Let’s not make a deal: Brexit

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Hello and welcome to the Intelligence on Economist Radio. I'm your host Jason Palmer. Every weekday we provide a fresh perspective perspective on the events shaping your world. When Russia annexed Crimea in 2014, it absorbed much of Ukraine's navy. Since then, Ukraine has been looking to the west for resources and training. Our correspondent joins a military exercise involving an American destroyer, underwater drones and a killer tomato. And rapid technological change in China has until now left many of the elderly behind. But the country's tech giants are starting to tap into the enormous grey market. But first, Traditionally in Britain, summer is a quiet time for politics. Parliament takes a recess and the business of government drifts a little till September. Not this year.

We're going to fulfill the repeated promises of Parliament to the people and come out of the EU on October 31.

We will do everything to stop no.

Deal, including a no confidence vote at.

The appropriate, very early time to do it. The Prime Minister seems to be trying to slip no deal through, slip past Parliament and slip past the British people.

Parliament will not stand for it. We have the mechanisms available to stop no deal from happening. Every MP should work to make sure that happens.

As new Prime Minister Boris Johnson gets into his stride, his mantra, much repeated, is that he will lead Britain out of the European Union by the deadline of October 31st.

We're going to restore trust in our democracy.

Many fear it would be incredibly disruptive to leave the EU with no plan for replacing the many ties that Britain has with the bloc. But there are growing signs that Mr. Johnson might find support for such a move. President Trump's national Security adviser, John Bolton, visited London this week, seeming enthusiastic about a no deal Brexit, saying America would swiftly negotiate trade deals with Britain. There's one body, though, that's been clear about no deal.

Britain's Parliament has repeatedly said it does not want a no deal Brexit.

John Peat is our Brexit editor.

They voted against it on numerous occasions because they think MPs think it will be bad for the economy, that it will be difficult to get out of. So whenever the question's been put to Parliament, they've been against a no deal Brexit.

But this week in particular, there's been a great deal of talk about no deal Brexit. Today, the former Chancellor, Philip Hammond, accused the Prime Minister of wrecking the chances of actually doing a deal. And he said that no deal is not an acceptable outcome. What could Parliament actually do to stop no deal from happening?

It's difficult for MPs to take on a government if the government is determined to leave with no deal, because that is the default option in current law. So if nothing happens, Britain will leave the European Union on 31 October without a deal. If MPs want to try and stop them, and many do, they're going to have to try some legislative hook or some other procedural trick. And, of course, there isn't an awful lot of time left.

So what sort of procedural tricks are still up the parliamentary sleeve?

Well, in March, MPs took control of the agenda against the government's wishes, the then government's wishes, and passed an act requiring the then Prime Minister, Theresa May, to ask for an extension of the Brexit deadline. They could try to do that again. Now it's a bit harder because there's no legislation, there's no motions in front of them that they can use to devise a law, and the government get in the way of other parliamentary tricks. On the other hand, against that, the speaker who controls the Parliament, controls its agenda and decides who can talk and what sort of amendments he wants to accept, has repeatedly said he thinks that Britain should not leave the European Union with no deal unless Parliament has agreed. So he will be trying to support the idea of there being a motion that could be turned into legislation. So we're going to see quite a lot of toing and froing in September during the two weeks that Parliament is sitting.

I mean, the other thing that has been in the news this week is discussion of a vote of no confidence in Mr. Johnson. How might that play out or how is Mr. Johnson trying to avoid it?

There is always an option, which is sometimes called the nuclear option, of if MPs can't legislate in the way that they would like to do, of passing a motion of no confidence in the government, after which usually there is going to be an election. It's complicated because since something called the Fixed Term Parliament act of 2011, it's provided a specific route for a motion of no confidence, which then has 14 days. If it is passed, there are 14 days for a new government to be formed or for the current government and Mr. Johnson again to seek the confidence that he failed to get on the first attempt. And it's not quite clear what might happen during those 14 days, whether there might be an alternative government, whether Mr. Johnson might just say, I'm going to continue as Prime Minister anyway. And it's not totally clear that the result will be an election. And if it is an election, it's not clear what date it would be held on. And it would be open to Boris Johnson to say at the end of a 14 day period, he's now going to hold an election, but he's going to hold it after we have left the European Union on October 31st.

