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Britain’s annual Brexit capitulation draws nigh



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Well, well, if it isn’t an approaching surrender in the Brexit talks by the UK disguised as victory. Seems like one comes every year. It’s premature to assume a Brexit deal is getting done, of course: this is Boris Johnson’s erratic government and his eccentric backbenchers we’re talking about, not to mention some EU member states neurotically obsessed with fish who may just, horrible though it is to contemplate, not be bluffing. Still, the chatter is pointing to a fairly obvious potential agreement on the “level playing field” issues. Britain will allow countermeasures in the form of tariffs or other trade restrictions if EU environmental or labour standards end up much stricter than in the UK, and theoretically vice versa.

The plan has dangers, which we described when it was floated six months ago, of perpetual judicial-political conflict. We’ll assume divergence is judged by a WTO-style arbitration panel, since realistically we can’t see the EU getting away with an antidumping-style arrangement where it imposes punitive tariffs based on its own judgment. As it happens, on Wednesday the EU and UK announced a roster of experts to arbitrate the initial Withdrawal Agreement, but that is rather less contentious than the trade deal. The panel members for the latter, if they start authorising tariffs because of carbon taxes or what have you, should prepare for personalised “Enemy Of The People” front pages in the Daily Mail and purple-faced eruptions from the Tory ranks about unaccountable international liberal judicial elites. But better to take that long-term risk than plunge into no-deal now? We’d say so.

Today’s main piece, on a calmer note, is a look back at how globalisation hasn’t imploded in 2020 despite the coronavirus pandemic, and we then return to Brexit for a Tall Tale about how the EU is a touch less evil and manipulative than its foes allege.

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The death of globalisation is postponed once again

Twenty-twenty was a year in which globalisation nearly imploded, but actually didn’t. To be quite honest, this is getting a bit repetitive. It was going to collapse a couple of years ago as a result of President Donald Trump’s US-China trade war, and before that in 2009 because of the financial crisis, and for your true Depression-redux hipsters it was the Sars epidemic (the first Sars, that is, back in 2002, a very niche virus). 

The second wave of Covid has been vicious for many. But the panic about trade has calmed a lot. In October the WTO’s economists updated their forecast for goods trade and took a big turn towards the optimistic, projecting a 9.2 per cent fall in merchandise trade in 2020 — barely more than a quarter of the 32 per cent collapse that was its pessimistic scenario back in April. Next year it reckons that 9.2 per cent contraction should mainly be undone with a 7.2 per cent increase. It’s unlikely to catch up with lost growth rather than just regain most of the level, but we can live with that.

Services trade has been absolutely hammered — US imports and exports of services are both about a quarter down on where they were in January — but a lot of that is travel and related services and should recover as bans on movement lift. There might be some permanent changes, obviously, Zoom calls displacing the Heathrow-JFK red-eye, but a secular shift in cross-border movement from flesh to pixel isn’t a crisis of globalisation.

Is it all over? Nothing to see? Well, maybe, but there are still some lessons to be learned. For a start, to what do we owe this welcome resilience? Partly, as we may once or twice have said, it turns out that a largely automated capital-intensive trading system can survive a pandemic pretty well. Goods trade has performed much better relative to gross domestic product than during the financial crisis, when it collapsed faster than a Boris Johnson negotiating position.

But also it’s got a lot more to do with macro than trade policy. Apart from a few rather feeble gestures about keeping trade going (weaker than the anti-protectionism pledges during the financial crisis, and we didn’t think much of those either), governments really haven’t built much of a multilateral wall against trade wars. Subtler forms of protectionism have continued to flourish

It was public spending and monetary loosening that did most to rescue trade by softening the blow to GDP, together with public procurement to ease particular shortages and stimulate the production of a Covid vaccine. The medical protective equipment crisis in the early months, for example, was ended by governments procuring more face masks, not by regulating trade to prevent export restrictions, which they emphatically failed to do.

The same is true of the other bits of globalisation. The first few months of the pandemic saw the biggest outflows of portfolio capital from emerging markets on record, part of a general flight to quality. Again, loose fiscal and monetary policy in both advanced and emerging markets came to the rescue, and markets stabilised. Possibly a bit more worrying is the fall in migrant remittances — bigger than official aid or foreign direct investment flows — which the World Bank reckons will next year be 14 per cent lower than in 2019. But then you’d expect the movement of migrant workers to recover more slowly than goods containers and high-frequency air travel, and it’s not a calamitous drop. 

