Eurosceptics beware: Just because developing economies grow faster doesn’t make them attractive for UK exporters

This is actually a reply on a previous post, which deserves to be elevated to a blog post in its own right, because it makes an important point kippers just don’t get when tweeting their #brexit nonsense.

I think UK Eurosceptics deliberately miss my point about the rest of the world (ROW) not necessarily being such a promising market for UK goods after #brexit. Of course when developing economies are in a growth spurt, they often need to import certain goods they cannot produce enough of themselves. These will be mainly bulk goods like more oil, more wheat, more timber, but especially new plant equipment to kit out new factories they’re planning.

So yes, these developing nations show promising international trade figures along with healthy GDP growth of 4- 6-8 %  that kippers get so excited about and like to compare to 0.4% growth we now see in the EU. In a kipper’s mind Britain is missing out on this trade that undoubtedly exist in other parts of the world and countries like Germany tap into so well. Why not UK they wonder, and the answer is always leave the EU to make it happen.

Problem is the UK is not a producer of the kind of goods developing countries are crying out for. Germany does, because their engineering sector has not been totally replaced by the service sector. Germany doesn’t just make paint, but also the machines that mix up the paint and put it in tins. So if it’s a bottling plant you’re after, chances are high that you get that sort of thing from Germany. In the UK economy, the manufacturing sector mainly makes luxury end-consumer goods for our home market which, at no 5 in the world, is considerable in its own right, although dwarfed by the EU common market size as a whole.

And sure, the budding entrepreneurs and leading politicians in BRIC  and Commonwealth countries will buy the odd Jaguar and armoured Range Rover. Their dealerships are already present in those region’s capitals and industrial centres. I am sure they do just fine just like any German quality car dealership.

However kippers forget the average income of the bulk of consumers in developing nations is often around the thousand dollar mark. Average income people there just don’t have the cash laying about to buy expensive items from us in volumes that count. That’s why on twitter I jokingly photoshopped a UK Nissan next to an African tribal hut. As if!

In France, Holland and Germany and other EU countries, they can however afford UK products. Their disposable income is often even higher than ours. Also in North America and Australia this is the case. That’s why trade with those countries is good. In fact they positively adore UK produce in those markets and we should stimulate the demand for UK goods on the European continent, not turn our back to it.

Why are we so bad at marketing the UK in the rest of Europe? Why have I never seen a commercial for UK Nissans on French TV? I have seen plenty for Citroen in the UK!
Do we think customers will come running to us just like that? Begging for our produce like they did in the colonies in the days of the empire?

We need to reach out, not distance ourselves from our European neighbours.

Yes,  3 million UK Jobs really depend on EU membership!

In today’s EU we now have intricately interwoven supply and production lines that span the entire EU and sometimes beyond. How interwoven they can be is illustrated by the fact that a UK production line can be halted in a matter of days by a short strike at the port of Calais. Tightening those borders and brexit, as kippers advocate, would only make things worse. Why not open them completely and join the Schengen area? These are the things which EU and eurozone membership favours and #brexit threatens. Not many UK politicians have the guts to come out and say so. It would be political suicide.

It is around this point kippers and other Eurosceptics steadfastly change the subject with words like: ” Yes but anyway, it’s not about the economy, the real reason we hate the EU so much is because the is EU killing its member state’s sovereignty, taking away their identities by homogenisation and killing diversity. These kind of arguments are just too batty to deserve a reply. I will always archive them under xenophobia and the onset of dementia in kippers.

Points about EU labour mobility however are more interesting. It just so happens I am in favour of it, because again it benefits the economy. In the USA you had two major aircraft manufacturing companies, Boeing in the North and McDonnell Douglas in the south. If one was booming and the other lagging thousands of skilled aircraft industry workers thought nothing of migrating north or South with their entire families to where the work was. Their skills were not lost on the dole. It is a fantastic thing we should copy from the flexible US economy, not oppose as kippers do.

When old British people retire to a depopulated  French countryside and their UK jobs are taken over by young skilled EU workers attracted by a booming UK economy, again that is a win-win in economic terms for all concerned.

