• Inauguration Day: Two winners and two losers.

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    Yesterday we saw the culmination of a series of three very unlikely events coming to fruition.

    These were Leicester City winning the Premier League, the UK voting for Brexit and the US electing none other than Donald Trump as its next President.

    Yesterday’s inauguration was different from previous recent inaugurations. For a start there were around 50 members of Congress who boycotted the ceremony. Then there were civil disturbances with “the usual suspects” going on the rampage smashing windows, burning cars and overturning litter bins.

    It was also one of those inaugurations where there were two winners and two losers: Mr Trump won the vote in the electoral college but Mrs Clinton won the popular vote. Each won by a healthy margin.

    This was illustrated by the contrast in the numbers of the American public attending the ceremony: sharply lower than the last ceremony in 2012.

    The other thing that set yesterday’s inauguration apart from others was the nature and content of the inaugural address. Traditionally this is where the new President seeks to appeal to the whole nation. Those who voted for them and those who voted against. The tradition (which Americans hold to be an important one) is based on the fact that the US President performs two roles: One is the head of the government. The other is head of state. The inaugural address is where they get the chance to try and demonstrate the latter.

    Before the ceremony the pundits were speculation as to what approach “The Donald” would take. It turned out that he took much the same line as he did on the campaign trail.

    So, what can we expect over the next four years?

    Well, if he implements what he said about a great increase in infrastructure spending this would take the form of a massive injection of money into the pockets of people with little at the moment – to say “de rust” the “rust belt” – would boost the US economy and lead to an increased demand for items across the board. This will help the world economy. It will also increase the consumption of oil which will firm up the oil price which will improve the balance sheets of the major oil companies, Royal Dutch Shell being among them. This in RDS’s case will make the dividend more secure.

    Whilst this is one part of the programme the new President will be able to quickly implement, other such as “trade deals” will take much longer.

    Climate Realists have been cheered by the new President’s welcome recognition that the great Glow Bull Warning Scam is just that: a scam! Whilst we welcome and applaud this, we have to be aware that the new President will meet the most ferocious opposition from the Glow Bull Warnists. Vast amounts of money are being made from these scams and large numbers of “green jobs” depend on the scam. These vested interests will not give up without a fight. They will be hoping that in four year’s time a sympathetic opposition candidate will win causing “The Donald” to be a one term president.

    Of course there is one aspect of the outlook faced by the new administration that is particular to the UK. Brexit. The Trump team hold the belief that Brexit had a material effect on the US election campaign. They know far more about domestic US politics than does your editor.

    Here is an irony: The Democrats are casting around for someone to blame. They have latched onto a certain Vladimir Putin. Here is the irony: the man who clearly had more effect on the campaign than Mr Putin was one Nigel Farage!

    Not only did Mr Farage not hack into a single computer, the man would not have a clue how to go about it!

    Now Mr Farage should be categorised as a special kind of politician. However “special” denotes a rarity and in Britain at the present time Mr Farage is not alone in advocating policies that can only exist “somewhere over the rainbow where skies are blue and where dreams always come true!”

    However as has been pointed out by the organ before, leaving the EU one day and carrying on under the auspices of a new trade deal the next is impossible.
    It cannot be done.
    When the country formally notifies the EU that it is leaving under Article 50 there is no provision to stop or reverse it. The wording is quite clear. So much so even the judges at the European Court of Justice could not obfuscate it’s meaning. The only alteration that can be made is to lengthen the time from 2 years to longer. And that requires all parties to agree. There is a very real danger that the UK could leave the EU without an agreement. If that happens the so-called “WTO default” option comes into play. The problem – and it is a gigantic problem – here is that it is NOT the tariffs that are the problem but the many NTBs or “non tariff barriers” that would immediately come into effect. Trade between the UK and the EU would effectively come to a halt.

    So serious would the economic situation – and contingent upon it the political situation – be in the UK that the Trump administration would be affected. That is because there is a significant US-UK trade flow and this would be significantly affected. Many US businesses would be adversely affected.