So fine, hooray for the world’s central banks and the finance ministries, some of them. Assuming the vaccine gets distributed en masse and there isn’t a premature shift to removing macro stimulus next year, the biggest immediate threats to globalisation should continue to dissipate.

And then all we have to worry about is the fracturing of global commerce in goods, services, data, capital, people and ideas from the US-China geostrategic conflict, the protectionist moves afoot in many countries to reshore production, the moribund state of multilateral rulemaking and the intense pressure that climate change will put on global models of growth and trade. We’ll come back to those next year. For now: phew.

Charted waters

UK goods exports have lagged behind peer countries this year in both the EU and other significant markets across the world, according to Financial Times research that highlights the scale of the challenge facing Britain as it seeks post-Brexit trade deals. The UK is recording falling market shares in goods exports in many key destinations, according to the analysis. During the six months to October, for example, Italy became a larger exporter of goods to the US than Britain for the first time since records began in 1980.

Bar chart of % reporting improving minus those reporting deterioration,  November 2020 showing UK exporters record deteriorating competitive positions

Tall Tales of Trade

The US-Canada-Mexico deal involves Washington using rules of origin to micromanage hourly wage rates in its neighbours © Susana Gonzalez/Bloomberg

Back to Brexit. The “wah-wah not FAIR” stuff from Brexiters criticising the level playing field rules holds that the EU is trying to dictate regulations to a trading partner in an unprecedented way. (Unprecedented apart from Switzerland, Norway, Iceland, Ukraine etc, but we digress.) The US doesn’t do that to Canada and Mexico, so why does the EU to the UK? Not FAIR. However, as pointed out by Jonathan Portes, myth-buster extraordinaire on trade and immigration, the US-Canada-Mexico deal (USMCA) actually involves Washington using rules of origin to micromanage hourly wage rates in its neighbours. (Check this out for heavy-handed bureaucracy: minute detail on inspections, required documentation, everything.) Even France hasn’t tried to do that to Britain. 

In fact, even with further-flung trade partners, the US is sometimes more neurotic and prescriptive than is the EU, partly because Washington feels it is losing the global regulatory battle to Brussels. The UK can do a deal with the EU and follow whichever food hygiene rules it likes domestically, if it accepts the border frictions. By contrast, Washington’s chemical-washed obsession with dictating sanitary regulations in its trading partners is legendary. The rules on labour and environmental standards in the level playing field talks are a pretty small subset of the regulations that determine trade. If the Brexiters are really going to block a deal on these grounds, it’s either because they’re too ignorant to grasp the issues or cynical enough to pretend they haven’t.

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Gastronomes look beyond pandemic to a revolution in French fine-dining




Chef Yannick Alléno used to serve a €395 menu featuring langoustines and foie gras at his three-starred Michelin restaurant near the Champs-Elysées.

But as France prepares to allow restaurants to reopen for outdoor service next week after six months of closure, he will instead be serving up burgers at his wine bar for a fraction of the price. 

That a superstar chef such as Alléno, whose stable of high-end restaurants from Courchevel to Marrakesh hold more than a dozen Michelin stars, is changing strategy underscores the difficulties facing France’s grands restaurants as they seek to recover from the ravages of the coronavirus pandemic

“We have to inspire people to come here by sparking their curiosity,” he said of the Pavillon Ledoyen, the neoclassical building that houses several of his restaurants, including the three-starred Alléno Paris.

Such temples to French gastronomy have long catered to wealthy foreign tourists, who will happily pay more than €1,000 for a meal for two as long as they experience l’art de vivre à la française. But with international travel severely curtailed by the pandemic, such customers are not expected back for some time. 

Chef Yannick Alléno
Yannick Alléno operates high-end restaurants from Paris to Courchevel and Marrakesh that hold a dozen Michelin stars combined © Francois Durand/Getty

Attracting locals is the new challenge, as well as retaining employees, many of whom have left the sector and its notoriously challenging working conditions. Many restaurants are also saddled with large debts after taking state-guaranteed loans to ride out the crisis.

“I have three years of struggle ahead,” said Alléno, adding that half the group’s €4m in cash reserves had been spent. “For three-star restaurants, there will be many casualties.” 

His flagship restaurant used to generate more than three-quarters of revenue from foreign diners, mostly from Asia and the US. As there is little point reopening without them, the doors will remain shut until September. Alléno will for now experiment in the less-formal location as he plots an overhaul that seeks to drag fine-dining into the 21st century.

“Everything must change,” he said, quoting the title of the book he co-wrote during lockdown. In it, he called for a revamp of everything from the style of service (warmer, more personalised) to staffing (more flexible and family-friendly).

