Category Archives: Economic

Britain, Economic, European Union, Government, Politics, United States

Britain dismayed at US trade war

US TRADE TARIFFS

THE Prime Minister Theresa May has attacked Donald Trump’s “unjustified” trade tariffs amid fears that Britain’s automotive industry could be hit next.

Mrs May said she was “deeply disappointed” with the US President’s decision to impose higher import taxes on steel and aluminium from Britain and the EU.

The EU has signalled that it is prepared to hit back, making a complaint to the World Trade Organisation (WTO) and finalising a list of American products it will target with tariffs of its own.

There are fears, however, that this could spark a spiralling trade war, with Mr Trump responding to any retaliation by imposing additional import levies on cars from the UK and EU.

That possibility will concern the more than 169,000 employees in the UK motor vehicle industry, on top of existing fears for Britain’s 31,000 steel workers.

International Trade Secretary Dr Liam Fox suggested that the UK may not fully support the EU’s retaliatory measures, instead saying Britain only backs the complaint to the WTO.

He said it would “take some time” for EU member states to agree their collective response, and urged the bloc to pursue compromise with the White House in the interim – even though British diplomats have previously offered their support to measures drawn up in Brussels.

Dr Fox said it would be “very, very unfortunate if we get into this tit-for-tat position, especially with one of our closest allies.”

He added: “Nobody wins in a trade war, there are only casualties. We very much regret that these tariffs were put in place.

“We think it’s of dubious legality and we will be with the EU 100 per cent in taking this to a dispute at the WTO.”

The deepening row comes just before a G7 meeting of world leaders in Quebec this week, where European leaders will air their grievances to the US President. French president Emmanuel Macron has already told Mr Trump his new tariffs on EU goods was a “mistake” and “illegal”.

Mrs May’s language was more measured, but she said: “I am deeply disappointed at the unjustified decision by the United States to apply tariffs to EU steel and aluminium imports.

“The US, EU and UK are close allies and have always promoted values of open and fair trade across the world. Our steel and aluminium industries are highly important to the UK, but they also contribute to US industry, including defence projects which bolster US national security.

“The EU and UK should be permanently exempted from tariffs and we will continue to work together to protect and safeguard our workers and industries.”

Although it is said that the Prime Minister has additional concerns over US trade tariffs, it is believed she has not expressed these in public as she hopes to tie up a comprehensive post-Brexit trade deal with the White House and does not want to inflame the situation.

The EU, which handles trade matters on behalf of the UK, has been finalising its response to the US, with measures affecting thousands of US imports to the EU worth £2.5billion, including Levi’s jeans and Jack Daniel’s bourbon, hit with tariffs of up to 25 per cent.

Cecilia Malmstrom, the EU’s trade chief, admitted the bloc was “anxious” that Mr Trump would follow through on earlier threats to impose tariffs on European cars.

She said: “This would create enormous damage, not only to the European economy but also to the US.” The US levies of 25 per cent on steel and 10 per cent on aluminium imports follow promises made by Mr Trump under his America First programme.

Earlier this year, he said: “If the EU wants to increase their already massive tariffs and barriers on US companies doing business there, we will apply a tax on their cars, which freely pour into the US.”

EU cars sold in the US face a levy of 2.5 per cent, compared to a 10 per cent tax on US vehicles brought into Europe.

How the US raised the stakes:

. Donald Trump announced in March that the EU and countries including Mexico, Canada and Brazil would be hit by increased steel and aluminium tariffs to protect US firms against imports from China, which has flooded the market with cut-price steel.

. The EU, which negotiates trade on behalf of Britain, was granted a temporary exemption while Theresa May and other leaders lobbied for a permanent reprieve.

. The UK is concerned about the effect of the measures on its resurgent £1.6billion steel industry, which employs some 31,000.

. Britain exported 350,000 tonnes of steel worth £376million to the US last year – 7 per cent of its output.

. If the EU hits back, as it has threatened to do, Britain fears that Mr Trump will retaliate by raising tariffs on cars, in a blow to the UK car industry, which employs around 169,000.