    So, could, theoretically the UK walk away from its relationship with the EU and the EEA into a new one with the USA?

    Ordinarily one would say no. However the consequences of a “Hard Brexit” would be so severe there is an extremely remote prospect that an alternative could be put together. It would not however be a conventional trade deal.

    This is because a conventional trade deal will not meet the UK’s requirements on Brexit + Day 1 (Independence Day).

    This is because of the UK’s membership of the Single Market also and more accurately called the Internal Market.

    To repeat, moving from the Internal Market to a trade deal is impossible in one go. The only practical way to move from the Internal market to a trade deal basis of trade is through initial membership of EFTA thus maintaining membership of the EEA (Internal market) for a transitional period.

    So if it looks like a Hard Brexit – a train crash of epic proportions what could be done?

    The EU might offer to effectively halt the process. This could only practically be done by extending the notice required under Article 50 from 2 years to a considerably longer period 5,10, 15 and formally suspending the negotiations. This would mean that NOTHING HAD CHANGED. The UK would no longer be leaving the EU.

    There would be costs! Heavy ones! The EU would demand a hefty payment. It is hard to see any UK government surviving such a humiliation.

    Thus faced with the economic catastrophe of Hard Brexit and the political disaster on the one hand or the political disaster of an Article 50 suspension on the other, is there another choice open?

    As stated earlier, theoretically it is possible. The problem here is that like would have to be substituted with more or less like.

    What does this mean?

    This:

    The UK is in a large internal market. Were it to leave such an internal market it would really need to join another large internal market. Now Dear Reader, please forget one word: tariff. It is irrelevant! The phrase you need to keep in mind is “delivery procedures”. These two words are very very important as the define the nature of the internal market.

    When a UK business sends goods to a customer essentially they use the same procedures whether the customer is over the hill in the next town or in Spain, or Greece.

    To replace the present internal market that is the EEA (European Economic Area) with another, (the USA) would be the cause of severe and expensive disruption. It would however be less severe, less expensive and less disruptive than membership of no internal market at all.

    Furthermore it would result in an enormous loss of sovereignty. The UK would effectively take back the sovereignty it had progressively handed over to the EU but then hand a considerable portion (but not all) of that sovereignty over to the USA! In other words we would regain some sovereignty.

    We cannot imagine that this could be regarded as in any way palatable! To a UK government.

    There would be consequences (of becoming in economic and trade terms the 51st state of the USA) that would be regarded as extremely negative by many but at the same time extremely positive by many more. This would be in the area of food.

    Food is one thing that ALL UK citizens require. Without food we die! Therefore keeping alive means we all have to eat it!

    It is a FACT that in the USA food is much much cheaper than in the UK.

    It is a FACT that poor people (those who cannot afford a Range Rover and cannot afford to buy organic, Mr Hammond) spend a considerable proportion of the meagre earnings on food. These people really do work to live!

    Seeing a dramatic drop in the price of their foodstuffs would be most welcome!

    For the Range Rover brigade however this development would be regarded with horror! This is because US food is produced to different standards. GMOs are used.

    UK farmers would be severely affected. Many however could survive by selling their high priced free range “animal friendly” organic produce to the Range Rover brigade.

    The thing that would be insuperable politically however would be the US insistence that the NHS is broken up. No UK government could survive this. In fact no UK government could get the Commons and the Lords to agree.

    The Anglophile Donald Trump may well be prepared to help we Brits out – but the cost would be high.

    When it comes down to it the UK is faced with two choices:

    1. Adopt Flexcit.

    2. Agree an indefinite Article 50 time extension and formal suspension of Brexit talks.

    The biggest dangers of all however have nothing to do with Brexit. But everything to do with two critical nations in the world. Israel and Taiwan.

    Mr Trump is clearly the most pro Israel US politician for many years. This is not a bad thing. However it is a very dangerous thing!

    As for Taiwan: This is best described by the acronym TAIWAN (Trouble Awaiting Incompetent Wanker Activating Nightmare). Enough said.
    NB: Declaration of interest: The Editor owns shares in Royal Dutch Shell.

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