So it sounds like any of the sort of procedural tricks and end runs that Parliament might try are all fairly difficult to pull off. And meanwhile, time is ticking. Do you think in the kerfuffle that's happened this week, no Deal has become more likely?

I think almost every week that passes no Deal gets slightly more likely, mainly because time is beginning to run out. October 31st is not very far off at present. Parliament is scheduled to have fewer than 30 sitting days between now and the end of October anyway. And if the government, if Boris Johnson is determined to leave with no deal on October 31, it's going to be difficult, not impossible, but difficult to stop him. So I guess the question really is, is that what he wants to do? And I'm not sure that there is a clear answer to that question.

Well, it certainly sounds like it is. That's certainly the sort of drum he's been beating for some time now.

He has. But at the same time he's also been saying, I want to leave with a deal, that's my preferred option. And he seems to be using the threat of a no deal Brexit as something that he thinks if he talks it up, the European Union, the other side will eventually say, well, we don't want this either, so we better make some concessions to him. He thinks that that's the way to get to a deal.

So what about things from the European side? Is there a chance that they will be sort of cowed into reopening negotiations on the deal?

I think it's pretty unlikely that the European Union is going to back down. They wouldn't offer a new deal to Theresa May when she failed to get the present deal through the House of Commons. They just said, you have to try again. They're not very enthusiastic about Boris Johnson, who's a very well known Brexiteer who doesn't like Brussels. And I think that they feel that if they were to make a big concession now, that could quite cause problems inside the European club. It could weaken the single market. It might even lead other countries to say, look, if the British can get a better deal, why can't we? So I don't think it's likely that they will make serious concessions.

But there has been an enormous amount of preparation for anticipation of this no deal Brexit. And there have been discussions with the EU about emergency circumstances and trying to essentially manage the no deal scenario. Do you think that those kinds of negotiations, taken in some, would provide a way out that does save some faith, that does avert disaster, that does keep the European Union sufficiently happy. But isn't the starkest version of no deal that we've talked about?

I mean, I think there are some things you could do to soften the impact of no deal. And indeed both sides have made some preparations already to do with creating parking space for trucks on the roads, ensuring that airlines can continue to fly, or most airlines can continue to fly if Britain were to leave without a deal. But in the end, I think these will be quite small things. Make sure medicines are can cross borders and so on. The law will kick in and you can't really avoid it. If you leave the European Union with no deal at all, you become a third party. European law no longer applies to the UK and that would affect trade, it would affect regulations, it would affect mutual recognition of standards. You might be able to soften it for a bit. But in the end getting into no deal carries huge risks that that it could be highly disruptive for both sides.

And what's your view on what Mr. Johnson really wants in the longer term here? Is this him implementing a policy he is really behind, or is this an appeal to voters with the thought of an election in prospect at some time soon?

I think Mr. Johnson can see that given that he has a majority of only one and it might easily shrink below that at any time, that he's quite likely to face an election fairly soon almost whatever happens. And I think he believes that he can only win that election by tempting back the hard Brexit vote voters who supported Nigel Farage's Brexit party earlier this year. So he thinks that going for no deal and being seen to be hard line is the best way of winning an election. What he really wants I'm very unsure of because he also sees that we need to have a decent relationship with our biggest trading partner. He thinks he can get that at the same time as being tough and hard line. I'm not sure going to work.

John, thank you very much for coming in.

Thank you.

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It's Europe's worst war for two decades. Since Russia's invasion of eastern Ukraine and the annexation of Crimea in 2014, more than 10,000 civilians have died. The Black Sea that the Crimean Peninsula juts into has since taken on heightened strategic significance. In the annexation, Ukraine lost three quarters of its naval personnel and warships, which were stationed in the Crimean port of Sevastopol. Although Russia now dominates the waters, other countries retain a strong presence. The NATO member states of Romania, Bulgaria and Turkey all border the Black Sea, and it is to NATO that Ukraine now looks for naval support. Recently, Ukraine, accompanied forces from the alliance to take part in Operation Sea Breeze, a naval exercise in the Black Sea.

