More profoundly, Stiglitz argues that, for the euro to work well, there must be a consensus among policy makers in all euro zone countries of what makes an economy grow. That consensus is missing. German and French economic views differ as much now, as they did when the euro was launched.  Germany does not believe that governments should provide fiscal stimulus when there is a down turn, whereas, in France, the political consensus would favour stimulus in almost all affordable circumstances.

Stiglitz, like the French, believes that reducing deficits should not be a priority, when the economy is slowing.  This may be good advice in theory, but there are two difficulties with it.

The first difficulty is that it presupposes that governments will pay for what they spend in bad times, by cutting back in good times. But that is usually politically impossible. This is a practical flaw in Keynesian economics.

The second difficulty concerns a fundamental fact that is not mentioned once in Stigltz’s 350 pages. This is the ageing of the population of all EU countries over the next 40 years. This reduces the ability of EU states to borrow and spend for other things.  The extra costs of pensions and health care for Europe’s ageing population will, if policies remain as they are, mean that the debts of EU governments will rise from around 90% of GDP today, to 400% by 2060. That prospect leaves little room for stimulative borrowing today.

In the 1990’s it was different. Then Europe had a younger population, there was an annual growth rate in world trade that was twice the present one.  There were growth promoting options then that do not exist now, and are not likely to exist in the near future. This limitation is ignored by Stiglitz, who blames everything on the euro.

He argues convincingly that the EU needs greater political integration, if the euro is to be a success. But some of the ideas he canvasses lack political realism, for example a tax on German trade surpluses, and a 15% EU wide income tax on incomes above €250,000 (on top of national income taxes)!

He argues that the euro is, to some extent, now being held together by fear. A currency break up would be so unpredictable that no one wants to try it. But fear is not a healthy basis for European integration. Ultimately a shared European patriotism, and a greater degree mutual trust between euro zone electorates, are needed if these electorates are willingly to put their savings at risk to insure one another against unexpected shocks.

Understandably, as an American and an economist, Stiglitz does not address how this might be done.  That is a task for Europe’s politicians, and so far they have failed to come up with many original ideas.

But if that task is successfully undertaken, the economic rewards for Europe of having its own global currency, and its own system of mutual financial protection for its member states and its banks, could be very great indeed. There are opportunities here, as well as threats, but this book unfortunately only looks at the latter.

Stiglitz might also have given greater weight to the improvements that have been made in the management of the euro in the past three years-in the form of better banking supervision, new bailout funds for states and for banks, and more subtle economic rules.

But this is not enough.

Some of Joseph Stiglitz’s other suggestions- a common bank deposit insurance system, a write off of some Greek debt, and a partial sharing of unemployment insurance costs- should be acted upon. They are needed to ensure that the euro is able to withstand the next economic shock, and should not be postponed until after the German, or any other, General Election.

Book Review for the “Irish Times” Author; Joseph E Stiglitz  Publisher; Allen Lane

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india

A VISIT TO INDIA

flag-1296283_960_720I am in India this week for a series of meetings.  I met the Minister of State at the Prime Minister’s office, Dr Jitendra Singh.

At the moment , India has the fastest growth rate of any major economy in the world…7.5% pa.

This is driven in part by the youthfulness of its population. Half of India’s 1.2billion people are under the age of 25.

Unlike China, which has been restricting birth rates for years, and will soon see a contraction of its workforce as more people reach retirement age, India will see its available workforce continue to grow for the next generation or more. This gives India almost limitless potential for growth.

But the key word here is “potential”. Unless India’s young people get the right skills for the modern world, they will continue to live in relative poverty.

India has some great companies, but not enough. Only 10 million Indians are employed in companies with a workforce greater than 50 people. A large pool of people are still work in farming . Farming has had two bad years in a row because of drought, which has caused real hardship. That said, India has more internet users altogether than has the United States, and its city roads are clogged with cars.

India is a highly decentralised country, and policies vary widely from state to state. Some states have gone much faster than others in facilitation the setting up of a new business. The World Bank recently highlighted  this.

Of 98 recommendations to improve the business environment, there was  

  • a 70% implementation rate in Gujarat and Andra Pradesh,
  • a 36% rate in Delhi and Punjab but only a
  • 1,23% implementation in Arunchal Pradesh.