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Disingenuous UK europhobes

disingenuous

Today spotted the following tweet on twitter. I feel I should elaborate my response in a bit more than just 140 twitter allows, so here it goes….

milkquotas

Why is this tweet ‘disingenuous’ coming from a eurosceptic Brit?

First of all a bit of history of the EU Common Agricultural Policy is required from the perspective of Britain’s accession negotiations to the ‘Common Market’ in the years leading up to 1973.

In a previous tweet I explained how in the aftermath of WWII our EU leaders (yes we still had some in those days)  instigated the Common Agricultural Policy (CAP) to ensure we had food security in Europe after years of post war rationing. Note how Kippers love to moan about CAP.

What actually happened in those years leading up to the UK’s accession to the Common Market is brilliantly explained by New Zealand’s terea web site:

“A country of less than 3 million people negotiated concessions (in the form of access quota rights to the British and European markets) from a powerful group of countries with a population of over 200 million.

To do this New Zealand needed Britain’s support. It was gained by playing on New Zealand’s wartime contribution, the strong cultural ties between the two countries, and the impact on the British consumer – New Zealand was a low-cost producer, so food prices in the UK were likely to rise if New Zealand produce was excluded from the market.”

So it wasn’t like the UK simply ‘dropped’ New Zealand in it in 1973. The web site explains how over the years New Zealand continued to have butter and cheese quotas well into the 1980s and 1990s – although gradually the levels were reduced, as New zealand developed alternative markets in it’s own geographical region.

When I was just married and moved to England in the ’80s, my then wife insisted on loading her shopping trolley up with New Zealand Anchor butter and Cheese as indeed her mother did before her. As a Dutchman I was acutely aware of the butter mountains piling up on the continent as an unforeseen consequence of Common Market intervention prices. (This alongside French and Italian wine lakes turned into industrial alcohol and Dutch tomatoes being ground up for pig food). Needless to say I replaced her NZ butter with packs produced in my adopted motherland the UK, even if slightly dearer at the till and much to the chagrin of my British wife.

Personally I thought it rather obscene, that we in Europe dumped packets of EU butter for 10 cents a pack on Russia, just to give a few Brits the idea they were supporting long lost cousins on the other side of the globe. Thank goodness that madness gradually came to an end, not last because British opposition within the EU to this kind of farm support which resulted in enormous waste when it overshot the intended production targets.

So with EU market intervention schemes aborted, milk prices started their descent in Europe, until a new scheme of mandatory milk quota’s was introduced. The EU had to, when tumbling prices meant dairy farmers all over Europe were quite literally going tits-up.  Again, as with all such schemes, they work for a while and then over the years become somehow counter productive. Again it was the Brits leading the way in abolishing these milk quotas in the EU, let there be no doubt about that!  A fact that doesn’t however stop kippers like Wayne Andrews in the above mentioned tweet moaning about it and seeking to mislead us all that it was in fact the EU that is/was “directly responsible” for the current woes of British dairy farmers.

I think ‘bullshit’ is an appropriate term for the musings of @TreasuryTutor. Greedy supermarket chains are more likely the culprit, when milk is sold cheaper than bottled water, don’t you think?

I guess many of you will have noticed how ukip likes to complain CAP supposedly adds hundreds of pounds to UK household’s annual shopping bills. Make no mistake: when they say this, they dream of ‘Anchor’ butter! In fact with their ‘trade global’ cries, they once again want to reduce milk prices, maybe even lower than today, by giving New Zealand industrial farmers with 15,000 cows unfettered access to our supermarket shelves.

And who has to compete against these super dairy farms from the other side of the world? You guessed it: the poor UK dairy farmers they are at the same time trying to mislead into voting for #brexit while planning to take away their precious farm subsidies.

And to whom is it left to protect our farmers? All of us who love our countryside and respect the hard working people who look after it. The same people who wouldn’t dream of voting “No” in the coming EU referendum, because we know which side of our bread is buttered.

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Difference between belonging to European Common Market and signing an FTA with EU

I have posted this before as an afterthought to a previous post, but it deserves spelling out again for those foolish enough to think that all Great Britain has to do to be a great trading nation again is to brexit and sign lots of Free trade agreements all over the world.

