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 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?

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About lasancmt

Passionate about Identity Management Disgusted at #ukip and #brexit
This entry was posted in #brexit, EU, EURO and tagged , , , , , . Bookmark the permalink.

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

  1. pm says:

    Marcus what the feck are you talking about? it all sounds very confused, why,o, why do you spend so much energy attacking Ukip/ Flexict/ Brexit, etc ,etc ? especially when the EU is so fecked up! sorry for the bad language , but you dont make eny fecking sense……..i apologize in advance…. to much fecking, well you know what.drink its Saturday night …… ah what the feck …….. god blesss….and here is i another thing …. dont you …. shite i fecking cant remember what the feck i was going to say …. feck it

    • lasancmt says:

      This is where you’re wrong. This is important. It’s important for our kids and their kids. Nationalistic kippers want to turn the clock back to a nationalistic Europe ridden with strife and divisions. They want to close borders further, while we in Europe enjoy free movement. Two million retired Brits enjoy this freedom. Fancy having them back after a brexit? The pound may be on a high, but while a windfall for us UK ex-pat pensioners, it is killing UK exports, pricing them out of the market. The UK economy may be strong on services, but that’s the part of the single market most likely to suffer after a brexit. It will be a double whammy. Tariffs on exports like UK manufactured cars while financial services move to Frankfurt, La defense and Dublin. A massive shot in both feet for Britain.

      • pm says:

        Marcus i am an expat so you dont have to explain the situation, but i am still hedgeing my bets and taking citizen ship. as for brexit …….. its simply not going to happen. people in the UK have more common sense than following UKIP , or sad idiots like Richard North , l just hope people like him stop whining, after him and his ilk get a good drubbing at his precious referendum! I note on his blog today he has written an article about Gene Sharp…… what an absolute joke, people like Sharp are used to overthrow governments , or at least those that dont “toe the line” maybe North is some kind of agent provocateur?

      • lasancmt says:

        Apologies accepted, we may be sitting that French Citizenship exam together.
        EU was supposed to make that sort of thing a thing of the past
        but I guess it’s amongst the pearls and the babies kippers will be throwing out with the # brexit bath water 😉

  2. pm says:

    P.S.I apologize for drunken rant on Saturday

  3. You use academic arguments, lets get down to reality. You argue that the rest of the world is not a good market – well, the UK’s export growth is mainly with the rest of the world, so much so that in the past couple of years the EU is down to 40-45% of the UK export market. You argue that Norway gets a bad deal out of the EU, it does, but countries with Free Trade Agreements such as Canada and South Korea get excellent deals, Norway should leave the EEA.

    You seem to be happy in France, probably because they have marvellous food and still, in some places, have a relaxed lifestyle. But they also have many of the same stores and out of town venues that populate the rest of the EU and are rapidly becoming just another part of Europe. In 50 years France will be gone.

    This homogenisation of Europe is deliberate and nasty, as is rampant globalisation generally. In the EU it stems from a fear of diversity born in the two world wars (it is racist). A stable world is a world of diverse, sovereign states that trade with each other moderately. It is not a world of regions specializing in particular industries with people sloshing about with every industrial and economic change.

  4. lasancmt says:

    I think you totally miss my point about the rest of the world (ROW) not being a good market for UK produce. Of course when economies start growing they need more of certain goods they can not produce themselves. These are mainly bulk goods like more oil, more wheat, more timber, plant equipment. So yes those trade figures show the healthy growth that kippers get so excited about.
    Problem is the UK is not a producer of any of those kind of goods. In our stage of development we mainly make end-consumer goods and the average income of the consumer in developing nations is often around the thousand dollar mark. They don’t have the cash laying about to buy expensive items from us. That’s why on twitter I jokingly photoshopped a UK Nissan next to an African tribal hut. In France, Holland and Germany, they can afford our products. Their disposable income is even higher than ours. Also in North America and Australia. That’s why trade with those countries is good. In fact they positively adore them 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 in the UK. Do we think customers will come running to us? Begging for our produce like they did in the empire? We need to reach out, not distance ourselves from our European neighbours.

    Also in today’s EU we now have intricately interwoven supply and production lines that span the entire EU and sometimes beyond. How interwoven they are illustrated by the fact that a UK production line can be halted by a strike at the Calais border. Tightening those borders and brexit only makes 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.

    Your points about homogenisation and diversity are just too batty to deserve a reply. I will archive them under xenophobia and general dementia.

    You point about labour mobility is 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 workers migrated north or South. It is a fantastic thing we should copy from the flexible US economy.

  5. Again, you are speaking of an imaginary, academic view of the world. The reality is that the UK has a splendid export performance to the rest of the world that is growing apace, now amounting to >50% of exports, and a feeble performance in the EU that is stagnant. This is the reality.

    You say “Your points about homogenisation and diversity are just too batty to deserve a reply.” This is our main difference. I love the diversity of human culture. The largest cause of diversity is religious difference (belief in a way of life) and the second most important source is Nation States. The idea of flattening the English countryside to grow crops more efficiently was widespread but is now regarded as absurd for good scientific reasons as well as to preserve the landscape. The idea of removing rainforests for crops was just obvious but is now thought to be a dangerous practice. Homogenisation always appears to be a “good idea” but fails on closer inspection. Your idea that preserving the diversity of culture is “too batty to deserve a reply” shows that you see little value in cultural diversity.

    ISIS see little value in cultural diversity and are widely labelled as extremist. However, at present, in the West and Europe, there are also people who, like ISIS, believe they have all the answers and can see no point in diversity. Here are a couple of reasons for diversity: firstly no-one has all the answers, secondly any system composed of moderately interacting parts is more robust and stable than a single system that achieves the same end. Redundancy is inefficient but essential, Nature has multiple redundancy precisely because it is required for long term survival. Corporations and ideologues will always press for uniformity because it is more “efficient” but corporations operate short term and ideologues are subversive. (See The Advantages of Globalization).

  6. Pingback: Just because developing economies grow faster doesn’t make them attractive | IdentitySpace

  7. DaveK says:

    In 1975 there was a majority VOTE by UK citizens to remain within the COMMON MARKET Trade Organisation. That’s Democracy.
    Nobody VOTED for UK to be incorporated into a Federated States of Europe and there has never been an election to VOTE for UK to become a part of the EU. I shall vote for out but am well aware that the result will be cooked. Not a problem as the whole corrupt pack of cards will collapse within ten years anyway.

    • lasancmt says:

      The UK did not join a trade organisation in 1975. Maybe you’re confused with the WTO? Already the treaty of Rome mentioned the words “ever closer union”. Don’t blame the EU for British parlementarians never reading their briefs

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