Divergences like this are also to be found between the states of the EU in respect of recommendations for economic reform.

Skill development is a key to the development of India, and a robust and reliable system for certifying training and skill levels could make a dramatic difference.

The current government of India, led by Narendra Modi is strongly in favour of opening up the economy. He is also determined to stamp out corruption, the black economy and tax evasion.

His action, this week, in taking certain large denomination bank notes out of circulation is designed to force people to exchange these notes in banks and thereby bring the money into the white economy and under the supervision of the revenue authorities.

Modi is in a strong position because his BJP party has an overall majority.

Relations with Pakistan over Kashmir remain exceptionally difficult ,with frequent incidents, involving deaths, occurring along the disputed border.

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uselections

PRESIDENT DONALD  TRUMP

donald-trump-1708433_1280There will be many explanations offered in the days to come for the surprise victory of Donald Trump. The United States is such a diverse country that it is hard to come up with a single or a simple explanation.

Trump was much more eloquent than Hillary Clinton. He came across as comfortable with himself, whereas Hillary Clinton appeared anxious at times.

He felt he could allow himself to be spontaneous, whereas she did not.

People listened to him, partly because they did not know what he was going to say next.  He did not worry about what the media described and “gaffes”, or worse. His electorate made allowances for him, because they felt he was authentic. Authenticity is very much in the eye of the beholder, and if people like what they hear, they will consider the speaker “authentic”.

But the Trump victory was about more than a livelier personality and better rhetoric.

My own sense is that it was primarily a cultural, rather than a narrowly economic, statement that the Trump supporters were making.

A majority of Americans are anxious about the pa
ce of change, and about the fact that the familiar world, in which they grew up,  is disappearing.  Americans felt that, by voting for Trump, they were taking back their own country. In a sense, they felt he would return them to an imagined past, in which they would be more comfortable.

Trump supporters no longer felt in full control of their future.  They felt that traditional institutions, like trade unions, could no longer protect them from the forces of automation and immigration, or allay their worries about the  affordability of entitlement programmes. These factors explain the Trump gains in states like Michigan, Wisconsin and Pennsylvania.

Donald Trump appealed to American nationalism, a nationalism that provides Americans with a sense of belonging and mutual security in an uncertain world. This nationalistic surge is not confined to America. English nationalism is behind the Brexit vote. Nationalism is likely to play a part in the French Presidential election, with potentially disastrous results for the European Union.

Trump’s victory also was a rebellion by those, who had not had the benefit of a college education, against being patronised, and told how to think, by those who had. This resentment has been aggravated by the prohibitive cost of college education in the United States, which has shut so many people out of the “American Dream”.

It is much harder to start poor, and become wealthy, in the United States today, than it was 50 years ago. Trump explicitly sought to appeal to this discontent. He was able to do this simply by repeatedly  attacking elites, but without putting forward specific policies that would increase social mobility.

Actually applying his policies will be the real challenge for Donald Trump as President.

If he implements 45% tariffs on imports from China and 35% on  Mexico, this will start a trade war. US corporations who have invested in supply chains involving these two countries will face major disruption. The likely abandonment of the Trans Pacific and Trans Atlantic trade and investment deals will slow the growth of world trade, which already has weakened by the slowing of the Chinese economy. This is bound to have negative effects on European exporting nations, like Germany.

He will not get Mexico to pay for the wall, so it may never be built.  The status of illegal immigrants in the United States will not improve, but I doubt if we will see mass deportations. The present situation is deeply unfair, and an affront to the rule of law, but it will probably continue.  

On the other hand, his commitment to invest heavily in the tired infrastructure of the United States will give a boost to global economic growth.

His tax cuts for richer Americans will not do much for growth because the better off people are, the more likely are they to save, rather than spend

He has the power to implement his policies. He will not have many excuses .He will not be able to blame a hostile Congress for blocking him, because Republicans have a majority in both Houses of Congress.

He promised the repeal, and replace, the Obama health insurance programme, which is proving to be more costly than expected. Repealing it will be easy, but replacing it will be really difficult.  