French haute gastronomie traces its roots back to visionary 19th-century chefs such as Auguste Escoffier and Marie-Antoine Carême, who created a cuisine based on rich sauces and meticulous — often theatrical — service. For decades it was considered the world’s best and became a key part of French identity.

But its popularity has faded in recent decades thanks to competition first from the flashiness of molecular gastronomy and then the pared-back Nordic style. As French haute cuisine lost ground, it became much more expensive, putting it out of the reach of many.

“The pandemic has exposed that the business model of high-end restaurants in France simply doesn’t function without tourists,” said Joerg Zipprick, co-founder of La Liste group, which ranks the world’s best restaurants.

“This is a relatively new development. It used to be that . . . a local doctor or manager would come to these places to celebrate a special occasion. No longer.”

Zipprick said that for the top chefs, many of whom had spent the past year experimenting with takeouts and meal kits, success depended on their willingness to adapt.

A customer picks up his order from Baieta in Paris
Baieta restaurant in Paris. Many top chefs have experimented with takeouts and meal kits during the past year © Franck Fife/Getty

Diners would not want fussy and experimental dishes on their return, he predicted, but would instead want to eat good food at a nice restaurant in the company of friends and family.

“No more technical stuff or food that requires a long explanation from the waiter about the fermentation process. People don’t want their meal to be a work of art,” Zipprick said.

The last time French cuisine reinvented itself was in the 1970s when chefs such as Paul Bocuse and the Troisgros brothers created nouvelle cuisine. The movement, less opulent and calorific than the fine-dining that preceded it, put fresh and high-quality ingredients to the fore and service became less formal. 

Alléno believes top restaurants must aim to tailor experiences by talking to clients beforehand about the occasion for their dinner, the guests and their tastes.

This “concierge service” approach would allow menus to be better planned, improving the customer experience and the economics for the restaurant.

“If I know I only have three people who’ll eat langoustine on a given night then I don’t need to order six kilos just in case,” he said. “It really changes things for the kitchen.” 

Others are being even more radical. Daniel Humm’s three-starred Eleven Madison Park in New York will no longer serve meat and seafood when it reopens next month, as the Swiss chef seeks to show that sustainable and environmentally conscious eating can be compatible with luxury.

However, Éric Fréchon, the three-Michelin-starred chef behind restaurant Epicure at the five-star Le Bristol Paris hotel, played down expectations of radical change.

“Things will return much as they were before,” Fréchon said, noting that the hotel’s restaurants had a significant local client base. “People have missed the experience of haute gastronomie for so long they’ll be eager to come back.”

Fréchon said he would retain some coronavirus-era innovations, including the €1,390 “gastronomy and to bed” package that is marketed as a one-night staycation for locals that includes dinner in their suite or hotel room.

“For New Year’s Eve we had 60 servers running back and forth to rooms, it was really difficult,” he said. “But it allowed us to reach new clients who perhaps would not have dared to come to a three-star restaurant. Now we have to keep them.”

Additional reporting by Domitille Alain in Paris

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Ireland’s healthcare system taken down by cyber attack




Ireland has shut down most of the major IT systems running its national healthcare service, leaving doctors unable to access patient records and people unsure of whether they should show up for appointments, following a “very sophisticated” cyber attack.

Paul Reid, chief executive of Ireland’s Health Service Executive, told a morning radio show that the decision to shut down the systems was a “precautionary” measure after a cyber attack that impacted national and local systems “involved in all of our core services”.

Some elements of the Irish health service remain operational, such as clinical systems and its Covid-19 vaccination programme, which is powered by separate infrastructure. Covid tests already booked are also going ahead.

However the system for processing referrals from GPs and of close contacts is down, the HSE tweeted, adding that those in need of testing should go to walk-in centres which would prioritise symptomatic cases.

“This is having a severe impact on our health and social care services today, but individual services and hospital groups are impacted in different ways. Emergency services continue, as does the @AmbulanceNAS [National Ambulance Service],” health minister Stephen Donnelly wrote on Twitter.

No group has yet claimed responsibility for the attack. Speaking on Friday morning, Reid said the HSE had also not yet been served with a ransom demand. “We are at the very early stages of fully understanding the threat, the impact and trying to contain it,” he said, adding that it was receiving assistance from the Irish police force, defence forces and third-party cyber support teams.

