Posted by: davidjmarlow | 01/11/2016

Nissan, CETA, Heathrow and the BREXIT virus…

I hate to start a piece with a cliche, but ‘we live in extraordinary times’. With a rampant BREXIT virus it is almost impossible to make any sense of the feverish narratives of post-referendum Britain.

This piece considers three ‘decisions’ last week – the Nissan announcement of new investment in Sunderland; the signing of the EU-Canada CETA; and the resignation of Goldsmith and by-election in the aftermath of Government’s Heathrow announcement. It explores some alternative ways of looking at these events, and seeks to challenge the Government and media orthodoxy in all of them.

Let’s start with the Nissan announcement that it intends to build the next generation of Qashqai and the Xtrail at Sunderland. There are so many ways this could be read – and the UK media has had a field day trying to present some of them.

Is this a vote of confidence in the global competitiveness and resilience of post-BREXIT Britain – essentially the BREXITEERS position? Is it, effectively, a blank cheque from the May government to indemnify Nissan against potential BREXIT losses – hence a sign of the immense weakness of Government’s BREXIT negotiating position? Is it the forerunner of the UKs negotiating position (of securing continued access to the EU internal market – as the PRIMARY, overriding goal)? This would mean a free-for-all policy of public indemnity of Government’s selected strategic industries and services. Is it none of the above – but just a continuation of the stumbling ‘making it up as they go along’ policy-making so characteristic of the Coalition and Cameron/Osborne era?

A week after the announcement, and with our Business Secretary seeking to provide reassurance and clarity over the weekend, we are no closer to knowing.

Perhaps the question we should be asking is an entirely different one – namely, ‘What is Carlos Ghosn (CEO and Chairman of Nissan, Renault [please note], and the Renault-Nissan Alliance) up to’? Dividing his time mainly between Paris and Yokohama, why did this preeminent global businessman chose to announce the Sunderland ‘decision’ last week?

Nissan states that 81% of Sunderland’s production is exported to 132 markets (of which around 70% goes to Europe). Sunderland’s vehicles have no more than 40% UK content through the supply chain, and that UK supply chain itself is heavily integrated with EU and non-EU partners.

Mr. Ghosn has no definitive idea at all what UK’s future trading relationship with the EU will be. Nor, to be fair, does he know what UKs future trading relationship outside the EU will be. Currently the UK motor industry trades as part of the EU collective tariff and quota regime of the WTO. As a previous blog illustrated, changing these tariffs and quotas will be extraordinarily complex and contested. They will not happen quickly. So, were the next Qashqai and XTrail models to be produced at Sunderland, Mr Ghosn has little idea of the terms on which inputs will be purchased or on which and to whom the vehicles will be sold.

In announcing an early ‘deal’ on Sunderland, backed by ‘specific assurances’ from the UK government, the Renault-Nissan CEO might have been seeking to achieve a number of things. Was it a preemptive strike to force the UK Government to acknowledge publicly its covert assurances to Nissan? This might assist Nissan’s negotiating position with UK Government post-Article 50. Was it an altogether more Machiavellian master-stroke to influence the tone and character of BREXIT negotiations (i.e. the primacy of trade over other issues) – on both UK and EU sides? Is it actually a coded invitation to European member states and regions with automotive ambitions to match the UK offer to secure Nissan investment?

What the Renault-Nissan CEO has definitely done is give the UK Government a massive (and for a committed-Remainer like Mr. Ghosn a deliciously painful) headache. The Nissan assurances have to be extended to much if not all the sector on fairness and legal competitiveness grounds. It then probably has to be extended to other strategic industries and services – but what are these, and where will it all end? At what stage, are there so many special cases that the general BREXIT case becomes no longer worth making?

The Nissan-Renault CEO has also clearly raised the red light with our EU negotiating partners. His announcement alerts them to watch assiduously for any UK illegal and/or anti-competitive behaviour. They will then be able to mitigate this in the Article 50 negotiations and beyond.

This leads to the second landmark decision of the week – the signing of the EU-Canada Comprehensive Economic and Trade Agreement (CETA). UK media analysis has been awash with illustrations of institutional failure of the EU to negotiate as a block, and with potential implications for UK BREXIT negotiations. These are predictable points, but possibly not the most interesting.