Whatever system of paying for healthcare is chosen, the costs seem to be rising inexorably. This is because people are living longer, and expecting, or are being recommended ever more complicated treatments.  I think this will be Donald Trump’s most difficult domestic policy challenge.

The most difficult thing to assess is President Trump’s foreign policy. Clearly he will be looking for allies of the United States to pay more for their own defence. But previous Presidents did the same. His trade policies will work against this. A trade war will weaken the ability of allies to pay more for their own defence.

In way, thanks to fracking and the increase it has made in US domestic energy supplies, the US is much more independent of the rest of the world than it used to be.  An early sign will come when President Trump has to decide of his policy on the war on Syria.  If he decides to ally himself with Putin, he will put himself on a collision course with Saudi Arabia. This could draw Turkey into the conflict because of its strong opposition to Assad.

Donald Trump has raised so many expectations that may be impossible for him to live up to them. Populism in power may not be as popular as populism on the campaign trail. Only if that happens, will the democratic world return to evidence based politics.

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THE VERDICT ON DAVID CAMERON’S PRIME MINISTERSHIP

cameron-at-10I read “Cameron at 10…the Verdict”, by Anthony Seldon and Peter Snowdon, over the summer, to understand how the UK came to hold a referendum on leaving the European Union, whose aftermath will bog down the UK and the EU in unproductive work, for years to come.

The first thing to say is that this is a good and well researched book.

It shows how the Liberal Democrat /Conservative Coalition came together in an atmosphere of good will and cordiality. It was bedded down by good institutional arrangements, which held it together right to the end.

But the cordiality disappeared when the Conservatives campaigned, with venom, to defeat the referendum on the Alternative Vote (PR in a single member constituency).

It is interesting to note that the Lib Dems loyally supported the austerity policies of the government, including on tuition fees which did them a great deal of electoral damage.

The reforms introduced by the Coalition, in education, health and welfare were important, and enduring. But they were not very different from what might have been done by a government led by Tony Blair. Cameron’s military intervention in Libya, for which he was a much greater cheerleader than Obama, was just as much a disaster as Blair’s intervention in Iraq. But Cameron knew what had happened in Iraq, so there is less excuse for him.

Cameron’s idea of a “Big Society”, where local communities take over responsibilities from government, never amounted to much. As one critic said “most people I know do not want to run their local library or school, they just want the service to work”.

Cameron’s problem with the European Union was not so much that he was a Eurosceptic, but that, like many Britons, he just did not find the EU interesting at all. Like his compatriots, he thought the EU was something external to the UK, with which the UK did business on an arm’s length basis, rather than something of which the UK was a full member.

He did not invest time in it, and thought that problems could simply be sorted out by a chat with Angela Merkel, as if the other countries would always do what she told them.  Merkel for her part thought Cameron was “apt to make his mind up too quickly”, and ask for more than he could ever hope to get. She preferred to start her negotiations with modest demands and build on them.

In 2007, as a newly elected leader of his Party, he had promised a referendum on the Lisbon Treaty, but by the time he came into office it was too late for that, because the Treaty had been already ratified. But his failure to keep that so called “promise” left him with problems with his backbenchers for the rest of his career.

The same backbenchers were also, of course, angry with him because he had not won the election in 2011, and instead had to opt for a Coalition with the Europhile Liberal Democrats.

The authors of this book think that Cameron’s position was so weak that he had no option, in 2013, but to promise an In/Out referendum. I disagree.  While there was a real threat from UKIP, I do not believe his party would have brought him down over this issue. There is no evidence that Cameron gave any serious thought to what ought to be done if the people voted for “Leave”.

When he came to fight the Referendum itself, he chose to appeal only to people’s pockets, and not to their hearts, or to their sense of self respect.

He could have pointed out that in 1914, Britain went to war, not for its Empire, but for Europe…to defend Belgian neutrality.

He could have reminded his fellow citizen that Britons went to war in 1939, also for Europe, to defend Poland.

 He did not do so.

Such an appeal to patriotism could have countered the xenophobia that occupied the emotional space,  that his materialistic campaign left unoccupied.