A container ship leaving  Felixstowe for Shanghai (containers mainly empty)

A container ship leaving Felixstowe for Shanghai (containers mainly empty)

Let’s go back to one of the core reasons why the EU Common Market was created in the first place.  After WWII the United Stated of America clearly emerged as the dominant industrial power and economic world trade power house. Economists studying the success of US companies growing so quickly from mom & pop stores into multimillion dollar corporations, noted that in the USA business start-ups  immediately had access to a huge single market. Having a common currency, the absence of state borders and tariffs and a common language helped them grow rapidly. Having achieved economies of scale in their formidable domestic market, US companies then naturally became internationally competitive on price and productivity, even when faced with competition of often lower wage economies. While the language barrier will of course remain an issue in the EU, by creating a common Euro currency and a single common EU regulatory trade frame work for goods and services, the EU has copied the success factors that made the US the No. 1 global economy. The fact that English is also in the EU the most spoken ‘second’ language only adds an extra advantage to the UK’s EU membership. After a brexit, there is no way that the other 27 EU nations are going to just give the UK unfettered access to the largest and richest unified consumer market in the world ‘for free’. ‘They’ll trade alright, but any post brexit EU trade agreement will have a stiff price attached as Norway will testify. Britain’s membership of the EU brings a net benefit of £3,000 a year to every UK household, employers’ organisation the CBI said in 2013. More recently in 2015, a German think tank the Bertelsmann Foundation calculated the potential cost of a brexit even higher at £3,500 per person! If you agree with me, as  explained in a previous blog, that the net cost per family of EU membership can be estimated at £330 per family, then brexit certainly makes no economic sense. To those that like to down play how many UK jobs depend on our trade with the EU I’d like to point out that with the ferry port in Calais going on strike and lorries backed up on the M20 it didn’t take very long for Toyota assembly lines to shut down due to lack of parts. That is how integrated modern EU wide supply lines are these days! I would like kippers and any other British Eurosceptic to ponder the following statements: True or false?

  • The simple signing of a piece of paper called FTA with EU or any other country is not a guarantee for trade to simply start flowing, it’s just an expression of intention of two governments; It’s UK entrepreneurs that must make it happen! The trading nations must have some relative trading advantage, e.g. an ability to produce cheaper manufactured goods of one sort or another, have access to resources or raw materials that the other nation doesn’t produce or needs lots more of; The trading party must have a stable currency or enough foreign currency reserves to pay for UK exports. It must be able to afford the UK’s relatively high prices for quality.
  • If being in the Euro zone and EU regulations are such a trade killer, why does Germany export six times more to China than the UK does? And why does Britain export more to Belgium than to China?
  • Ask yourself the question: Are customers of UK goods more likely to be found in affluent and nearby mainland Europe (GDP $35 K per capita), In former Commonwealth countries (GDP $3.5 K per capita), or in far flung countries of Africa with an average GDP often less than $900 per capita? Have a look at this list on Wikipedia that illustrates nations’ relative purchasing power.
  • Is the mere statistical event that EU exports dropped below 50% a reason to turn one’s back on it as idiots like Dan Hannan would have you believe. All the predictions I have seen is that even in 2030 EU exports still account for 30% of UK trade. Which compony could afford to write off 30% of it’s customer base without going bust?
  • Don’t just look at growth percentages from currently very low base GDP countries. Remember 100% growth of nothing is still next to nothing. 0.5% growth of $17 Trillion is an awfully big number!

Thinking of the UK’s own imports and persistent trading deficit with Europe and most of the rest of the world (except with the USA for some mysterious reason)

  • How long can the UK afford to pay for its trade deficit by selling the ‘family silver’ like expensive London real-estate and manufacturing companies to our creditors? Note UK gold reserves are flowing to China via the Swiss in an alarming rate.
  • Will Foreign Direct Investment (FDI) and the Financial Services sector continue to balance the UK’s negative goods trading books ‘ad infinitum’ or will it all end in tears?
  • Do you think that, upon a brexit, UK eBayers and other eTraders will suddenly change their terms of business from today’s unaspiring ‘deliver to UK and Ireland only’ to an optimistic outlook of  ‘Will deliver anywhere in the world’? Note that most refuse to send stuff to mainland Europe even if EU clients offer to pay for the extra freight:-( In other words do you really think brexit is a safe bet to make the UK a prosperous global trading nation once again, or just a dangerous and deluded ukip pipe dream?

