The UK’s Singapore-on-Thames Delusion

I will not spend much time on this topic because it is so ridiculous. But the notion that the UK can become a ‘Singapore-on-Thames’ seems to underlie some Brexit fantasies. Do these have any foundation?

First, here are some basic facts. The UK’s GDP is roughly 8 times bigger than Singapore’s; its population is more than 10 times bigger. Singapore used to be a British colony, and developed from being a key Asian trading hub for the East India Company. The UK is a declining imperialist power. It once had a go-between role for the US in Europe, and still remains a major backer of imperial oppression around the world, but now has its pretensions at diplomatic expertise seen as very irritating.

Singapore sling

In the field of finance, the UK was already a multiple of Singapore’s weight in the world economy before it finally left the European Union: 6 times bigger in international banking, 5 times bigger in FX trading and 30 times bigger in financial derivatives turnover. Whereas Singapore has a regional niche in global finance, the UK has been a leading global player.

It will be difficult, not to say impossible, to further extend the UK’s financial position outside the EU. Any belief that messing up links with the major trading bloc in Europe is a good economic decision – while remaining outside USMCA, RCEP and other trading blocs – would also need to undergo a sanity check.

Some reports have suggested that City of London financial companies contributed a great deal to the Vote Leave campaign in the 2016 UK Brexit referendum. Quite likely some did, though these seem mainly to have been hedge funds and so-called venture capitalists. By contrast, the overwhelming majority of City business, from banks, to life insurance companies, to pension funds and other asset managers, to legal and accounting firms, were clearly pro-Remain.

All City business has benefited from the existing UK tax laws developed over decades. But the hedge funds and so on would have been far less dependent upon EU-related business relationships, or will have dealt more directly with ‘offshore’ centres and Switzerland. That will account for the divided opinion. In the broader corporate arena, with one or two exceptions, businesses were pro-Remain, with only a section of small businesses being pro-Leave. Nevertheless, big companies did little to voice that opinion before the 2016 vote because they did not want to annoy half of their customers.

The end result was that, for reasons explained elsewhere on this blog (see here and here), despite capitalist opinion being greatly against it, the British working class helped enable Brexit, by 52% versus 48% in 2016. A more up-to-date measure of that political outlook can be seen in maps showing the large December 2019 Conservative election majority vote in England.

Where does this leave Singapore-on-Thames?

Singapore has exports that are some 90% bigger than its GDP, whereas UK exports are ‘only’ around 30% of GDP. So, onwards and upwards to Singapore-on-Thames? As you might expect, there are a few problems with this perspective.

Singapore is a small country and an entrepôt centre, with lots of re-exports. This produces a total exports number that is much higher than GDP because it is not based on the value-added measure that goes into a GDP calculation. In theory, the UK could also become an entrepôt centre, but the economic benefits of such a move are very limited.

More than that, any such move implies enforcing a low labour cost economic strategy. Evidently, that implies cutting labour costs. This is at the heart of capitalist economics, and has been explicitly embraced by Conservative pundits.

To use the UK political cliché, the EU would also be very clear in protesting against this kind of policy for being in breach of the ‘level playing field’ of fair competition between the UK and the EU post-Brexit. The EU was once grateful to the UK for proposing policies to cut labour costs, but now that is seen both as destabilising an already shaky EU economic system and as an unwelcome, aggressive trade policy from an ex-member of the club.

One could imagine some benefits of a Singapore-on-Thames – for example, free wifi and a good transport system, like in the real Singapore. But stupidity is its own reward, and the reality is going to be much harsher.

Tony Norfield, 20 January 2021

Iran Sanctions, Imperial problems

Trump's anti-Iran move on Tuesday was deeply worrying for allies of the US. It is a blow for those countries, especially in Europe, that were hoping to build on the big expansion of trade with and investment in Iran after the July 2015 nuclear deal was signed. But it is more than just an economic opportunity under threat. As Germany’s Zeit Online commented ‘with nationalism and protectionism, Donald Trump is gradually eliminating the world order shaped by the USA’. Here I look at some implications of the latest US policy and the reasons for its timing.

