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Aug 28, 2018

Keep Carney and carry on for Brexit Britain | Business I The Guardian


Larry Elliott


Mark Carney played hard to get when he was first approached by George Osborne to take over from Mervyn King as governor of the Bank of England. When Carney demanded a generous remuneration package, Osborne said yes. When Carney said he would only serve five years at Threadneedle Street rather than the eight specified in the job description, the then chancellor said yes to that as well.
Carney has since relented a little on his departure date, pushing it back by a year from the summer of 2018 after being sweet-talked by Philip Hammond into staying on until after Britain’s scheduled departure from the EU next March. Now a rumour has surfaced that Carney has been approached about extending his term until 2020.
The Treasury did not exactly pour cold water all over the story, saying merely that it did not recognise the report. That’s probably because Hammond would like to have Carney at the Bank for as long as possible.
One small – but not insignificant – reason for that is that if Carney goes as planned next summer Hammond would have to spend scarce Treasury management time this autumn searching for a successor. An advert asking for applications was supposed to go out in July but has yet to appear.
But Hammond’s reluctance to see Carney depart next year goes deeper than that. The chancellor thinks the governor is an asset for Britain; he likes having Carney next to him at international meetings.
The two men also have similar views about Brexit: namely, that there is a danger to the economy from a no-deal outcome. Hammond would find some high-level support useful in what could be bruising cabinet and internal Conservative party battles to come.
Last but not least, Carney soothed the financial markets in the choppy days that followed the EU referendum in June 2016, but his impact might well be blunted next spring if he is a lame-duck governor.
So, from Hammond’s point of view, it is a no-brainer. The real question is whether Carney wants to do a seven-year stint at the Bank. In turn, that might depend on what his plans are after he leaves Threadneedle Street. Carney was once seen as a future Canadian prime minister or as a possible managing director of the International Monetary Fund. Neither job looks likely to become vacant by next summer and there are not that many Carney-shaped holes out there.

Nafta winner? Not quite

Trade is a complex business. Only the initiated really understand tariff schedules, quota arrangements, facilitation agreements and intellectual property rights. That’s why there are really only two types of trade stories: “trade war looms” or “trade war averted”.
This week, markets are up because they think the deal struck between the US and Mexico means the threat of protectionism has been rolled back. Donald Trump’s tough negotiating style appears to have paid off. The North American free trade agreement (Nafta) will be re-written in a way that is more favourable to the US. Mexico has already sued for peace. Canada will shortly do the same. Game, set and match to the White House.
Well, not quite. For a start, the detail really does matter when it comes to trade deals and the small print of the agreement between the US and Mexico remains sketchy.
What’s more, Trump only has authority to conclude a deal with all three original Nafta partners: Congress would need to approve separate US-Mexico and US-Canada trade agreements. That might prove difficult.
Finally, Trump has opened three separate trade wars with Nafta, the European Union and China. If the president sees the renegotiation of Nafta as an unalloyed success – as he undoubtedly does – that will encourage him to take a hardline with Brussels and Beijing.
Last week’s talks between the US and China did not go well. Meanwhile, the latest set of US trade figures show that the deficit widened from $67.9bn to $72.2bn in July. That’s only to be expected given that Trump’s tax cuts are boosting consumer demand and sucking in imports. But it is likely to harden the president’s stance.

Wonga wobbles

Wonga is in serious trouble. But although accountants from Grant Thornton are standing ready to put the payday loan company into administration, sadly this does not mean that UK households are finding it easier to make ends meet.
On the contrary, Wonga’s financial problems are due to a surge in compensation claims. If it goes under, other lenders will take its place.