The battle cry of the Brexiteers – ‘taking back control’ – is totally blown away by this episode. That ‘little Wallonia’ is allowed to determine the fate of CETA is a powerful signifier of just how ‘democratic’ the EU is. Such democracy will never be extended by the May Government to areas of the UK – as her treatment of the devolved administrations in their first meeting about BREXIT negotiations shows. The  EU did eventually get the deal over the line, through hard work to resolve differences, compromises, and going around the table many (sometimes too many) times. That is the reality of how you deal with globalisation – not walking away and taking your bat and ball home!

A further interesting dimension of the Wallonia episode is the precise economic positioning of that region. The latest Eurostat regional and sub-regional data shows most of the UK ‘failing’ miserably. Take GDP per capita at purchasing power standards for NUTS2 regions. If one compares the UK with Ireland and Northern Europe (Germany, Scandinavia and Benelux), of the bottom ten regions, eight are in the UK. Of the bottom 20, 15 are UK.

I have written elsewhere on UK failure and the ‘Sunderland question’ of the BREXIT leanings of struggling places. However, for the purposes of this piece, it is worth identifying the two NUTS2 regions that sit alongside their eight UK comrades at the bottom of Northern Europe’s GVA per capita. They are Provinces Hainault and Luxembourg (BE) – both in Wallonia.

One suspects in May’s Britain Sunderland and our other poor performing regions will never achieve the influence and democratic sovereignty that Wallonia demonstrated last week. The price they will pay for BREXIT will be immeasurably higher than Wallonia pays for remaining.

The ironies come thick and fast here. I don’t know the answer to this – but post-BREXIT will UK have to renegotiate any CETA with Canada, or shall we still be bound by the CETA regime? Knowing the competence the May government is demonstrating, I suspect they do not know the answer either?

Finally to Zac Goldsmith’s decision to resign as constituency MP of Richmond Park to protest at Government’s Heathrow expansion decision. Again the media have crafted a marginal narrative around potential LibDem resurgence and Labour disarray.

A more powerful case, though, can be made for this event as the clearest indicator yet of the total disdain for voters and lack of integrity of the May government.

Think it through. A new Government, with no electoral mandate of its own, and with a majority of twelve, refuses to contest a by-election in a seat it already holds. Why? Because it knows Zac Goldsmith will probably hold the seat and return to the Tory benches. They prefer to go through a token, ritualistic exercise rather than properly argue their case with Richmond Park voters.

Why have Boris Johnson and Justine Greening – both senior cabinet members who will continue to vehemently campaign against the decision – not resigned and forced by-elections in their constituencies? Because that would require an integrity totally beyond Johnson, and a Wallon-like determination that may be beyond Greening. Indeed, would Goldsmith have resigned had he been appointed to a senior cabinet post by May?

The challenges of making sense of post-BREXIT Britain are extraordinarily demanding and dispiriting.

None of these decisions are what they seem, and the outcomes of them will be very different  to the narratives they appear to advance. For Sunderland, I suspect this is a masterstroke of Japanese ingenuity. Ghosn has presented an ‘option’ to UK to host the Qashqai and XTrail at Sunderland, subject to making good on its assurances. On the balance of probabilities, therefore, Nissan will be exiting (or at least significantly downgrading) its Sunderland capabilities within a decade. For Heathrow, much like the BREXIT referendum itself, the issue will be largely determined by petty-Tory party politics. The additional runway is unlikely ever to be built.

Perhaps the most difficult to call, though, is CETA and the Wallonia lessons. This example of EU devolved democracy should act as a beacon for Scotland, London and other ambitious, outward-looking places that wish to continue to fight the BREXIT virus.

The nation state is not all-powerful in the era of globalisation. Regions and cities can craft their own relations globally, and with each other. Scotland, London and other determined places should demand future relationships with the EU that work for them. They should use every means at their disposal – not just the failed Westminster parliamentary model – to press their case. They should explore innovative and new forms of regional sovereignty. They can be awkward, irritating, and exasperating if the unelected May government cannot or will not accede to their demands.

It is difficult to predict how this will play out. May will probably try to manage and mitigate it through a General Election. Richmond Park suggests progressive Britain is in no shape to fight that battle. Can they either sort themselves out, or shift the battlefield, over the coming six months?


  1. […] European family. Unlike the highly centralised UK, the EU is used to doing this – as the case of Wallonia and CETA […]

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