Holy orders

The extent of the new US sanctions is at present unclear, although there will be some delay before full implementation. What worries the Europeans is that they are unlikely to apply only to US companies, like Boeing.

On past form, any company not doing as the US wishes could be liable to suffer financial penalties. They could also face problems of access to the US market and its banking system – the latter being necessary for all international companies that use the US dollar. This extra-territoriality of US sanctions, in the words of France’s Finance Minister, Bruno Le Maire, makes the US ‘the economic policeman of the planet’, and that is ‘not acceptable’.

Last October, the now ex-Secretary of State Rex Tillerson claimed that the US will not interfere in Europe’s business dealings with Iran. But the newly appointed US ambassador to Germany, Richard Grenell, has taken a very different tack. He followed up Trump’s statement with a threatening tweet: ‘German companies doing business in Iran should wind down operations immediately’.

It would be hard to top that as a sign of imperial arrogance, something that has become ever more embarrassing for US allies under the Trump regime. To have a smoothy like Obama advance US interests after a chat among ‘friends’ was acceptable. Now the veneer is off and the modus operandi of the nincompoop POTUS is to fart, blame someone else and carry on regardless.[1]

The little, big problem

Following the long years of sanctions, Iran is far from being a big economic partner for the major western powers. Last year it was only number 33 in the ranking of external trading partners of the European Union. Trade between the EU and Iran was close to €21bn, with a little over €10bn of both exports and imports, but this made up less than 1% of the EU’s total external trade. EU trade with India is four times bigger, and it is more than seven times bigger with Turkey. US trade with Iran is much smaller still, roughly $200m last year, which is barely a rounding error in the statistics.

Nevertheless, there had been rapid growth in trade for the EU in recent years, mostly imports of fuel from Iran and exports to Iran of manufactured goods, especially machinery and transport equipment. From 2014 to 2017, EU exports grew by nearly 70% and EU imports by nearly nine times.

Much more trade growth has been in prospect, together with attractive investment opportunities, for EU companies such as Renault, PSA Group, Airbus, Siemens, Total, Alstom and others. Iran’s half-wrecked economy offered a cornucopia of deals in the tens of billions to refurbish, resupply and rebuild.

All that is at risk with the new US policy. More important, however, is that the Iran deal was the result of a longwinded negotiation involving all the major powers, and now the US has walked away from it. This calls into doubt the status of more or less anything else the US has signed up for in the past, and also the status of the US as the unquestioned leader of the western powers.

Why now?

Why did former president Obama’s signing of the joint agreement with Iran look like the ‘worst deal ever’ for Trump? First, note that the US has sustained hostility to a country that dared to step out of line in 1979, when the Shah was overthrown, and has since not been cooperative enough. While the US has come around to accepting other miscreants – notably Vietnam, which beat it in a war – this is very rare and is, in any case, a very slow process. Similarly for Cuba. The irony in Iran’s case is that, aside from sections of the elite who make gains from managing the sanctions regime to their advantage, the country was overwhelmingly in favour of doing a deal with the west as a means of gaining access to technology and development. Nevertheless, despite signing the 2015 deal, Obama was not exactly friendly to Iran. Even afterwards, US political prejudice hindered American business prospects in Iran, with the Europeans much quicker to take advantage.

What seems to have scuppered the Iran deal now is the problem that US policy faces in the Middle East region. This is behind Trump’s long signalled change of course.

Apart from its own direct military intervention, the US has had two elements of control in the Middle East: Israel and Saudi Arabia. Each of these has become more unstable and problematic in recent years, causing trouble for western policy and some embarrassment when it comes to ‘human rights’ in family plutocracy Saudi Arabia and Palestinian rights in the racist gangster state of Israel. Yet the US has not been able to find alternative local tools. After the disaster of US policy in Iraq, another adventure, to replace Assad in Syria, and so to undermine Russia, has failed. This now leaves the US with two dysfunctional supports in a region scarred by imperialism, a mess that it cannot sort out.

