Financial Times Europe - 28.08.2019

8 ★ FINANCIAL TIMES Wednesday28 August 2019

EU could declare no-deal decision reversible According to emails leaked at the weekend, the UK government is seeking advice on the legality of proroguing parliament for five weeks before October 31. Failing that, the alternative strategy is to arrange an election shortly after October 31, dissolving parliament for 25 working days before so that the UK would automatically exit with no deal in place on October 31. However, this undemocratic trickery, in imposing an outcome that was not part of the 2016 referendum, is easily avoidable. The EU could announce that it regarded a decision to leave without a deal without parliamentary legitimacy as reversible by an incoming, democratically elected new government. To be precise, this would involve the UK reapplying for membership of the EU, with the EU quickly passing the necessary legislation so that the UK could revert to the pre-October 31 status quo. If an election was held in early November, voters would then have a clear say on a no-deal Brexit. Boris Johnson’s only hope of winning would then be the electorate’s fear of Jeremy Corbyn, best friend to the no-deal Brexiters. Were Mr Corbyn to stand aside, no-deal would surely lose. Prof John Muellbauer Nuffield College, Oxford, UK

A chance to resolve

the backstop impasse Boris Johnson, the UK prime minister, has said that renegotiation of the EU withdrawal agreement is “touch and go” (report, August 26). Maybe the chances are better than he implies. The Irish backstop is a necessary part of the present agreement because the Democratic Unionist party will not accept an arrangement that treats Northern Ireland differently from the rest of the UK. In particular they will not accept that, unlike the rest of the UK, Northern Ireland should remain subject to the regulations of the European single market and customs union — what has come to be called the “checks in the Irish Sea” option. But the DUP can speak neither for the suspended Stormont government nor for a majority of the Northern Irish electorate. Might a solution to the impasse be to hold a referendum in Northern Ireland on the acceptability of “checks in the Irish Sea” as an alternative to the

reinstatement of a hard land border with the Republic of Ireland? If a referendum were to show this solution to be acceptable to the Northern Irish population as a whole, the European Council could add a codicil to the withdrawal agreement disapplying the backstop clauses. Mr Johnson could claim he had a new agreement; the EU could claim the agreement was unchanged; the Irish government and the US Congress could profess themselves satisfied that the Good Friday Agreement was not threatened. With the looming prospect of a no-deal alternative, Mr Johnson could even hope for a parliamentary majority. Everyone could claim victory except, perhaps, the DUP. Nicholas Boyle Emeritus Schröder Professor of German, University of Cambridge, UK

It’s time to plan for the

things we can control Daniel Thomas’s report “Two-thirds of businesses fear economy will worsen” (August 27) — and in particular the chart titled “Companies are pessimistic about economic prospects” — reveals some important truths about the economic outlook, the likely impact of Brexit and the way forwards:

Yes, we’re generally pessimistic about
the global economic outlook;

Yes, we’re generally materially even
more pessimistic about the UK
economic outlook; but

We’re generally much more bullish
about prospects in our own industries.
Takeaway: we tend to have this
generalised fear about the economy
and about Brexit, but most of us are
actually quite sanguine about the
prospects for our own businesses. If
ever there was a time to “person up”
and focus on planning for the things we
can control and delivering them, then
this is it. Plus this maximises the odds
of a “good” Brexit.
Mark O’Hare
Chief Executive,
Preqin,
London EC4, UK

I recall when the UK was a

leading voice in EU circles Reading the insightful article by Miriam González Durántez (“Britain is becoming a mere geopolitical toy”, August 26), I could not help but recall a time when the UK was a leading voice in EU circles; a more than constructive partner. This was the period 1986-92. Our purpose then as now was to enhance

the EU’s co-ordination so as to present, as far as feasible, a common position on matters discussed in the UN. In meetings among the EU members, conversations were held in French and English but as English was more often than not the lingua franca, our UK partners, as frequent penholders, held sway and did so in a most useful way, not only enabling the EU to reach a common position but also frequently helping to bring on board many like- minded third countries to vote with the EU on UN resolutions in the General Assembly. Arlette Laurent New York, NY, US Former chargé d’affaires, EU delegation to the UN

You’ve still got your

Brexit blinkers on, FT The Financial Times’ ability to see the Brexit issue from the point of view of any European country but Britain is evidenced by your editorial “Boris Johnson’s European tour leaves all the work to do” (August 24). You suggest that Mr Johnson, prime minister of a country with 65m people, should be rushing off to Dublin to talk to the prime minister of a country with less than 5m. Should it not be the other way round, given that a no-deal Brexit would do far more damage to the Irish economy than to Britain’s? Your attitude merely reinforces the view, sedulously cultivated by former prime minister Theresa May, that in all this Britain is, or should be, a supplicant rather than the world’s fifth- largest economy and one of Europe’s most successful. Roger White Sherborne, Dorset, UK

