Post-Brexit Political Update by Mark Garnier MP
Governments face a variety of challenges. Some are self-inflicted, some are as a result of geo-politics, others are natural disasters. Most, one way or another, have an effect on our economy.
Last year was certainly an interesting one from the point of view of natural disasters and COVID-19 has challenged governments across the globe. But as we ended 2020, and Coronavirus: Season 1, we had no idea that Season 2 would hit us with the vigour it has already. Within days of the new year’s muted celebrations, we have seen another national lockdown.
To a certain extent, a natural disaster is what it is. Were this an earthquake, there would be visible and contained damage. But a pandemic is different. Squash it too much and you harm your economy, squash it too little and it stays, harming your economy. The reality is, no one really knows exactly what the right amount of lockdown is and experiments of liberalisation elsewhere have led to greater problems later. The only way that seems to really work is to quarantine your entire country, as we have seen in places like Taiwan and New Zealand – models that, as an island nation, we could deliver.
What is certain is that uncertainty causes economic damage. If the Government could deliver a mapped out recovery plan, it would. After all, the long-lasting legacy of this is colossal public debt and increasing quantitative easing. Generating activity that can be taxed is what any government wants; and the sooner we find a way back to normal, the better. But if COVID keeps reinventing itself with new, increasingly contagious varieties, then the Government continues to be challenged at a level previously unseen.
Meanwhile, turning to self-inflicted challenges, the trade deal with the EU was finally concluded, signed and ratified. All those saying that the EU always does a deal at the last minute have been proved right. Sovereignty has been delivered, and we move forward as an independent nation.
Of course, we can pick holes in the deal. The fishing rights are not quite what some envisaged. Financial services should have been a lot better, but that probably speaks as much to the problems governing trade in services than any Machiavellian EU plot to stymie our banks in the single market. That said, this is an area for keen attention: we have a significant trade surplus in services to the EU, a deficit in goods from the EU. No tariffs on manufactured goods, an attempt to limit red tape at borders, but no clarity on access for services into the EU makes this a deal that favours the EU.
What has been surprising, however, is the lack of media coverage on this, and the Japan trade deal. Indeed, in addition to the EU, we have signed deals with over 60 countries at a value of over £900 billion. Yet there is little public debate about what that means to our economy, our domestic standards, competition in the UK, and opportunity for our exporters. We have negotiations in play with Australia, New Zealand, and the US. The US is a particularly big deal, with 14% of our total trade transacted with a country we currently have no trade agreement with. The so-called chlorinated chicken will feature in the run-up to that deal being finalised, but it is fascinating that all these deals are given such relatively scant coverage. My guess is that until we see exactly how trade differs from what we are used to, we simply will not be able to judge it all. Time will tell, but there is plenty of scope for disagreement.
Looking forward to 2021, what will be the big political issues to watch out for?
Domestically, we have English council elections in May (the plan is still to hold the ballot). This will give the political pundits an opportunity to see how Sir Keir Starmer is doing as the new Labour leader. Mid-term local elections are usually tough for the party in power, and if Labour doesn’t make significant progress, his first test as leader will be seen as dismal.
However, far more importantly, we have Parliamentary elections in Scotland. Usually seen as a bit of a sideshow by those in England, this year’s elections will be an important proxy on Scottish independence. Nicola Sturgeon will fight her campaign on independence and delivering a further referendum and re-joining the EU as an independent country. Scottish courts are looking at the legal position of a referendum called by the Scottish parliament, the claimants trying to overthrow the assumption that only the UK national parliament can call such a profound vote on the future of the Union. Current opinion polls suggest independence would win; and make no mistake, losing Scotland would be bad for us all.
Internationally, we have a new US president. It will be interesting to see how Trump’s legacy is perceived with the benefit of hindsight. His tax cuts certainly helped the economy and the stock market, but his domestic focus has had implications for global trade and security. Biden, a hugely experienced politician and former vice president, will take America back to a more traditional role that should deliver more international stability and an upholding of the international rules-based system.
But the big, geopolitical challenge this year? China.
There continues to be friction between China and India on their borders. Two nuclear powers squaring up their combined 2.7 billion populations is something that should focus the mind. Add to that the Straits of Taiwan and the South China Sea issues, and pacific security becomes more of a global issue – especially as we seek to join the CPTPP (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership). Hong Kong is a further, very specific UK problem that we are, correctly, taking responsibility for.
What is interesting is China’s Belt and Road Initiative – BRI. China is investing huge amounts of time and money into building infrastructure projects across the developing world. This brings prosperity to the countries that benefit, and Chinese influence. Slightly more worrying is that these countries are now in debt to China. Failure to meet the terms of the debt lead to the more sinister influence of debt diplomacy. China, emerging from decades of isolation and embracing modern technology with an astonishing gusto, is possibly becoming the single biggest influencer the world will see. Who knows to what end.
So 2021 will be a year when we look to scientists and health providers to crush COVID, when we look to the US to take back its global lead and influence, when the UK discovers exactly what Brexit delivers, and when we cast a wary eye towards China. Quite the challenge. Happy New Year?
31st December 2020