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Is Growth Possible in a Brexit Economy?

by John Brian Shannon

“KPMG predicts economic growth of 1.4 per cent next year, but cuts this to 0.6 per cent if Britain leaves the EU without a deal.”The Times

While some firms predict slower than normal growth for the UK economy in the post-Brexit timeframe, it’s always good to reflect on the assumptions that forecasters employ in creating their reports and why such forecasts can cause more harm than good.

  1. If you tell your employees that, ‘the chips are down, the economy is sinking, and corporate belt-tightening isn’t far off’ they are likely to respond in a negative way. Some may look for other employment, some will opt for early retirement, while others spend more time in the staff room talking with their coworkers about their employment concerns than getting their work done. Which means such reports can actually cause the negative outcome they’re warning about. It’s human nature to perform to a predicted level instead of trying to exceed expectations. There are few exceptions to this behavior and they are called names like; Olympic athlete, Pulitzer Prize Winner, President, or Astronaut who have the innate ability to ‘power through’ the negative times without losing momentum.
  2. Such reports deal with known inputs only. For example, a zero-tariff trade deal with the Americans may seem far off today, but by 2020 it may already be signed. And not only the U.S., other political and trade blocs are likely to sign trade deals with the UK following Brexit. The AU (Africa), MERCOSUR (the South American trade bloc), the Pacific Alliance (several Pacific nations), the CPTPP (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership) nations, ASEAN (the Association of Southeast Asian Nations), The Commonwealth (Commonwealth of Nations), and China, are likely to expand their trade links with the UK after it departs the European Union. America and those seven trading areas will have a combined total of 7.0 billion people by 2020. That’s a lot of potential consumers, and the massive opportunities presented by signing zero-tariff trade deals post-Brexit are absent in most economic projections by design. Even if the UK were to sign only one free trade deal (with the U.S., for example) it could improve UK growth by a full 2 per cent or more. Presto! A shiny new UK economy!
  3. “Now we’ve got them!” While economic forecasting provides vital information for policymakers, Brexit negotiators aren’t helped by the news that growth will slow even in the face of a ‘good Brexit deal’ and will slow moreso in a ‘no Brexit deal’ scenario. It’s the kind of report that makes Michel Barnier’s day! KPMG is certainly one of the most respected firms around, but if you’re a Brexiteer and a report like this has been released to the public instead of it remaining in the hands of policymakers it plays with your mind; “Are they working for the UK’s best interests or are they working for the EU’s best interests?” (and) “Who commissioned (who paid for) this report and what parameters were used?”

So, while the good people of KPMG do their best to provide policymakers with the best near-term assessment of the UK economy, making such reports public can actually cause the negative things to occur about which the report warns.

That’s why policymakers everywhere must be ahead of the curve and treat all such documents as ‘the worst-case scenario’ without exception.

Now that UK Prime Minister Theresa May has been reliably informed that the worst the UK can do is 0.6 per cent growth between now and 2020, it should be an easy matter to arrange a number of free trade deals and blow the doors off that projection by 3 or 4 per cent by 2020.

Looking at this in the proper context means accepting that exiting the European Union is merely a necessary stepping stone to get the UK to 4 per cent growth by 2020 — which should result in Theresa May keeping the PM’s chair for at least one more term and with all past ‘political sins’ forgiven.

Not a bad deal Theresa, if you’re up for it! 🙂

How Canada and the UK Could Work Together post-Brexit

by John Brian Shannon

Until the official Brexit date of March 29, 2019 the UK remains in the European Union — which means that Britain remains a party to the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada.

And the CETA accord is a very fine agreement (as it should be, because it took 7-years to negotiate) but it may take another year or two to become fully implemented. At the moment CETA is only partially implemented, but eventually 98% of tariffs between Canada and the EU will be eliminated.

Once Brexit happens on March 29, 2019, the UK will cease to be a CETA signatory and something else (a ‘drop-in’ agreement) will need to replace it.