Travelling to Beirut in September, air passengers found a paean to a central bank governor in the seat-back pockets in front of them. The in-flight magazine celebratedRiad Salamé’s 25th year at the helm of the Banque du Liban, which owns the national carrier Middle East Airlines — his face was in heroic profile on the glossy black and white cover. Lauded as an “engineer of stability in a time of crises”, Mr Salamé was particularly praised because of his management of theLebanese lira-US dollar peg, held at about 1,500 lira to the dollar, for more than two decades. Butreports this monththat the black-market value of the lira has slipped to 1,560 to the dollar have shaken that reputation. “It looks like he’s losing control of the peg,” said an ex-banker in a smart, semi-deserted restaurant — a sign of straitened times in Beirut’s ostentatious downtown. In the face ofa heavy outflow of hard currencythat is depleting the country’s dollar reserves, Mr Salamé’s legacy as defender of Lebanese financial stabilityis under threat. With unemployment rising and businesses closing, he has said that Lebanon is facing “zero growth”. Mr Salamé has for yearsbolstered reservesto buy time for the government to fix its fiscal deficit, using measures he dubbed “financial engineering”. The governor has four times orchestrated complex deals with local banks, involving government debt issuance and swapping lira for dollars, to shore up

BdL’s foreign exchange reserves, protecting the local currency. “Of course, maintaining the peg is costly... but less costly than floating the currency,” he said. BdL maintains that devaluing the lira would hurt people whose savings and wages are in lira, potentially leading to instability. The west cares deeply about Lebanon’s stable presence in a volatile region — so much so that international donors have pledgedsoft loans worth $11bnfor Lebanese infrastructure projects, which the government is struggling to unlock. But the country’s economic woes are increasingly stark. Because Lebanon does not produce much, it has a severe trade imbalance. A steady supply of dollars via bank deposits has therefore been crucial to maintaining the foreign exchange reserves Mr Salamé so prizes. But for the first time since 2007, net deposit growth has turned to shrinkage since the beginning of this year, according to Goldman Sachs. This is a big problem for Mr Salamé. BdL reserves have lost $8bn from January to June, writes Goldman. Beirut’s banks have long been its economic lifeblood. Anonymity for account holders and a fun-loving atmosphere in a conservative region made it an attractive place to park money. Lenders were profitable. Lebanese economist Jad Chaabanhas noted the“extraordinary influence”of Beirut’s bank boardrooms over monetary, fiscal and political affairs. Now, the relationship between the BdL, local banks and the finance

ministry, which kept Lebanon financially stable in defiance of economic gravity, looks to be on the rocks. Banks have all but stopped subscribing to the finance ministry’s debt auctions, whose notes yield much less than do deposits atBdL.Local media reportssay the government is delaying paying its bills. More than halfof the commercial banking sectors assets are now stashed in the central bank, which has, in effect, offered them an eye- wateringly high interest rate of 14 per cent on dollars. This has raised questions about the availability of cash. A widely-watched measure of money supply was down 9 per cent year on year in June. Last week, Beirut earned another ratings downgrade to its enormous debt pile, reclassified on Friday toCCC from B- by Fitch, which willraise debt servicing costs. The tiny country, whose entire population is smaller than London’s, already has the world’s third highest debt to gross domestic product ratio, at about 150 per cent. About half of government revenues went on debt servicing in 2018. “Any marriage is a complicated relationship, and there is a marriage between the government and the banks,” Nadim Munla, an adviser to Lebanese prime minister Sa’ad Hariri, admitted in May at the Grand Serail, the prime ministerial headquarters, symbolically located parallel to the city’s main street of banks.