I spent three days aboard the USS Carney, which is one of America's Arleigh Burke class destroyers.

Shashank Joshi is our defence editor.

It's an enormous 505 foot ship, absolutely bristling with guns and missiles. Hey, three's off the bollard. You want us just taking it? We launched early in the morning from the Ukrainian port of Odessa. Hey, just start pulling it from there while he does that. Joseph, let's go.

It's in the water.

So I had the run of the ship. I spent quite a lot of time hanging around on the bridge where the ship is piloted from, Looking at the Russian warships lurking in the distance. The Sukhoi jets they occasionally sent to whiz around some of the other ships involved. What I was actually there for was to look at the exercises the ship was conducting with other NATO partners with Ukraine as part of Sea Breeze itself.

So these exercises, Sea Breeze, what do they involve?

They're essentially a big naval exercise. They have lots of components. Ships maneuvering. Sounds like the ribs in the water. So let's go man up on the flight there. Practicing hunting submarines, Practicing working with each other, getting used to each other. Of course, Ukraine's not a NATO ally, so it needs to practice working with other NATO allies to get its procedures straight. At one point, we were hunting for a drone underwater to practice submarine hunting. And the pings of the ship's active sonar can be heard throughout the ship, resounding right through the metallic structure. One of the exercises was a gunnery exercise that involved a gigantic red cube being inflated on the back of the USS Carney. That was not a super weapon. It was the Killer Tomato. It was a flotation device used as target practice by the various ships and the Carney. HMS Duncan, the British destroyer, the Ukrainian frigate, all had a chance at hurling their bullets and shells at it until it withered and collapsed in the water.

Keep going, keep going.

That's it. Lower.

Empty Opinion.

The gun.

As it rains.

Hell yeah, dude, good shot. The Killer Tomato was killed.

The killer tomato was crushed.

And so what is the current state of play in the Black Sea? What's the balance of power?

Well, Russia, since taking over Crimea, has really reinforced not only its Black Sea fleet by adding lots of missile boats, submarines and other vessels. It's also stuffed Crimea itself, itself full of anti ship missiles, anti air missiles like the S400, which means that the military balance of power in the Black Sea has changed a Great deal. Russia has become much, much stronger. The Crimean Peninsula, of course, juts out into the Black Sea and in a way dominates the northern part of it. So that changed things. But America, its NATO allies, they're not standing back. They are supporting Ukraine. They are getting their own ships in there. The USS Carney was, I think, the fifth US warsh to visit this year alone. NATO ships have hugely increased the amount of time they're spending in the Black Sea. So the west is essentially supporting Ukraine and it's contesting that Russian presence in the Black Sea.

And so how big a role does Ukraine play in those exercises?

Ukraine is host of the exercises. It's one of the main powers, but of course, it doesn't have many ships. Right. It lost three quarters of its fleet and its personnel. Its navy was headquartered in Sevastopol in Crimea five years ago. Many of the sailors I met, they had left behind families in the Crimean Peninsula. They were seething with anger and they were demoralized. So this was a huge blow to the navy. In fact, I hitched a ride back to Odessa from the Carney on the Ukrainian frigate, and a Ukrainian officer showed me around the officer's mess. He showed me the silver plaque that has all the names of the ship's captains on it. Over the years, two of the eight names were scratched out. They were, as he called them, traces. They had defected to the Russian Navy after the seizure of Crimea. And I think that gives you a sense of just how serious these losses were for Ukraine. They're licking their wounds and rebuilding now.

How do you mean rebuilding? What are they doing?

They are building up to what they call a Mosquito fleet. They recognise they haven't got the money or the resources to build a huge fleet of warships that can sail across the Black Sea, that can take the fight to Russia. That's not their focus. They are focused on a smaller fleet or agile, more manoeuvrable boats that would be able to defend themselves in coastal waters closer to you, Ukraine's own shores. So they're buying a smaller boat. They're getting help from the Americans, who are giving them some of their old patrol boats. And I think that's the only way they're going to be able to slowly rebuild.

