Monthly Archives: May 2017

EU and Brexit

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The European Union is either demonstrating its lack of understanding of a main motivator for the people of Great Britain’s decision to quit the EU, or it’s intent on making the departure onerous pour encourager les autres, or some combination of the two.  Michel Barnier, the EU’s “Brexit negotiator,” has laid out the terms of his initial position.

One such term is

ensuring that EU citizens in the UK keep their welfare benefits and residency rights for their lifetimes.

Never mind that EU citizens drawing welfare benefits should have those benefits paid for by the EU or those citizens’ home country—which do not today pay the generous rates that the British government does.

Furthermore, those rights

should be directly enforced by the European Court of Justice, the EU’s top court, giving it a role in Britain until “well after the UK leaves.

This ignores the simple fact that, as a sovereign nation, Great Britain gets to use its own court system for all domestic matters and to determine whom it shall permit within its borders.  It is not for any nation, or any foreign court, to dictate to another to what laws that other must submit or whom that other must accept into its bosom.

That’s not all.  There must be

British payment to cover past EU financial commitments[.]

The payments, of course, insists the EU through Barnier, must be in euros, putting the currency exchange risk on the departing Brits.

And

the status of the Northern Ireland border

is for negotiation and not for the sovereign British to decide with the Republic of Ireland—which is to say the border’s status is already determined.

And this bit:

Michel Barnier repeatedly emphasized that Brexit would be painful and complicated.

Which reminds me of what Theron said to Queen Gorgo in 300.  Barnier displays the same contemptuous disdain for Great Britain.  He should however, recall Theron’s fate at Gorgo’s hand.

The Apocalypse is Upon Us

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Or so Lauren Collins would have us believe in her fearful piece in the New Yorker, titled The Future of Europe Hinges on a Face-Off in France about this weekend’s money round of the Presidential election in France.

After all, this election is a referendum between a globalist economy and a globalist identity (Macron) and a nationalist economy and a nationalist identity (LePen).  That does sound apocalyptic, but really, it’s more apocryphal.

As a practical matter, and as is the case with most democratic-oriented governments, French government power is divided between an executive, the President, and the legislative, which elections are next month.  French government power is divided further: the legislative branch’s majority party appoints the Prime Minister, who has serious executive authorities of his own.

A President Le Pen will face two obstacles to her agenda: a Prime Minister from another party (Front National is unlikely to win more than a few legislative seats) and a hostile legislative.  A President Macron may well have to work with a Prime Minister from another party (his En Marche! is all of a year old and unlikely to win many more seats than Front National), and while he would face a not particularly hostile legislative, its agenda most assuredly will not be his.

Either President will find Executive ambitions greatly dampened.  That’s a purely domestic matter, but it spills across French borders.

As a (n international) political matter, Europe’s political future is not much influenced by either President.  Aside from the domestic dampening, which must also dampen these potential Presidents’ influence externally, both Europe and the European Union are made of sterner stuff.

I’ve written of the lack of long-term viability of the EU, but that weakness stems from weaknesses internal to the EU as an institution, not from pressures from within this or that member State, for all that France is an important member State.  No, the EU is good for several more years, the British departure won’t hurt it or Europe, German continued prosperity definitely won’t hurt Europe or the EU, not even the continued brink-of-bankruptcy state of Greece won’t hurt it.

And neither will a staunch EU-supporting President Macron significantly enhance the viability of the EU, nor will a staunch anti-EU President Le Pen significantly diminish the EU.  Indeed, Le Pen has promised a referendum on French membership in the entity, and the French citizenry are strongly more in favor of Remain than of Exit.

What is a threat to Europe is the aggressively acquisitiveness of Russia and most of Europe’s timidity in responding to that.  Nor Macron’s election nor Le Pen’s will have much impact on Europe’s attitude or what France might do about either that timidity or Putin’s acquisitiveness.  Even with Le Pen’s affinity for all things Putin.

Little Compelling Evidence?

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Greg Ip, in his Monday Wall Street Journal piece on the matter of corporate tax cuts, says that

most of the US’ largest trading partners cut their corporate rates. But their experience offers a reality check. There is little compelling evidence any enjoyed substantially faster growth as a result, and certainly not on the scale of Mr Trump’s ambitions….

He offered some examples:

Britain reduced its corporate rate from 30% in 2007 to 19% now. A 2013 study by the British Treasury predicted the tax cuts since 2010 would eventually boost the level of gross domestic product by 0.6%. That is certainly worth having, but spread out over, say, six years, would boost the growth rate by a barely noticeable 0.1 percentage point.