[email protected]

A complicated

Lebanese

marriage on

the rocks

Beirut

Notebook

by Chloe Cornish

Your editorial “Global recycling crisis should be a wake-up call” (August 24) calls for the reduction of waste through reuse and investment in recycling facilities, saying that the current crisis is an opportunity for change. Surely the great opportunity here is to buy better quality goods but fewer of them. In this regard you failed to mention that among the greatest sources of plastic pollution around the planet is the fast fashion industry and clothing made of supposedly cheap man-made fibres such as polyester and nylon. These materials are petroleum-based, not biodegradable, and release billions if not trillions of microplastics into the world’s oceans every year. Such

garments are often worn just a handful of times and the retail price fails to reflect the true cost to the planet. Slow fashion, thankfully a growing trend, may cost slightly more at retail but is certainly a better deal for the environment. Furthermore, quality clothing made from natural fibres continues to look good for years and even decades, not just months or weeks. On a “per wear” basis, well- made clothes from quality fibres and fabrics are a definite bargain. In 2017 Greenpeace published the results of asurveyinvestigating the fashion shopping habits of more than 1,000 20- to 45-year-olds in Europe and Asia. It concluded that there was a

high incidence of compulsive shopping, often fuelled by access to online shopping and social media, motivated by a longing for excitement and satisfaction, or to kill time and relieve boredom. The survey also reports that the excitement of a shopping binge is usually gone within a day, and often followed by feelings of emptiness and guilt. A transition from “quick hit”, short lifecycle products to the purchase of long-term high quality goods would therefore also improve the wellbeing of consumers, not just our planet. Michael Modiano G Modiano Ltd, Wool Merchants, London EC2, UK

Slow fashion is better for the environment

Letters

WEDNESDAY28 AUGUST 2019

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Recent technological advances have for the first time given scientists the power to make specific changes in human DNA that will be passed on to future generations. Whether and when to use that power is the biggest issue in con- temporary bioethics, which will be highlighted this week at a meeting on gene editingconvened by the World Health Organization in Geneva. At the same time,industry has joined the debatefor the first time. The international Alliance for Regenerative Medicine declared that its member companies would use gene editing only to treat disease in individual patients but would stay away from procedures leading to mutations in sperm or eggs — the human germ line — which would be inherited by their children and descendants. The sense of urgency comes from the rapid worldwide adoption of new gene editing techniques — Crispr in particular — which enable scientists to modify an organism’s DNA far more precisely than the cruder methods used previ- ously for genetic engineering. While Crispr was transforming agriculture and moving into medicine, super- charging gene therapy research, scientists worldwide avoided human germ line editing. The informal moratorium was bro- ken last November when the Chinese biophysicist He Jiankuishockedfellow scientists with an announcement that his lab had edited an immune system gene in early embryos, leading to the birth of twin girls resistant to HIV infection. Their descendants will inherit this mutation. Dr He may have wanted honour and glory as an inspired pioneer but instead he has quite rightly received almost universal condemnation from scientists, politicians and ethicists — now joined by biotech companies. The overwhelming reason why it is

wrong to edit embryos is that we still know too little about the long-term effects of a procedure with conse- quences lasting indefinitely into the future. In contrast, the risks and bene- fits of manipulating an individual’s genes last no longer than his or her lifetime. Looking ahead to the prospect that gene editing for medical purposes could lead eventually to the enhance- ment of other inherited characteristics such as intelligence and appearance, there may be moral objections to the social inequity of potentially enabling wealthier people to design their own descendants. And some opponents of human germ line editing have more fundamental objections, including reli- gious beliefs that it is wrong for humans to design their own future. For now, however, the key issue is to construct an international regulatory framework to stop inherited gene editing, while allowing the technology to be used in individual gene therapy. Thir- ty-one clinical trials are already under way to treat diseases from cancer to haemophilia and blindness. Their progress must not be blocked by any backlash against more controversial applications of Crispr. The world’s scientific academies and the World Health Organization are working on a dual track to control human gene editing, with the WHO planning a registry of research in the field. If their efforts are well co-ordi- nated and supported by national regulatory authorities, it should be possible to prevent any more premature attempts to create edited babies, while permitting human embryology research that could lead to germ line engineering when the science is ready. It would be wrong to rule out a technology that could eventually stop people passing on a vast range of inherited diseases to their descendants.

DNA changes should benefit patients but not yet their descendants

Edited genes are not

ready to be inherited

Such is the capriciousness of Donald Trump’s approach to global affairs that many will count the weekend’s meeting of G7 leaders in Biarritz as a signifi- cant success. In other circumstances the absence of public acrimony among leaders of the world’s big democracies would have been unremarkable. With Mr Trump in the White House, it is cause for considerable relief if not rau- cous celebration, not least in the world’s financial markets. The summit had been preceded by a dangerous escalation of the US president’s trade war against China and a White House suggestion that Russia’s Vladimir Putin be invited to rejoin the group despite Moscow’s continued mil- itary presence in Ukraine. The split between the US president and Euro- pean leaders over the international community’s nuclear deal with Iran threatened further ruptures as did the US administration’s disdain for international action to limit climate change. Much credit goes to the meeting’s host, French president Emmanuel Macron, for his adroit diplomacy in defusing these potential time bombs. Mr Macron has had his own domestic political troubles, but he has emerged as a leader with weight and seriousness in international affairs. His willingness to act as a broker in an effort to bring together Mr Trump with Iranian president Hassan Rouhani for directtalks on the nuclear crisisshowed laudable diplomatic imagination. In handling Mr Trump, Mr Macron found a balance between necessary if embarrassing flattery of the president and strong resolve to promote Europe’s commitment to the multilateral international order. There is a lesson for Boris Johnson, Britain’s prime minister. Mr Johnson, affirming at his first G summit his willingness to see theUK crash out of the EUwithout a deal with its European partners, already has the