The master of Dublin’s Rotunda Maternity Hospital said it was advising patients who were less than 36 weeks pregnant not to present for appointments on Friday. In a statement, Cork University Hospital said patients should present for outpatient appointments, chemotherapy and surgery “unless you are contacted to cancel”, but that X-ray and radiotherapy appointments for Friday were cancelled.

Professor Donal O’Shea, consultant endocrinologist at St Vincent’s Hospital in Dublin, told RTE radio that there could be implications for patient care. “Clinical systems haven’t been targeted, but if you can’t access your computer, then getting results is impossible . . . so before long, there are going to be clinical implications,” he said. In its statement, Cork University Hospital said “only emergency bloods” would be processed at this time.

Reid said that patients nationally “should still come forward until they hear something different” and that an update should be available later on Friday. A spokeswoman for the HSE was unable to provide a further update on patient care by mid-morning. “We apologise for the inconvenience to the public and will give further information as it becomes available,” she added.

Healthcare workers told the FT they were told to turn off their laptops, leaving staff at home offline and those working in hospitals reverting to pen and paper to manage patients’ information.

In a statement on its website, Ireland’s child and family agency Tusla said that its emails, internal systems and portal for child protection referrals was also offline because it was hosted by the HSE’s network.

The attack comes as actions by cyber criminals to disrupt public services have increased during the pandemic. Earlier this month, hackers believed to be from eastern Europe breached the IT systems of the Colonial Pipeline, a major fuel conduit that supplies much of the eastern US.

“Opportunistic cyber attackers targeting flooded healthcare organisations has been a common theme throughout the course of the pandemic,” said Charlie Smith, consulting solutions engineer at Barracuda Networks. “These scammers are aware of the huge significance of health services’ IT systems at this time, and so will stop at nothing to disrupt said systems or steal valuable data in exchange for ransom.”

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Watchdog turns on Polish government over coronavirus election




Poland’s supreme audit office has accused prime minister Mateusz Morawiecki of exceeding his powers, as it unveiled a highly critical report into the government’s attempt to hold last year’s presidential election by post because of the pandemic.

The salvo by the supreme audit office (NIK) is the latest in a series of disputes over last year’s election, which was meant to be held in May, but was eventually postponed until June as coronavirus swept through Europe.

It is also the latest in a series of clashes between the ruling Law and Justice party and Marian Banaś, a former finance minister who was put in charge of the NIK in 2019 thanks to the support of politicians from the ruling camp, but has since become a thorn in the government’s side.

Representatives of NIK, which is responsible for auditing government spending, on Thursday said the attempt to hold the presidential election by post in May — which was ultimately abandoned after disagreements in the ruling camp — had cost at least 76m zloty ($20.2m).

They also said that there had been no legal basis for the prime minister to give any orders to two state-controlled entities, the Polish Post and the Polish Security Printing Works (PWPW), in relation to holding the election, such as the printing of voting cards.

“The only body entitled to organise elections was the State Election Commission,” Banaś said during a press conference. “Organising the elections on the basis of an administrative decision should not have happened and was without legal basis.”

He said the NIK had informed prosecutors of possible crimes committed by the boards of the Polish Post and PWPW, which were involved in the preparations for the postal ballot.

The Polish Post said “categorically” that “all its actions taken to implement the prime minister’s decision of April 16 2020 were founded on legal provisions”. PWPW said it considered NIK’s move “unjustified” and “baseless”.

Banaś added that the NIK was analysing whether to notify prosecutors of concerns relating to the actions of other parties involved in the preparations for the election.

The government said that “all decisions on beginning technical preparations for postal voting in the presidential elections were in accordance with the law”.

“All the actions [of the prime minister and the head of the chancellery of the prime minister] were aimed at holding elections by the constitutional deadline,” the government’s information office said in a statement.

“The prime minister never called for presidential elections or for postal voting. The goal of the actions taken was to allow the participation in the elections of those who were entitled to vote, but whose life and health were at risk as a result of the pandemic.”

Jacek Sasin, minister for state assets, took a similar line, and told Polish state radio that the NIK report was “a certain element in the fight between the government and . . . Marian Banaś”.

Banaś has been under pressure to step down from his post since media reports emerged alleging that a building he owns was used as a brothel. In an interview with Politico, he dismissed the allegations as a “smear campaign” aimed at ousting him.

He concluded his press conference by drawing attention to the fact that the NIK was one of a series of institutions targeted by fake bomb threats earlier this week, and to an email sent to the NIK this morning falsely claiming that Banaś’s son was going to commit suicide.

“I ask you yourselves for a comment on this,” he said to the assembled journalists.

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