British investment as a share of GDP is actually lower than before 2007….

But the EU, which included a full-throated Great Britain at the time, suffered even more deeply from the Panic of 2008 than the US, and its “recovery” has been even poorer than ours, albeit Great Britain was one of the nominal leaders of that sham recovery.  Not many of the EU member nations have recovered to their pre-Panic levels.

And

Canada cut its corporate rate from 28% in 2000 to 21% in 2004. While growth from 2000 to 2004 was about half a percentage point faster than the prior decade, it has since slowed.

A couple of other things contaminate Ip’s thesis that “[t]here is little compelling evidence” that corporate tax rates actually stimulate economic growth. In Great Britain’s and Canada’s cases in particular, and in the EU generally, the presence of VAT taxes (20% for Great Britain, 13% for Canada, similarly high rates for the continental nations of the EU) vastly dilute the impact of a mere corporate income tax cut.

Also, the existence of régimes of heavy regulation in Great Britain, Canada, and in continental EU add costs that heavily dampen the favorable impact of corporate tax cuts.

The small bumps in economic growth that followed those corporate tax cuts came despite those road blocks.

“We pay a lot to feed the civil servants”

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That’s what Zhou Dewen, Zhejiang Private Investment Enterprise Association Director, a business lobbying group in the People’s Republic of China has said.  He, like business representatives anywhere—including here in the US—is right to be concerned.  That concern is compounded by President Donald Trump’s tax proposal.

Now, Chinese officials and executives worry that the tax proposal Mr Trump announced last week will set back China’s global competitiveness and spur companies to invest in America instead of China.

Which is one of the points of Trump’s proposal that, among other things, seeks to drastically lower our usurious business tax rates.

Trump’s proposal also is a much more intelligent, much more moral, response to American companies moving overseas than the iron curtain that ex-President Barack Obama (D) and his Treasury Secretary Jack Lew (D) tried to erect with their punishing (in every sense) taxes that they tried to impose on companies in order to trap them here.  If we’ve got one of the lowest tax rates going, it no longer would make business sense to relocate out of the US.  And, such a decision would be that of the companies’ owners; it would not be driven by Government watchdogs.

Speaking of relocating businesses for tax-based reasons,

Chinese windshield maker Fuyao Glass opened a $600 million factory last October near Dayton, Ohio, and plans other facilities in Illinois and Michigan, creating 4,500 jobs. CEO Cao Dewang caused a stir in December when he told a reporter the decision was driven by tax differences: “Overall taxation for manufacturers in China is 35% higher than that in the US.”

The PRC government is getting involved, too.

In anticipation of the US tax move, the State Council, China’s cabinet, said earlier this month the government will reduce corporate taxes by over $55 billion to “improve business conditions.” The Communist Party’s newspaper, People’s Daily, warned on Friday that the new US plan could trigger a “tax war” if countries start competing to offer the lowest rates.

Such a race to the lowest tax rates would benefit the folks of all nations involved.  Pop Quiz: which type of economy will prosper the most from such a contest?

“We pay a lot to feed the civil servants.”  Don’t we all.

EU Bad Faith

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The European Union now says that any trade deal discussions with Great Britain must come after the terms of Great Britain’s going out from the EU have been agreed.  Fair enough; it’s tough to negotiate a trade deal before the nature of the relationship between the two has been identified.

But now there’s this, too.

…EU courts must continue to have a role in Britain after Britain’s exit from the bloc.

And

They [the EU leadership] emphasize the importance of ensuring no hard border is re-established between Northern Ireland and the Republic of Ireland and even touch on issues like the future legal status of Gibraltar….

Say, what?  The internal territories of a nation are the business of that nation, and no one else’s.  Gibraltar’s “future legal status” is the same as it has been; Great Britain’s going out has no more effect on the place than it does on Wales.  The borders of a nation are the business of that nation, and no one else’s.  Great Britain’s outward-facing border along Northern Ireland is the business of Great Britain; the EU has nothing to say about this domestic matter.  The courts of a nation are the business of that nation, and no one else’s.  British courts consist of the British court system.

One of the reasons the Brits decided to leave was to regain British sovereignty over their own nation.  Either the EU peerage inhabiting Brussels haven’t been listening, or they’re being entirely disingenuous in their affront over the Brits’ impertinence in rejecting these persons’ superior abilities to govern.