look of a prime minister caught, vassal- like, in Mr Trump’s slipstream. Mr Trump’s relatively conciliatory comments at his end-of-summit press conference held the hope, at least, of a sustained de-escalation of the tit-for- tattrade war with China. Nothing can be taken for granted, but it may be that the stark evidence that trade tensions are driving the world towards recession has changed the calculations in the White House. Appealing to his political base by taking a tough line with China is one thing; a recession during 2020 could wreck his chances of re-election. In suggesting Mr Trump holds direct talks with Mr Rouhani, Mr Macron has appealed directly to the US leader’s ego. “Go on, do the deal” is a challenge the US president finds hard to resist. The hope now must be that the Iran hawks surrounding the president — notably John Bolton, the national security adviser — do not succeed in undermin- ing the initiative. The world cannot afford another war in the Middle East. Measured against such issues, Mr Johnson’s demands of the US president at the summit seemed eccentric. The terms of any post-Brexit trade deal between the two governments, he told Mr Trump, must include ready access to the US market forMelton Mowbray pork pies, British-grown cauliflowers and British-made shower trays. Such, perhaps, is the inevitable fate of a prime minister who has been so eager to surrender the influence Britain has exerted on international affairs through a leading role in the EU. It is impossible to say whether the G summit will help calm the serious dis- turbances in global economic and geopolitical affairs. For as long as he is in the White House Mr Trump will be a dangerous and destabilising force. Mr Macron, however, deserves considerable thanks for his efforts to calm the storms.

Brexit has already pushed Britain to the margins of global affairs

Macron’s G7 summit

calms the storm, for now

If businesses want to do right by the community,

start with solar panels

It is nice to read that the US Business Roundtable isconcerned about the environmentand its effect on climate change. There are profitable ways to address this issue. According to theUS Energy Information Administration, businesses are major users of electricity. The commercial sector accounts for about 35 per cent of our nation’s total electrical usage while the industrial sector consumes a little over 24 per cent. My suggestion is that if businesses want to do what is right for their communities, then they should begin putting solar panels on their roofs. Solar panels pay for themselves after seven to 15 years and can last for more than 25 years. Conservatively speaking, companies could probably expect to have at least 10 years’ worth of free electricity. That’s a good deal. Some companies though, may not be able to provide for all of their electrical needs with renewable energy. They may be located in a high-rise building or a shopping mall. In that case, a mechanism could be set up where those companies donate 60 per cent of their electric bill into a fund for low- income property owners to install solar panels on their homes. This will do much to reduce greenhouse emissions from the residential sector. On an optimistic note, we do not have to eliminate all carbon dioxide emissions. Prior to 1950, existing plant life was enough to remove any man- made carbon dioxide from the atmosphere with photosynthesis. If we can get back to that point, we will still be able to use some fossil fuels for our transportation needs, but in order to do that, we must reduce substantially the amount of fossil fuels we use to generate electricity. Businesses can make that happen by switching over to solar power. If the Business Roundtable wants to make a difference in stakeholders’ lives, its members should invest more in renewable energy. The return for society will be greater than any money paid out for buybacks. Walter Weis Forest Hills, NY, US

German universities are

having a research impact Frederick Studemann muses on whether German universities might move up the rankings following recent changes there (“German universities are back in vogue for foreign students”, Notebook, August). This may be happening already. For example, no German university appears in the top 50 economics departments in the world using the overall QS rankings. However, when just research impact is used, the picture changes dramatically, with three German universities, Bonn, Mannheim and Munich, in the top 50, all above Cambridge and Oxford on this ranking. The other part of the QS ranking is based on international reputation with academics and employers, a much more subjective measure and subject probably to long time lags, given the difficulty of building up brand/reputation. John O’Hagan Emeritus Professor of Economics, Trinity College Dublin, Ireland

             

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Financial Times Europe - 28.08.2019

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