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December 03, 2019

What to look out for in the last week of the compaign

In some respects, the UK election is one of the most boring we can recall. Not that we know the outcome. It is quite possible that this election will get less boring in the final stretch. A lot of people have an interest in making the election more exciting than it is - journalists naturally, but also the parties themselves. Nothing motivates supporters more than the fear, or hope, of a narrow outcome.

So, what do we know? An ICM poll last night saw the gap between Tories and Labour closing by 1pp, to 7pp. The various poll trackers are showing a gap of around 10/11pp. We noted a comment by Stephen Bush in the New Statesman that we are a normal-sized polling error away from a hung parliament. We don’t think this is so.

What we do know for sure is that Labour has been gaining at the expense of the LibDems. The LibDems are suffering the classic squeeze of the small party in a first-past-the-post system. The LibDems are currently at 13% - which is more than the 7% or so they got at the 2017 elections. We expect more LibDem voters to switch, but we should not underestimate the residual anti-Corbyn sentiment in that group.  

We have to be careful in how we think about statistical error. The narrow statistical error in a poll-of-polls is probably quite small, given the large combined sample size. The two sources of error that are hardest to account for are asymmetric mobilisation and first-past-the-post idiosyncrasies. The second is the Donald Trump effect - he lost the US national vote in 2016, but won the presidency.

The aforementioned ICM poll also said that around 8 out of 10 Tory voters are certain to vote, but only 7 out 10 Labour voters. The big YouGov poll last week told us that the Tories have a good chance to capture traditional Labour constituencies in the North. Those numbers are consistent with a survey by the trade union Unite, which showed that a large number of traditional Labour voters are undecided because of Brexit. That information, too, has to be treated as a rallying call. We heard of another poll showing that the Tories hold a very strong lead over Labour among working-class voters.

What we need to look out for in the last few days of the campaign are signs of two types of shifts happening. The extent to which centrist voters in the south are ready to support Jeremy Corbyn in order to defeat the local Tory candidate. And the extent to which the Tories attract the working-class voters of the north. It is our best guess that the rise in Labour support in the headline polls reflects the former, but not the latter. 

Our conclusion from these observation is that further shifts in the LibDem vote are unlikely to be decisive. What Jeremy Corbyn needs to achieve in the next 10 days is to mobilise reluctant pro-Brexit Labour voters in the north. 

There is not much the Tories can do. They have consolidated the pro-Brexit vote. They will need to keep the high degree of mobilisation of their voters. The Tories have concentrated most of their campaign funds on the final stretch for that very reason. Based on what we know, we conclude that we are still not anywhere near to hung-parliament territory right now.

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December 03, 2019

Trump threatens tariffs on French luxury exports

Donald Trump did it again. This time France, not Germany, becomes the target of his punitive trade policy. Trump threatened to slap a 100% tariff on French luxury goods as tit-for-tat for the digital tax France is levying on Internet giants such as Google, Apple, Amazon and Facebook. 

Champagne, handbags, porcelain, cheese, or yoghurt are among the French product that are at risk of a US tariff. As well as threatening levies on new categories of imports, the US administration said it would consider whether to impose fees or restrictions on French services, writes the FT. The new tariffs will not be imposed until after a public comment period that includes a hearing in Washington on January 7. There producers and consumers of the affected goods can argue on the tariffs. 

Emmanuel Macron imposed a 3% digital service levy as a way to ensure services are paying taxes where they are consumed, after attempts to agree on a common approach within the EU failed. The French tax applies to any digital company with revenue of more than €750m, of which at least €25m is generated in France. Macron took the case to the OECD for it to work out a multilateral solution. Other countries with similar taxes, like Italy, are likely to be investigated by the US administration as well.

Trump uses the threat of tariffs to get what he wants without actually having to implement them. His threat to impose tariffs on EU cars worked well for him because German car makers ended up increasing their investment and employment in the US. This transfer of production and know-how cannot apply to French goods, though. Sparkling wine outside the Champagne region cannot be called Champagne, and what would be the appeal of a French cheese produced in Oregon? In that sense the French brands are much more vulnerable to these threats than the German brands, which are globally more mobile.

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