In a recent article Nick Hubble, of investment company Southbank Investment Research, draws an interesting analogy between climate change and Brexit anxiety:
“According to The Sun, experts are concerned chocolate will run out in the next 30 years. Climate change will make it too hot to grow cocoa beans.” Global warming will result in arid condition in the world’s main cocoa-growing regions of Ghana and Ivory Coast, so the cocoa plants will die. Apart from the difficulty of predicting the climate 30 years hence what other changes might occur in that time? There should be new regions able to grow cocoa, perhaps more than offsetting those that are lost; or new, hardier varieties might be bred in anticipation; or subsistence farming might be replaced by more intensive methods, including pesticides and machinery today’s producers can’t afford. By isolating one variable and assuming “all else is equal” The Sun’s experts see only the death of chocolate.
Nick uses another analogy: by turning one knob on a machine while leaving the others untouched we might try to discover its function. A hotter climate could increase cocoa supply if it grows in more regions, or scarcity might raise its price so boosting investment to improve yields or use more marginal lands. The climate and Brexit knobs are interconnected, you can’t change one thing without affecting others. Likewise Europeans won’t just stop using the City or trading with and investing in Britain, indeed they could be driven towards London and New York by the EU’s increasingly stringent financial regulations. Our industries and services won’t just dry up, plus trade with other markets will alter as tariffs change and new FTAs are agreed. It’s all very difficult to predict, as we’ve already seen in 2017.
Christine Lagarde, head of the IMF, once again forecasts the UK will be an economic laggard during 2018 – you might think she would shut up after her totally wrong forecasts following the Referendum vote. Remainers can’t help themselves; this is from the Financial Times in October 2017: “The UK was one of the fastest growing advanced economies in 2016 but dropped below all other G7 economies in 2017 and is expected to remain towards the back of the pack this year, with Japan and Italy.” From that we might conclude that whether a country is inside the EU (Italy), outside the EU (Japan), or leaving the EU (UK) makes no difference at all.
Of course economic hindsight is so much more reliable than prediction. When Britain repealed the Corn Laws in 1846 to become the first unilateral free trade country in the world, the poor benefited against self-interested farmers but the overall affluence of the country vastly increased over the following decades. Eventually the French caught on and Napoleon III saw that free trade was a way to bolster peace as well as growth in a sluggish French economy. The Anglo-French Commercial Treaty of 1860 was agreed and more commercial treaties were signed between European nations in the following decade; it has been called the ‘first common market’. Conditions won’t be identical in future, to start with there are far more possibilities for non-tariff barriers to hinder trade than there were in the 19th century. Nevertheless, on average EU consumers pay about 6% more than world prices and subsidise big farmers in particular [following the wine lake and butter mountain absurdities the CAP subsidies were changed to support acreage (sorry, hectarage) rather than output volume].
So what are our predictions for 2018? After what we’ve just written we must be careful but we’re pretty confident that Michel Barnier will utter more haughty put downs. What we can almost guarantee is that the unelected, superannuated politicians and civil servants in the House of Lords will do their best to frustrate the Government’s Brexit plans. Despite their poor showing in the last General Election there are more than 100 Liberal Democrat peers, representing a party determined to ignore the Referendum promise to voters to “implement what you decide”. What is it that their Lordships admire about the unelected, superannuated politicians and civil servants in Brussels? These are our two top tips but we’re tempted by an each way bet on more EU politicians declaring that their voters care more about their jobs than punishing Britain and so become pragmatic instead of dogmatic.