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Wednesday, 25 January 2017

Mrs May's Machiavellian Moves (2)

On Tuesday 17 January 2016, the UK PM gave her long awaited Brexit speech in which she put the UK's cards on the table (eg, Guardian, NYT). The speech caused a lot of attention in British media. On the other side of the Channel, it was business as usual. I have been wondering about this.

Apart from Scottish whiskey, I wouldn't know any other UK product that we buy on the European Continent,  This reminded me of President Obama's remark in December 2016: Russia “doesn’t produce anything that anybody wants to buy except oil and gas and arms. They don’t innovate.”

The Top 10 UK exports confirms the above. All UK exports are all in the Business-to-Business (B2B) rather than the Business-to-Consumer segment (B2C). This will seriously handicap British negotiations to get a fair deal as it appears that Europe does not even need the UK. Politicians represent voters. Voters are consumers. Consumers only care about products that they like. To paraphrase President Obama: the UK "doesn’t produce anything that anybody wants to buy".

The fall of Pound Sterling compared to the Euro (10Y chart) and US$ (10Y chart) should facilitate a boost in UK exports and will make imports from Europe more expensive. However, "Britain’s service industry [] accounts for almost 80% of the economy" (eg, FT, UK Gov). The Brexit impact on Britain’s service industry will be decisive for the future of the UK.

A deteriorating European export to the UK will further complicate negotiations. The UK will claim that it's the result of a strong Euro (or: weak PST). Europe will claim that the decline is politically motivated. In such case, it will be extremely unlikely that Continental Europe will have any urge for facilitating a tax sheltering UK services economy (eg, FTIndependent).

Dutch finance minister Dijsselbloem: "I also have trouble understanding what the prime minister envisages for the financial sector. The City serves us all of Europe so there’s a great joint interest but continental Europe can’t accept that the city has different rules over time." He added that proposals to turn the UK into a low-tax centre after leaving the EU are “unproductive and damaging” (FT)

Dijsselbloem predicted a gloomy outcome for the UK. He expects Mrs May’s Brexit plans to lead to “massive unemployment” by 2037. “Let’s speak to each other again in 20 years, and then England will be back to where it was in the seventies,” he said. “Totally outdated, massive unemployment, totally impoverished.” (eg, FT, NRC). 

I am still convinced that Theresa May's Brexit plan is a well-crafted example of reverse psychology. The only way to convince Brexiteers to stop Brexit is by executing a hard Brexit and by allowing UK Parliament to vote it down. By then both sides will ferociously blame each other for either requesting or executing a Brexit

I'm impressed by Mrs May's Machiavellian Moves. It might just be wishful thinking but I trust my gut feeling. I think, feel and believe that she's much smarter than people give her credit for. 

Superwoman (2008) by Alicia Keys - artist, lyrics, video, Wiki-1, Wiki-2