Please don’t get me started on twittering about ‘national sovereignty’, ‘democratic deficit’ and other ukip rubbish in reply. If that was of such  importance to the British people, why is it that  more than 15.7 m. eligible Brits didn’t even bother to turn up to vote for the last general election in 2015?

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Brexit Grexit, a Greek tragedy and a British farce

damoclesEver since over the last few days Eurozone leaders seem to have agreed on the conditions for Greece to seek a third bailout to keep it in the Eurozone, British #brexit supporters have been trying to outdo each other making the most outrageous statements, claiming how this supports their ‘Britain out’ or ‘No toEU’ campaign. This ranges from the understated ‘wonder what this all means for our #brexit campaign’ to the idiotic ukip brigade tweeting German Nazi’s  have just overpowered another EU country. For a while there was even a #thisisacoup hashtag trending on Twitter. Just when I was about to despair and sink into a depression about the silly state of the Europe debate in Britain, one Telegraph columnist  singlehandedly restored trust in my adopted home country by unequivocally pointing out the elephant in the room:

No, the Greek agreement is not a coup and if you think it is, you’re an idiot

He continues to point out..

“Likening today’s German government to the Nazi regime is offensively stupid….if you compare the actions of the democratic German government led by Angela Merkel to those of Nazi Germany, you are not just an idiot but a hateful, small-minded and bigoted idiot…”

Amen to that! But not just kippers with pea sized brains are making this Greek bailout into a brexit thing. Now even some leftish comedian and media darling Owen Jones feels he has to weigh in on the #brexit side:

“You’ve got a massive democratic deficit and a lack of accountability at the heart of the European project… it’s an attack on democracy as things stand.”

Well you can imagine the British brexit brigade getting almost delirious. See it’s not just us right wing patriots saying this stuff about undemocratic German dominated EU, even the left’s poster boy agrees? I want to just finish with my own thoughts.  What kind of message are we giving to our kids? You know the generation that will be saddled with our debts? That it is OK to spend and spend, someone will bail you out in the end? And let’s face it, when the bailiffs come knocking at our neighbour’s door, take their flat screen TV away and their hire purchase car. Do we start shouting the bailiff (doing his court appointed job) is some sort of Nazi fascist preying on the poor?

The German tax payer owns the lion’s share of Greece’s debt (see chart below) and Angela Merkel would be hammered at home by her voters, if she was seen to be throwing good money after bad money, without assurances. And what does Britain do in this time of crises of a club ‘they belong to’?  They stand there scampering from the side lines, refusing to accept their share of the responsibility, just like they did with the drowning migrant crisis in the mediterranean off the coast of Italy. Instead of sympathy with the poor Greeks, all they can muster is ‘schadenfreude’ with the Euro Zone countries.

Very few Europhobes realise that per head of the population Britain’s National debt is actually bigger than Greece’s. “Oh but we can afford to live beyond our means”, kippers tweet.  This is what you get when you sell fluffing up the Cappuccino milk in the City of London into so much froth. When you print pictures of loaded container boats heading for China, but fail to mention most of them empty returns.

Now imagine a no vote in two years’time. Imagine Standard and Poor, Moody’s and all those other credit rating agencies reducing UK government debt bonds to junk status, like they did in Greece.  How many friends will Britain be able to count on to bail her out in her hour of need? Don’t say you haven’t been warned!

greece_debt

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About the old-fashioned uses of Sovereignty

Most of  of my previous blog posts have been about the economic absurdities of Britain leaving the EU, debunking some of the myths perpetuated by our ukip friends and Eurosceptic Tories. When it comes to arguments about ‘loss of sovereignty’, other than making fun of people who get hot under the collar where their food labels are designed, I find those kind of points much harder to debunk. Basically I couldn’t care less about national sovereignty. That may be because I feel more European, rather than Dutch, English or French. Today I would like to reblog someone who has actually put into words, far better than I ever could, why the sovereignty these europhobes so hanker after, is nothing but an illusion.