The US inability to get rid of Assad has raised Saudi Arabian and Israeli paranoia about Iran. Worried about the stability of their own regimes, they see a long shadow from the bogeyman who does not necessarily do what the US wants and use this to disturb the US’s own discontent. This is neatly summed up in the invention of the so-called ‘Shia crescent’ of Iranian power and influence from Iran through Iraq, Syria and into Lebanon and the Gaza Strip. Saudi Arabia even sees Iran in Yemen, while Netanyahu starred in his own special anti-Iran video for Trump. In an inversion of reality that only someone of his powers can provide, Trump even outdid them with his latest comment that Iran backs al-Qaeda and ISIS.

Trump will tweet and things may change again. But it looks like the foundations of the world order are crumbling further.

Tony Norfield, 9 May 2018

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[1] Apologies for lowering the tone, but the word ‘trump’ in colloquial English also means to break wind.

Trump and the US-Russia-China Triangle

Although it is the world’s major power, the US has found it difficult to impose its will in the past decade or so. From President Bush’s ‘mission accomplished’ speech about Iraq in 2003, to the continuing disasters in Afghanistan, Libya and Syria, from US policy in Ukraine also being upset by Russian intervention in Crimea, to how the Saudis and other Gulf states have destabilised the Middle East, the US has not been getting its own way and has been unable to impose settlements that would otherwise be expected of a hegemonic power. This puts the incoming US administration under The Donald in an interesting position.

Early signs suggest that POTUS-elect Trump is taking a softer line on Russia, one different from the still Cold War-inspired position of the Obama regime. Trump has stated that he expects the Europeans to pay more for their own NATO-related defence, which might make them less willing to finance an increased build up of military operations close to Russia’s borders. Trump has also rejected Obama’s rhetoric on Putin’s supposed involvement in Russia’s alleged cyber attack on Clinton’s emails. Perhaps most striking of all, Trump plans to appoint Rex Tillerson as US Secretary of State, that is to be the main person in charge of foreign policy. Tillerson is Chief Executive Officer of ExxonMobil, and is well known to have friendly relationships with the Russian government.

ExxonMobil opposed sanctions on Russia from its own business perspective, but one would have to agree that the aggression shown to Russia by the current US administration makes little economic or political sense. Russia is far from being a threat to US interests. Instead, Russia may have prevented the unravelling of Syria that was the direction of previous US policy, and which would have had a deleterious impact on the stability of the Middle East, with knock on impacts into Europe. For this reason, Trump’s likely Russian rapprochement makes sense, even if it will embarrass the Europeans.

All this, and more, is still to be determined, since the billionaire has yet to establish himself in the White House. However, it seems that while there is very likely to be a US-Russia rapprochement, the US political antagonism to China will continue under the Trump administration.

Under Obama and previous US presidents, Taiwan had remained in the limbo of being diplomatically isolated (it has not been a member of the UN since 1971, under the ‘one China’ policy) although politically and militarily supported by the US. But Trump took a call from Taiwan’s president, much to China’s displeasure, which saw the incident as an implicit recognition of Taiwan. This also makes sense from a US perspective. China is both a political and an economic threat to US interests, one that has been recognised in numerous US Congressional reports. China’s economic power has seen it gain influence in Africa, Latin America and Asia, often giving governments in these regions an alternative to the US-dominated world financial and economic system.

More pointedly for the current political climate, it is China, rather than Russia or anywhere else, which is being singled out as the country that is being ‘unfair’ in trade and taking American jobs. An anti-Chinese political stance makes far more sense for the US on many more levels than the anti-EU stance does for the UK, since it not only appeals to the latest domestic populism but also coincides with longer-term US strategic interests.

Trump’s election is one more sign of a shift in the tectonic plates of the imperial world economy. It will impact not only US relationships with Russia and China, but also the position of Europe, and even the acceptability of Russia outside Europe. Interestingly, in the past day or so, Russian President Putin had a meeting in Japan with Japan’s Prime Minister Abe on the Northern Territories/Kurile Islands, an area of dispute between the two countries since the end of World War Two. No resolution was made, and no peace treaty agreed on this, but there were 80 documents signed, including 68 on planned commercial deals between the two countries.

Tony Norfield, 16 December 2016