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Economic, European Union, Government, Italy, Politics, Society

A provocation and insult to democracy

ITALY

ITALY has had no fewer than 65 governments since the War – with an average survival rate of just over a year. The country is hardly renowned as a beacon of democratic stability.

Even by the standards of this volatile nation, however, the current political crisis is becoming more troubling and bizarre by the day. It proves yet again the disastrous folly of imposing the one-size-fits-all euro on countries for which it is so obviously unsuitable. Pertinently, it demonstrates that Brussels has no qualms about trampling on democracy to keep the dream of a European superstate alive.

Italy’s national finances are in a dire state. Marooned in a sea of debt, with a stagnant economy and crippling unemployment rate, citizens of that beleaguered land renounced their mainstream Europhile parties in a general election just three months ago. They rightly blamed membership of the single currency for their misery and elected a coalition of unashamedly populist, Eurosceptic parties – led by the maverick Five Star movement and Right-wing Northern League.

Yet, when radical economist Paolo Savona – a passionate opponent of the euro – was named finance minister he was vetoed by Italy’s slavishly pro-Brussels president Sergio Matarella, who then nominated his own man as prime minister and invited him to form a totally unelected government. It has no mandate of course and will soon fall. Mr Matarella could possibly be impeached for overreaching his powers. But what an affront to democracy.

Had this happened in some Third World state, it would have quickly been denounced as tyrannical and corrupt. Not in Europe. In both Paris and Berlin, Mr Matarella is being praised for his courage. There is no better example or illustration of how people across the European continent are being disenfranchised – and just why they are crying out for change.

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Britain, Business, Economic, Government, Politics

Carney: A Brexit investment boom once deal with Brussels is signed

ECONOMIC

Carney

Mark Carney told MPs on the Treasury select committee an investment boom will follow once a Brexit deal with Brussels is agreed.

THE Bank of England’s Governor Mark Carney has predicted that businesses will launch major investment drives after Britain signs its Brexit deal with Brussels.

Mr Carney said many firms had put off important spending decisions since the referendum but may turn on the taps when Britain’s future relationship with Brussels becomes clear.

In comments highlighting the importance of striking a deal, he claimed that families were already £900 a year poorer than they would have been if Britain had voted not to leave the EU.

But he said there may be a pick-up in economic growth and productivity once Brexit is settled.

Appearing before MPs on the Treasury select committee, he added: ‘It’s understandable businesses are holding back – there are some big, big decisions that are about to be made.

‘I could build a case to say that actually business will use those clean balance sheets, access finance and start to put capital to work, and we should see a sharp pick-up in business investment.’

Mr Carney – who warned before the 2016 referendum that Brexit could be an economic disaster – added that the economy was as much as 2 per cent smaller than it would have been if Britain had chosen to remain.

Mr Carney said: ‘Real household incomes are about £900 per household lower than we forecast in mid-2016, which is a lot of money.’

The comments drew an immediate riposte from Foreign Secretary Boris Johnson, a leading Brexiteer.

On a visit to Buenos Aires, Mr Johnson rejected the Governor’s view and argued that Britain will prosper outside the EU thanks to new trading opportunities with countries such as Argentina.

Pro-Brexit MP John Redwood dismissed the claims that families were £900 worse off, saying: ‘I see no evidence.’

John Longworth, former director-general of the British Chambers of Commerce, said: ‘He’s basing that number on forecasts which were flawed. There are lots of factors influencing that number.’

GOVERNMENT BORROWING

BRITAIN’S borrowing is at its lowest for 16 years as rising tax receipts confound warnings of economic doom following the Brexit referendum.

In a sign that the vote to leave the EU has done nothing to derail plans to put the country’s finances back on a stable footing, the Office for National Statistics (ONS) said the Government borrowed £40.5billion last year – down from £153billion in 2009-10 under the last Labour government.

It is also around half the amount George Osborne predicted Britain would borrow last year in the event of a Brexit vote.

The figures give the lie to warnings that the decision to leave the EU would crash the economy and hammer tax receipts.