In 2015, people and parties, which are talking about sovereignty, mostly use it to protest against Europe. Against European integration, at least. In France, the Front National (FN) believes it garners electoral successes, defending the Nation, the French People and their unchallengeable sovereignty when really, most of its newly recruited voters just try to express their disbelief in the ability of the traditional political parties to solve the economical crisis that France seems stuck in. In the UK, Cameron made a political bet ahead of 2015 General Elections, which was quite right at the crossroad between obliviousness and a kamikaze oath, when he promised to hold a referendum concerning the UK membership to the EU. This was, too, on behalf of the sovereignty from which London has allegedly been deprived by Brussels. The EU is a fairly handy scapegoat for anything that goes wrong and that, more exactly, what national leaders can not handle, as a matter of fact”.

Read the full article from “All Eyes on #Politics” here… About the old-fashioned uses of Sovereignty. shareEconomy

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A recipe for disaster

UK’s massive public debt
UK’s structural trade deficit
UK’s S&P credit rating downgraded
UK’s contemplating #brexit
UK’s recipe for disaster

A container ship leaving  Felixstowe for Shanghai (containers mainly empty)

A container ship leaving Felixstowe for Shanghai (containers mainly empty)

Some links for you to support my claims

  1. http://www.debtbombshell.com/
  2. http://www.ons.gov.uk/ons/rel/uktrade/uk-trade/april-2015/stb-uk-trade–april-2015.html
  3. http://www.telegraph.co.uk/finance/economics/11671596/UKs-credit-rating-downgraded-to-negative-by-SandP-on-EU-referendum-risk.html
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Keeping up appearences

owen paterson

Owen Paterson, an Eurosceptic Tory spokesman on the #Marrshow today

Listening to Paterson on the #marrshow today, he seemed to be singing in tune with the part of the Tory party that share delusions of grandeur with nationalistic ukippers. He also seemed to sing well rehearsed lines from Dr. Richard North Flexcit hymn sheet. First he boasted again about the UK being the 5th largest economy in the world and how he resented the UK being represented by a Swedish psychiatric nurse. (EU trade commissioner Cecilia Malmström, was indeed a nurse for 3 years, this must immediately disqualify her right? The rest of her CV is impressive. That’s why she got the job, I’m sure)

Anyway, as is my custom, I keep pointing out that the main problem with the no-camp is that they are always barking up the wrong tree. Are ‘freedom and sovereignty’ really better served outside the EU trade block? Will the UK vote different to the EU trade representative in all but a few rare cases? Has the UK not often held the same post in the EU commission as Ms. Malmström ?

The uncomfortable truth about Britain’s constant ‘higher than exports’ imports is that the UK has been selling the family silver for decades to balance its trade books. Today, who owns the major manufacturing plants in Britain? Its car assembly lines? Who owns large chunks of its transport and distribution services? Who owns the prime real estate in London? What does this ‘freedom’ get UK citizens, other than a chance for their elected representatives putting up another charade in other than non-EU international bodies they like to speak of ? Just about everything Britain once proudly owned is mortgaged to the hilt with the same people Paterson says he would like to negotiate with for a better deal?

My handle on twitter is ‘Opium Wars’ to remind kippers of a period in it’s history when the UK was running out of silver to pay for the Chinese tea is was so fond of importing. (The Chinese emperor made it clear he wasn’t really interested in anything the UK manufactured in those days either).

A commenter in the Telegraph pointed out that since 2008 the UK’s exports now includes gold. Large quantities are exported via the Swiss to China. Is this gold mined in Great Britain, or is it just another case of ‘selling the family silver’? Remember I blogged about this here and the inclusion of precious metals in UK export statistics mainly seems to serve to UK’s desire of ‘keeping up appearances’ at all costs ?

Personally I don’t mind terribly who owns our factories, as long as they are in the EU and respect EU laws that respect our European values. That’s why I am in #voteYes

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