But then it emerges in this book that Cameron himself sincerely believed in having a cap on immigration, including from Poland, the country Britain went to war to defend in 1939.

In 2010, he had said “Kick us out in 5 years, if we don’t deliver a cap on immigration”. A well informed Party Leader would have known, even then, that such a promise was incompatible with his country’s obligations as an EU member!

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FERGUS O’BRIEN RIP

former

I am deeply saddened to learn of the death of my great friend, Fergus O’Brien.

He had a distinguished career in politics, winning friends for his direct approach, in all parts of the political spectrum.  He was never silent when he felt the issues at stake were important. He was someone to whom I turned for advice many times.

His ministerial career was fruitful and contributed to the development of what was to become the IFSC, in Dublin’s , then semi derelict, dockland quarter.

I saw him during his illness and was struck by his positive attitude and his continuing interest in others, in his faith,  and in the country to which he had given such great service.

To Peggy and all his family I extend heartfelt sympathy.

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REMEMBERING JOHN DILLON MP

john_dillon_1851-1927I spoke at a Seminar organised by the Reform Group in Wynn’s Hotel in Dublin on John Dillon MP , the last leader of the Irish Parliamentary Party (IPP), who was the father of James Dillon TD, who was leader of Fine Gael from 1959 to 1965. John Dillon died in 1927 having lost his seat in the 1918 General Election.

A soundtrack of the seminar can be accessed through the Reform Group website at

http://www.reform.org/site/2016/10/15/forgotten-patriots-seminar-15-oct-2016/

As well as Dillon, the seminar dealt with the DD Sheehan MP, who was a member of  The” All for Ireland”  League, set up by William O Brien MP, who was one of the few Irish Nationalists of the time to make a serious effort to understand the concerns of Ulster Unionists.

O Brien and Dillon, once close friends and allies, became rivals later in their careers, although both of them shared a belief in the Home Rule cause, and in exclusively constitutional and peaceful agitation to achieve their goals.

Grandchildren of both men were present at the seminar.

THE LAND QUESTION, RIGHTLY, CAME FIRST

John Dillon was first elected to Parliament in 1880 and, from the outset, he pressed the cause of land reform, which, along with the enactment of Home Rule into law in September 1914, was to be a crowning achievement of the IPP.

In looking for rent reductions, and the eventual transfer of Irish land ownership from landlords to their tenants, Dillon had to contend with claims that this involved breaching contracts and property rights, which were then, and still are, regarded as central to the market economy.

Yet, if the land question had not been solved prior to Irish independence, the resultant struggles might have been so severe as to undermine the democratic character of the state, something that happened in some central European countries ,who gained independence in the early 1920’s without prior land reform.

PARTY DISCIPLINE

Dillon, from the beginning, also believed in party discipline, and in the central control of candidate selection. In this, he clashed with Tim Healy MP and with William O Brien.

He believed, rightly, that discipline was vital if the Irish nationalist minority in the House of Commons was to achieve anything. In a parliamentary democracy, party discipline is of abiding value in achieving coherent outcomes, something Irish voters are inclined to forget nowadays.

COULD NORTH EAST ULSTER EVER HAVE BEEN COERCED INTO A UNITED IRELAND?

Like many Irish nationalists, then and since, Dillon had difficulty facing up to the reality that Ulster unionists could not, in practice, be coerced into a United Ireland.

Arguing publicly for something, that one knows in ones heart cannot be achieved in practice, is bad political leadership.

Successive Irish governments gave bad leadership on the question of how a united Ireland might come about, until the principle of consent was belatedly accepted in the 1970’s.

In Dillon’s case, he gave a speech in Belfast in March 1915 in which, on the question of a possible partition, to exclude part of Ulster from Home Rule, he said

“We will never agree to divide this nation”.

That remained the position of the IPP.

But Tim Healy claimed, in a letter to his brother Maurice in 1914, quoted in Frank Callanan’s excellent biography of Healy, that Dillon was privately of a more realistic opinion

“Dillon is going about (the House of Commons) talking to the Liberals in favour of the exclusion of Ulster “

Healy claimed Dillon was justifying this by saying

“How can we coerce Ulster with our record against coercion and that we cannot face civil war as a beginning to Home Rule”.