Instead, last year’s deficit was 2 per cent of national income – the lowest since 2001-02, when Tony Blair and Gordon Brown began a debt-fuelled spending spree.

When the Tory-Lib Dem coalition came to power in 2010, the deficit stood at 9.9 per cent of gross domestic product.

Liz Truss, Chief Secretary to the Treasury, said: ‘Borrowing as a share of our economy is at a 16-year low.

‘This is testament to the hard work of the British people as we fix our finances and build a Britain fit for the future.

‘We are strengthening the economy whilst cutting income tax and investing in public services. Labour would put that all at risk with their bonkers borrowing binge.’

In the so-called dossier of dome issued two years ago, former chancellor Mr Osborne said borrowing would hit almost £78billion last year if voters opted for Brexit.

In the Autumn Statement in November 2016, the Office for Budget Responsibility (OBR) pencilled in borrowing of £59billion as it warned of the impact of the Brexit vote.

In fact, the Government borrowed £40.5billion as tax receipts rose 3.4 per cent to a record £701.8billion. Corporation tax receipts rose 6.3 per cent to £57.7billion.

It borrowed a further £7.8billion in April, the first month of the fiscal year – down from £9billion in the same month last year.

Receipts from income tax and capital gains tax jumped 12.3 per cent to £12.8billion last month as record levels of employment boosted Treasury coffers. VAT receipts rose 2.8 per cent to £11.5billion.

The figures will put pressure on Chancellor Philip Hammond to ease austerity and free funds for public-sector pay rises.

But with the national debt close to £1.8trillion, or 85.1 per cent of national income, he will be reluctant to embark on a spree.

The national debt has risen nearly six-fold since 2000, from just over £300billion to nearly £1.8trillion.

The Government spent £54.6billion in debt interest payments alone last year – which equates to more than £1billion a week.

INFLATION

PRICES are rising at the slowest pace for more than a year in a boost to millions of families, official figures show.

The ONS said the annual rate of inflation fell from 2.5 per cent in March to 2.4 per cent in April.

That was the lowest level since March last year and down from a post-Brexit referendum peak of 3.1 per cent in November.

Inflation has risen by far less than feared since the Brexit vote and now appears to be heading back towards the 2 per cent target, easing pressure on family finances.

Two years ago, then Chancellor George Osborne warned that a Brexit vote would push inflation towards 5 per cent this year. Instead, it is only a little above the 2 per cent rate the OBR forecast for 2018 had the country voted to remain in the EU.

Brexit supporters branded the warnings issued by Mr Osborne and other Remain campaigners ‘ridiculous and outrageous’. With inflation falling and wages rising at the fastest pace for more than three years, analysts have said that ‘things are looking up for UK households’.

Chancellor Philip Hammond said: ‘Good news on inflation – it fell to 2.4 per cent in April and is expected to keep falling. With wages going up that means more money in people’s pockets.’

However, it is feared that the rising oil price may keep inflation above the 2 per cent target for longer than hoped as the cost of petrol and diesel increases.

The ONS figures follow a string of reports showing UK employment at a record high, unemployment at a 43-year low across the country and government borrowing at the lowest level for 16 years.

The flurry of upbeat economic data contrasts with warnings that the Brexit vote would crash the economy.

Before the referendum, Mr Osborne warned of an ‘immediate and profound shock to our economy’ that would plunge the UK into recession, put as many as 820,000 out of work and result in government borrowing of almost £78billion this year.

Instead, the UK economy has grown for seven quarters in a row since the referendum, employment has risen by 609,000, unemployment has fallen from 4.9 per cent to 4.2 per cent, and borrowing was around half what Mr Osborne claimed it might be.

Conservative MP Andrew Bridgen said: ‘As time progresses, people are seeing just how ridiculous and outrageous this was. There must be many people who voted Remain who now regret it, who were intimidated by the prophets of doom and gloom.’

Oil prices have been climbing after US President Donald Trump said the country would leave the Iran nuclear deal, raising the prospect of a fall in supply from the Middle East.

Brent crude surged above $80 per barrel last week, sparking fears of further fuel price increases.

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