Friday, 23 September 2016
VISA-FREEDOM FOR BRITISH PASSPORT HOLDERS?
Of all the world's passports a British Passport provides visa-free access to more countries than any other, to 186 countrie, which is most of the world. The next best Visa-free passports provide access to 170 or less. When the UK resigns its EU membership it conceivably risks losing access to 27, supposing the rest of the EU plays hardball in retaliation for the UK restricting the free movement of EU nationals to come to the UK? British Passports will eventually require a re-design to remove references to EU membership. While that and any travel restrictions in EU may be irritating, to go where currently far more British citizens travel to than elsewhere in the world, perhaps less irritating than loss of "passporting" rights to UK based businesses. Insurers, banks, and other financial services, half of whom are UK domiciled, that account for nearly half of the UK's trade, many rely on passporting rights to do cross-border business in the EU. Loss of EU membership and of The Single market would frustrate UK based goods manufacturers, who account for the other half of the UK's trade, of which 60% is currently with the EU, also ony half of whom are UK-domiciled. Ten per cent of UK trade in goods and services is with Ireland. Maybe there will be special arrangements in this case, but possibly not any longer allowable post-Brexit. Companies can re-register their domicile in say Estonia, Cyprus, or Malta and manage their business remotely from the UK. That may not work for very large companies who may have to genuinely move their head offices into an EU country, which then becomes their principal tax jurisdiction. Ten per cent of British citizens in the UK may qualify for Irish passports and thereby gain EU and or dual citizenship. Others sufficiently desperate can take up residence in another EU country and gain citizenship after five years or marry an EU citizen. Irish dowry prices just went up? It has to be a curious exchange that fifty million British citizens will lose a large amount of their freedom of travel only so that they in turn can restrict that of a few hundred thousands of foreign visitors to the UK and perhaps impose irritating visa requirements on 22 million visitors from the EU. They may feel some compensation, however, because of the lower pound exchange rate. Brexiteers argue that free access to EU markets will most likely continue because the EU has a large trade surplus with the UK. That cannot continue, however, if EU imports into the UK will become, as they already have done, 10 per cent more expensive. Hence, there is already less to lose by not granting the UK full or free tradeing rights in the EU, which anyway will thereby save itself much or most or all the UK's trade surplus in financial and other services. The UK has a trade surplus with Ireland in both goods and services. ireland a large trade surplus with the rest of the world but a deficit in capital flows with the UK, and may therefore improve its balance of payments by no longer permitting either of the UK's surpluses to continue, on top of which it stands to attract a lot of UK businesses seeking to re-domicile within the EU? While the sovereignty of borders in today's globalised world can offer little or no political-economy protection when there is free movement of capital across borders, sovereignty can make a difference to trade. The UK already has a high trade deficit of about 6% ratio to GDP in goods with very few sectors earning a significant or any trade surplus except finaancial and related services. The UK therefore will have to rely far more than in the past on voluntary inflow of private capital than annually for decades has been wporth about 2% ratio to GDP. But that is equivalent to borrowing and to selling net financial and property assets. For UK trade to take advantage of lower exchange rate and balance its external account better will require exports of goods to grow much faster than not only imports of goods but much faster than the likely shrinkage in UK exports of financial and related services. It is not hard to imagine the UK having to increase its borrowing (in hard currencies) from the rest of the world for years at an annual rate of about 5% ratio to GDP, and especially if UK banks persist in their four decades old habit of not growing lending to businesses but only to property and for mortgages such that today for every £1 lent to businesses, UK banks lend £6 for mortgages! If this continues there will be no prospect of the UK outside the EU becoming better able to pay its way in the world. It will become a massive nebt debtor, hardly a good foundation or recipe for economic independence and negotiating trade deals?