If Healy is to be believed, and he was no friend of Dillon, then Dillon was more realistic in private, than he was in public.

Healy, himself , thought the Ulster Unionists were only bluffing, and could be coerced. This is a nonsensical belief, but it is the unstated assumption of most modern day critics of the Home Rule  policy, including Sinn Fein and some historians.

At least in private,  John Dillon was a realist.

This gap between public rhetoric, and private belief, about the feasibility of enforcing a united Ireland, has proven very costly ever since.

This sort of self deluding rhetoric may become prevalent again in nationalist circles, if Theresa May persists in her “hard Brexit” policy.

COMMEMORATION ……WHAT CRITERIA SHOULD WE USE?

I believe official commemorations, of their nature, have to be selective.

So what criteria should guide our selection of the events to be singled out for commemoration in government ceremonies, postage stamps and public sculptures?

Commemorations cannot change the past.

All they can do is influence how we think about the future.

So government should select things to commemorate that will help us use historical event that help us manage foreseeable future challenges.

Thus I believe the focus of official commemorations on violent events, like the Howth gun running, the 1916 Rebellion and ambushes, is wrong.

These events have little of use to teach us about what we need to do in the future Ireland of the 21st century.

In contrast, the careers of men like John Dillon, his agitation, his compromises and his peaceful achievements, have much more to teach us ,about what is relevant to today and tomorrow.

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WHO WILL PROTECT IRISH AND OTHER EU FIRMS DOING BUSINESS IN THE UK AGAINST DISCRIMINATION, AFTER BREXIT?

cropped-European-Union-flag-006-1.jpgMany Irish firms, and firms from other EU states, have extensive investments and trading interests in the UK. Indeed this must one of the most intense investment relationships in the world.

For the past 40 years, these investments have been protected by UK membership of the EU, which allowed firms, who might feel they were being discriminated against, in favour of British owned competitors, to appeal not only to the UK Courts, but also to the European Court of Justice(ECJ)

Yesterday the UK Prime Minister announced that , once the UK leaves the EU, the jurisdiction of the ECJ in the UK would be ended. Thus there will no longer be any, non UK controlled, arbiter to protect Irish or other EU investors in the UK against discriminatory laws by a future UK government. The UK has no written constitution.

Therefore it will be important that there be a robust independent investor protection disputes mechanism, capable of overturning discriminatory decisions that might be taken by the UK courts against the interests of EU owned firms.

 This must take immediate effect the day the UK leaves the EU.

It cannot wait for the longer term trade agreement the EU negotiates with the UK, which may take years to finalise. Investor protection clauses can be controversial, as we have seen with the TTIP negotiation, and are a reduction of “sovereignty” in the abstract sense.

But , given three factors

  • the highly nationalistic tenor of UK politics at the moment,
  • the dramatic ideological trends in the Labour  party, and
  • the likelihood of trade tensions between the UK and the EU,

Irish and other EU firms doing, or intending to do, business in the UK will need a very robust independent investor protection regime.  These three phenomena must be confronted realistically. We must not assume that everything will work out in the end. It may not!

Unless Irish and other European firms have concrete assurances that they will not face discrimination of any kind in  their activities in the UK after Brexit, they may have to commence disinvestment to protect their shareholders’ legitimate interests. The proposed “Great Repeal Bill”, reversing EU law in the UK, will need to scrutinised with immense care by  Irish and other European investors in Britain. Political assurances will not be good enough.

In the present atmosphere of UK politics, it is all too easy to envisage calls for discrimination in favour of UK firms in contracts with UK local authorities, in access to certain public services, and in standards for goods and services. All would be done, of course, in the name of “protecting British jobs”, or “defending British standards”.

If the ECJ is no available to protect Irish and EU firms from discriminatory practices on the UK market, alternatives will have to be agreed with the UK. These alternative mechanisms, investor courts in other words, will have to have the power, like the ECJ, of striking down UK decisions, including UK court decisions,  that they deem to be discriminatory against the interests of an EU investor.

These mechanisms are known as  an Investor-state dispute settlement (ISDS) or an  investment court system (ICS). They are an instrument of public international law and  grant an investor the right to use dispute settlement proceedings against a country’s government.