That is the topic of this blog post.

Enter the United States, Canada, and NAFTA.


Where’s Canada on the International Trade Map?

Canada is a surprisingly strong exporting country. With a population of only 36 million and a territory that measures 3.855 million square miles, it means the country is practically empty.

Across this huge landscape are fields of crops larger than the entire UK, but Canada’s few cities are large. In fact, the Greater Toronto Area (the GTA) is larger and has a greater population than the New York Metropolitan Area.

And it’s an exporting superstar; Making it the 11th highest exporting nation in the world.

“Canada is currently the fourth largest exporter of cars in the world and the ninth largest auto producer in the world, making 2.1 million cars a year. Trade with the U.S. is by far the most powerful driver for the automotive sector.”Export Development Canada


What if There’s No New NAFTA Agreement?

If the NAFTA agreement falters due to insufficient efforts between U.S. and Canadian negotiators Canada will end up producing cars for itself — which means it won’t be exporting 1.8 million cars to the United States annually once NAFTA is terminated (or) once President Trump slaps a 25% tariff on Canadian cars exported to the United States.

Which means a lot of Canadian autoworkers are going to become unemployed the day after that announcement.

Which means that Canada (insert drum roll here) needs a ‘Plan B’.


President Trump Isn’t ‘Being Evil to Canada’ He’s Protecting American Interests Because That’s His Job!

You can’t blame him for that. For goodness sake he’s the President of the United States, not of Canada.

But Canada can’t sit idly by and wait for the world to end. The country must pick itself up and get on with business.

And the best way to do that is to respectfully approach the UK and inform them that it’s likely NAFTA will be terminated or changed in ways that result in Canada having an excess auto manufacturing capacity of up to 1.8 million units per year.

Such manufacturing capacity could be very useful to the UK government and to UK industry.


How Canada and the UK can Work Together for Mutual Benefit

The cost of living in the UK is much higher than it is in Canada, therefore wages in the UK are higher than in Canada.

And it’s the reason why only premium car lines are built in the UK where the high labour cost for exceptional hand-built cars are reflected in the final price and nobody minds paying extra. See; Aston Martin, Jaguar, Land Rover, etc.

Even Rolls Royce and Bentley were forced to move to continental Europe because they couldn’t afford the high labour costs of UK workers and the costly land/building/business costs of manufacturing cars in the United Kingdom.

Post-NAFTA, huge opportunities exist for Canada to export lower-priced GM, Ford, and Fiat Chrysler (FCA) cars and trucks to the UK — freeing-up huge amounts of disposable income for Britons.

Which means that saved money will be spent elsewhere in the UK — whether on home renovations, tuition, school supplies, vacations or investments — because it isn’t going anywhere (it isn’t going to magically vanish!) it will simply be spent on other items.

Any Canadian-built vehicles that are exported to the UK over what the UK market can sustain can be forwarded to Commonwealth of Nations countries by UK re-exporters.

India alone has a population of 1.32 billion and its economy is rising fast to become the third-largest consumer economy in the world. There’s no lack of demand for cars and trucks in the Commonwealth.

A Must Read: India Poised To Be Third Largest Consumer Economy (Forbes)

All of which works to help the UK economy.


Trump Wins, Trudeau Wins and May Wins!

President Trump wins because he will have prevented Canada from exporting 1.8 million vehicles to the United States annually, and American factories (meaning American workers) will need to fill that demand gap, Prime Minister Trudeau wins because he will have saved the Canadian jobs associated with the manufacturing of those 1.8 million cars and trucks, and Prime Minister May wins because she will have ushered in three new lines of lower-priced vehicles for UK consumers and those savings will translate into higher levels of disposable income for British consumers that can be spent elsewhere in the UK economy.

It’s so easy when you know how...

Western Powers Attack Syria

by John Brian Shannon

The International Order is Broken

We know this because the world’s politicians are using military means to solve what are essentially political problems they don’t know how to solve.