Well, and presumably also preparing for potential conflict. I mean, how likely do you think that a Russian invasion of Ukraine, or, in any case, armed conflict in the Black Sea is at this point?

I think it's relatively unlikely. I think that, by and large, Russia's interest is in keeping Ukraine off balance. It's in preventing, preventing Ukraine from joining NATO and showing NATO that this is an unstable country that was too risky to bring into your alliance. Russia itself probably isn't interested in an all out conflict. That would probably provoke more sanctions, a bigger response. Right now Ukraine doesn't really get that much lethal assistance from Western countries. If Russia were to invade or to make bigger offensives in the Donbas region in eastern Ukraine, that could change. It could prompt even more ships to be given to Ukraine. It could prompt these exercises to get even bigger. I think Russia is probably set against that. But NATO countries don't want to take any risks and they want to remind Russia. You may think the Black Sea doesn't matter to us, but it does. And we are going to hang around here. We're not going to leave this place to you. It's not going to be, as the Turkish president said three or so years ago, a Russian Lake Dzhong thank you.

Very much for your time.

You're welcome.

When you think of an emerging tech consumer, you might think first of a 20 something maybe swiping left or right. But that's not always the case in China, where the country's 250 million-odd seniors are entering the market.

They're using square dancing apps in parks, they're on WeChat, China's ubiquitous messaging app. They're buying meals and medicine and they're even dating.

Stephanie Studer is the Economist's China Business Correspondent and is based in Shanghai.

On a recent weekday evening I went to Xiangyang park and around 7pm this transforms into a ballroom and loudspeakers start playing old Chinese pop songs. Couples are waltzing under the plane trees. And I met there Mr. Zhou and Ms. Shi, who are both in their 70s and they told me that they loved their smartphone as much as the dancing. Is this his first time on WeChat?

No, he has been using it for.

Three years and they're totally addicted to their smartphones. And Ms. Shu in fact told me that she'd rather go without food mood than without her smartphone. She says she could live, she could not eat, but she can't live without her phone.

And is this a common scene in China? I mean, how many smartphone addicted couples like this are there?

Well, in fact, the couple that I spoke to is a little bit of an exception. If you look at an average across the country for smartphone ownership for the over 50s, just one in three reported having a smartphone in 2016. There's also been quite a lot of angst in the last few years as China has developed technologically so fast that elderly people in particular might be being left out. But for those who are wired up, they're using their phones in lots of interesting ways.

How do you mean?

Those who do have smartphones are really committed users. WeChat is very popular among the elderly. They like to text each other. The over 60s use 4/5 of their data on WeChat alone, and that's compared to just 7% for those in their 20s and early 30s, because young people are on lots and lots of apps, so their attention is fragmented.

So that makes for a big market opportunity, I guess, for a less fragmented audience and a big one.

Yes, it does. I mean, of course WeChat is hoping that it can keep its lead. In fact, now people over 55 are WeChat's fastest growing cohort. But there are lots of other interesting smaller companies that are trying to entice China's grannies and grandpas. One of them is I have a Partner, which is a dating app for the elderly, which started last year. It has bold fonts and voice messaging if you're a little slow at typing. And there's also one for square dancing, and it posts professional dance videos, but lets the dancers of Xiangyang park and others upload their own. You've even got filters that you can use on your videos to iron out the wrinkles. And it's already been downloaded 200 million times since it began in 2015.

So all of this seems to point to the idea that perhaps the older market is not being left behind. In fact, that the market is meeting them where they are.

Yes, and I think that for tech companies, this is probably going to be their next big growth market. China's population is aging. In fact, the share of the population over the age of 60 is expected to double to 1/3 by 2050. So it makes a lot of sense to be trying to gear your app towards gramming.

Stephanie, thank you very much for joining us.

Thank you, Jason.

That's all for this episode of the Intelligence. If you like us, give us a rating on Apple podcasts and you can subscribe to the economist@exterator.com radio. Offer 12 issues for $12 or 12 pounds. See you back here tomorrow, Sam.