Provisions for ISDS are contained in a number of bilateral investment treaties, in certain international trade treaties, such as the North American Free Trade Agreement (chapter 11), the Trans-Pacific Partnership (chapters 9 and 28) and the Comprehensive Economic and Trade Agreement (sections 3 and 4). ISDS is also found in international investment agreements, such as the Energy Charter Treaty.

If an investor from one country (the “home state”) invests in another country (the “host state”), both of which have agreed to ISDS, and the host state violates the rights granted to the investor under public international law, then that investor may bring the matter before an arbitral tribunal.

The prospect of having to use such cumbersome procedures will undoubtedly be daunting and difficult for small firms.

This will be particularly difficult for Irish firms who have been used to treating the UK as part of their “home market” since 1966 and the Anglo Irish Free Trade Agreement.

In the aftermath of the original referendum decision, soothing statements were made by British Ministers about the position of Ireland, and about there being no “hard border. But Prime Minister May’s speech to her Party Conference yesterday represents a major shift in position. She is going for a “hard Brexit”, which inevitably means a “hard border”. She offered no assurances to Ireland.

Indeed it is hard to see how the UK could offer special protection to Irish firms investing in the UK that it was not also offering to French or Romanian firms.

The Irish food industry is heavily invested in the UK market. Before it joined the EU, the UK discriminated heavily in favour of UK farmers and against Irish exports. The food industry is far more complex now than it was forty years ago, and the opportunities for discrimination more subtle and more numerous.

The European Union will need to adopt a tough line on investor protection in the forthcoming negotiations and make sure these protections apply in full from the moment the UK leaves, and are not left to a wider long term negotiation.

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AFTER THE DEBATE….WHERE STANDS THE RACE?

US political partiesMost observers believe Hillary Clinton did better in the recent television debate than Donald Trump.

But not everybody did.

The Republican supporting “Washington Times” newspaper claimed that Trump did better because he focussed on America’s (perceived) global weakness, and  because he “projected authority”, and “appeared every bit the non politician”.

He did appear to me to me to be more spontaneous than Hillary Clinton, who sometimes appeared to have memorised her lines.

But the price of being spontaneous is that he said some things that were barely coherent , and  were sometimes inaccurate.

Given that the United States is a democracy governed by politicians, rather than by bureaucrats, it is worth reflecting on the preferred system of government of anyone who thinks being a “non politician “ is a plus.

In the 1920’s in parts of Europe, “anti politician” rhetoric like this was often a prelude to something much worse.

The Washington Times also argued that Clinton had not been asked the hard questions about her record as Secretary of State in the Obama Administration on

  • Libya,
  • the attempted “re set “ of relations with Russia and
  • the rise of China.

I think the intervention in Libya, although motivated by humanitarian concerns, may have led to even worse humanitarian results than non intervention, but that is hard to prove. Trump may bring that up in later debates.  Mrs Clinton support for the Iraq war ,as a US Senator, is not quite on the same level of responsibility, as Mr Trump’s alleged initial support for it as a private citizen, and she got away with pretending that it was

It is hard to argue that an attempt should not have been made to improve relations with Russia, although these have proved fruitless.

It is not clear what Mrs Clinton’s critics would have wished the Obama Administration to have done about the rise of China.  It did attempt to negotiate a Trans Pacific agreement to draw the rest of Asia closer to the US and away from China, but both Trump and Clinton now oppose that .

Trump’s plan to impose a 45% tariff on Chinese imports to the US would certainly slow China’s rise, but would hurt America too. That issue was not explored in the debate, which was a great pity. Mrs Clinton seemed to be more interested in Mr Trump’s business past, than in his potential future trade policies.

The race will be fought in a few battleground states.

To win the Electoral College, Trump must win all four of the following states

  • Florida (where he is 0.5 points behind in the latest polls),
  • Pennsylvania (where he is 1.8 points behind),
  • North Carolina (where he is 0.8 points ahead), and
  • Ohio (where he is a more comfortable 2 points ahead)

He needs a major win in the debates to achieve this, and so far he has  not achieved that.

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