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.
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 company 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?