As the Syrian crisis rolls into its 8th year no clear winner has emerged, other than ISIS has been degraded by Western and Russian forces operating throughout Syria.

Not that Russia and the West are working together to destroy ISIS, rather, Western countries are working to destroy the evil entity to prevent it from spreading across the Middle East and the Western world, while the Russians are tearing ISIS apart because it represents an internal threat to Syria, its longtime ally.

Which are reasonable and noble goals.

But at any time since the Syrian conflict began in 2010, Western, Russian and Syrian diplomats could’ve worked out a plan to solve the terrorist problem inside Syria and could’ve wrapped up the whole mess within 24 months with relatively few civilian casualties. But they didn’t. Or they couldn’t.

The very definition of broken-ness, right there.


“No problem can be solved by the same level of consciousness that created it.”
Albert Einstein


Why Are We Broken?

When the interests of several countries align — and they still can’t put together a unified coalition — it’s a textbook case of a broken international order.

Which is how we stumbled into WWI, WWII, the Cold War, the Korean War, the Vietnam War, the Gulf War, the Iraq War, the Afghan War, and several other conflicts, such as the Rwanda genocide that killed 800,000 people in a matter of days. And we know how those wars turned out, and we know how many people were killed in total in those 20th-century conflicts.

The failure of politicians and their diplomats to find better solutions and thereby prevent those wars is appalling beyond any scale that humans can understand.


“All war represents a failure of diplomacy.”
Tony Benn


 Sometimes, very complicated problems can stem from a very simple problem.

FOR EXAMPLE: The neighbourhood’s troubled teen filling your car’s fuel tank with water overnight — although a simple act in itself — can cause serious problems after the car is driven the following morning. Such a simple act can cost a vehicle owner hundreds of dollars to repair and cause major inconvenience.

And likewise, every war fought in the 20th-century was caused by an astonishingly simple misunderstanding of human psychology by the world’s politicians and diplomats.

We are broken because those politicians believed that employing ‘Win-Lose’ thinking to solve problems was the preferred path, instead of realizing that ‘Win-Win’ thinking is a higher form of thinking that only humans can employ to solve problems.

Every war since 1900 is the direct result of employing ‘Win-Lose’ thinking to solve political problems. Another way to say it, is that every single death and injury caused by war in the 20th-century is 100% on the heads of the people who practiced politics and diplomacy in that century — because their thinking wasn’t up to the task.

Never in human history had anyone seen bungling on the scale of 20th-century world leaders.

Therefore, as the ‘default mode’ for politicians in the 20th-century was to employ ‘Win-Lose’ thinking, every serious disagreement inexorably turned into war and mega-millions died as a result.

Because the politicians of the day resorted to their animal instincts, over 250 million people were killed in war and in famines caused by war in the 20th-century. Some might call that number a conservative estimate of the total death toll.

Sobering, isn’t it?


Aren’t We Better Than That?

Apparently not. Because even today we’re still using bombs to solve the problems we’re not smart enough to solve. Problems that humans created aren’t being solved, because we’re not using the right methods to solve our problems.

So we bomb our way out of problems.


Using ‘Win-Win’ Thinking to Solve Our Problems

There are few examples of the world’s politicians using ‘Win-Win’ thinking to solve our very human psychological problems.

Ending the Cold War is the stellar achievement for diplomats in the 20th-century. And just in time, because the civilization that humans built over thousands of years came dangerously close to annihilation many times during the Cold War.

Another example of ‘Win-Win’ thinking occurred when the world’s politicians and scientists came together to sign the Montreal Protocol to eliminate chlorofluorocarbons from our supply chains; chemical compounds that were rapidly destroying the Earth’s ozone layer. The Montreal Protocol has been called ‘the most successful accord in history’.

Yet another example of ‘Win-Win’ thinking occurred when the Allied Powers joined forces after World War II to rebuild Europe using the Marshall Plan to fund food aid, reconstruction of damaged infrastructure, and to help establish a fairer world order based on peaceful relations. In postwar Japan, the Allied Powers facilitated the country’s rebuilding by purchasing billions of dollars of Japanese goods which benefited the Allied Powers as much as it benefited the former Axis Power.

Without the assistance of these, the most brilliant minds that ever lived, humanity may have become extinct long before the year 2000.

The ‘Win-Win’ thinkers who ended the Cold War, the ‘Win-Win’ thinkers who ended the use of chlorofluorocarbons, and the ‘Win-Win’ thinkers who invested in the former Axis Power economies during the postwar era, changed our world for the better (at the very least) and may be responsible for saving all life on the planet (at best).

Those examples prove ‘Win-Win’ thinking can work to solve our problems and that we don’t need to retain ‘Win-Lose’ thinking as our default problem-solving method.


Regardless of the Method we Choose, we Must Stand Up for Our Principles

President Donald Trump today authorized 3 military strikes inside Syria to hit suspected chemical weapon sites and chemical research and development facilities ostensibly used by the Syrian military.

The president cited Article 2 of the U.S. Constitution in his justification for the attack saying that Syria represented an area of strategic importance to the United States. However, there almost isn’t a place on Earth that is of less strategic importance to the U.S. and its allies, as Syria.

It may be the president misread his teleprompter — because Syria isn’t a strategic place from the U.S. viewpoint — and if he sticks to that view he will spend days or weeks defending this military action to members of the Congress and Senate.

What is of strategic importance to the United States (and what would work for members of Congress charged with upholding the U.S. Constitution) is that preventing the proliferation and use of chemical weapons is of strategic importance to the United States, and therefore, President Trump’s authorization of use of force is justified and necessary, and in the best interest of the United States.

In that way the president’s use of force is legal and justified under the U.S. Constitution, and may also serve as a deterrent to a Syrian regime that seems bent on destroying significant numbers of its population and has refused any chance to allow them escape to another country.


Choosing Humanity vs. Hubris: Why We Fight

Exterminating your own citizens because they have a different political view isn’t acceptable and no doubt President Trump is privy to images and videos from Syria that are marked classified because they’re too horrific for U.S. television viewers to see.

And let’s be honest, seeing those images hastened his decision to veer hard towards military action rather than continuing to employ so-called ‘Soft Power’ to bring about a diplomatic solution to the Syrian debacle.

It may be that punishing Syria each time it uses chemical weapons against civilians or terrorist entities will serve as an effective deterrent. However, Syrian forces may become more adept at hiding such attacks from Western eyes and ears.


“We cannot allow the use of chemical weapons to become normalized.”
Theresa May


Syria’s plan seems to be to kill every terrorist, every non-combatant family member of terrorists, or anyone stuck in areas known to contain terrorist entities.

While this may seem normal to dictators, it is highly offensive to civilized people. Even Syria’s ally Russia, abhors attacks on civilians and non-combatants — and Russian citizens seem extremely offended when chemical attacks are used to solve what are, in the final analysis, human problems for which the diplomats haven’t yet found solutions.


Short-term Deterrence or Long-term Mutual Success?

Whether Tomahawk missile attacks act as a deterrent to Syrian chemical weapons attacks inside Syria, or not — at least President Trump can say that America and its allies didn’t stand idly by and let it happen without challenging it.

Yet, the long-term way to solve this crisis is to show these heinous acts on every television in the world, to explain what is actually occurring there, to make chemical weapons use anywhere unacceptable to everyone, and to use ‘Win-Win’ thinking to save our broken, but still human, civilization.

When we finally adopt ‘Win-Win’ thinking as our default option to deal with human-caused problems, that will be the day that human beings finally surpass the animal kingdom in every way on this planet. And if we don’t, our short break from the threat of Cold War-style Mutually Assured Destruction (MAD) will soon be over.