Trade after Brexit: Better to sell where 90% of growth is or 90% of purchasing power is? Crisps anyone?

The last few days of February are proving to cause a bit of a meltdown in the fragile ranks of the brexiteers in my adopted homeland Great Britain.

First we had the spectacle of Theresa May having an away day with her entire Cabinet, 614 days after the Referendum and 335 days after invoking Art.50, to finally thrash out once and for all, what they actually jointly want out of Brexit; what kind of relationship they as the acting UK Government envisage the UK should have after the UK leaves on 29/03/2019.

Yes, that’s only 395 days away! Yes they should have sorted this out before triggering Art. 50!

True to the adversarial form of British Politics, at the same time the Labour Shadow Cabinet had their own Brexit huddle in boring Westminster and yesterday we saw a long awaited speech by Leader Jeremy Corbyn, finally putting a glimmer of clear blue water between the Government’s Brexit position and what the Labour opposition hopes to get out of it all.

What the Labour and Conservatives official position have in common is that both profess to want to respect and implement ‘The will of the People’ and leave the European Union. Notably for Labour this means drawing a red line somewhere short of the UK leaving the EU Customs Union.  Note that Labour is at pains to point out they do not want to remain in “The Customs Union”, but rather in “A Customs Union”.  The difference between “The” and “A” Customs Union for the moment is anyone’s guess. That, explains Mr. Corbyn, is a question for “negotiation”.

Listening dispassionately to Mr. Corbyn, 90% of his long awaited Brexit speech seemed to be a passionate pro-EU speech outlining all the advantages Great Britain derives from its membership. He mentioned the value to UK of membership of EU institutions like the  EU Medicines Agency(EMA), Chemicals Agency (ECHA) and Euratom. He mentioned workers’ rights and protections aspired to by Labour, but implemented by EU. He mentioned the Environment and Carbon Trading schemes. All areas where European nations are more effective and efficient collaborating rather than competing.

Today I am shamelessly exploiting the appearance of a crack that is appearing in the UK public’s perception of the Customs Union, with an amendmend on continued participation due to be voted on in Parliament this week. Theresa May’s Government’s majority is wafer thin on the subject. I read that only six Conservatives need to side with Jeremy Corbyn on continued membership of the Customs Union, to cause the UK Prime Minister a major head ache. The issue is of course intricately linked to the Northern Ireland border issue.

Meanwhile Theresa May seems to have thrashed out some sort of compromise between the ‘Soft’ and ‘Hard’ brexiteers, fighting each other tooth and nail in her Cabinet. This week the main adversaries will each take turns sharing their newfound shared insights with the British public.

Today was Liam Fox’s turn to take the limelight with a speech in which no doubt he will take aim at Labour’s sudden conversion to the benefits of retaining “a Customs Union” with the EU after Brexit. Indeed he called it “a betrayal of Brexit voters”. Never mind that in an earlier life he himself called it “the best way forward”.

With the customary leaks to the press of the contents of his speech, the main arguments Fox will put forward can be roughly summarised as follows:

  • Being part of “the” or “a” Customs Union will restrict the UK’s capability to strike its own Global Free Trade Deals by removing an incentive for future trade partners;
  • 90% of growth in the world economy will take place outside of the EU and Brexit Britain needs to be able to focus its trade on those economies rather than the slow growing EU Single Market.

Both points are pure Brexit bullshit of course. Like all propaganda, there is a grain of truth in them. Yes staying in the Customs Union means the UK would have to set the same tariffs as the EU. The UK could as an example not set a zero import tariff on Oranges from Morocco a fruit we don’t grow, but Spain in EU does. We could also get closer in trade to our cherished Anglosphere brethren in New Zealand by removing all restrictions on importing New Zealand lamb and Anchor butter.

I see Brexiteers nodding their head and smacking their lips in anticipation, but the truth is that upon joining the then Common Market the UK government has already negotiated generous tariff free EU export quotas for New Zealand lamb. Export quotas that New Zealand hasn’t fulfilled in years, because to them it’s more profitable to export to nearby China and other emerging markets. The oranges example also falls flat on closer inspection. It seems only during the height of the Spanish Orange harvest the EU puts some restrictions on Oranges from Africa. Most of the year Africa can export Oranges and clementines tariff free to its hearts content, so we are never without them!

Every time I ask a leaver for examples how the EU is denying poor African farmers a living by raising punitive tariffs, I find that the truth is that that country can already export to EU tariff free in huge quantities. Not just oranges, but same with processed coffee, which is another favourite myth peddled as a restrictive EU trade practice hurting developing countries.

Coming to the second bullet point for debunking, in another blog post I already pointed out that this fixation on where global ‘growth’ takes place is a very stupid myopian trade strategy. Leave zealots haven’t got a clue what it is that the UK economy actually produces for export and what these emerging economies are actually buying.

The truth is that the huge majority of the population in these markets haven’t got a penny to rub together to buy the things we in the UK produce en mass and  successfully export by the truck load on a daily basis to our EU neighbours. A key indicator for spotting this trade myopia is a country’s GDP Per Capita. This indicator of purchasing power is what you get when you divide a country’s fast growing GDP by their even faster growing population.

Who can afford the innovative jams and the luxury cars the UK manufactures so well (apart from Chinese millionaires, Russian oligarchs and a few tin pot dictators)?

The EU per capita GDP is $35,000 instead of the Commonwealth’s $3,500.  And that $3,500 average becomes a lot lower if we take the two richest Commonwealth nations Canada and Australia away from this figure. Go figure where the biggest market is for Jaguars, Bentleys, Rolls Royce?  But also for more down to earth UK Nissans, Tiptree Marmalade, Cadbury chocolate bars, McVitie’s Hobnobs. Not in some village in rural Africa!

The reality is that what developing countries are ‘bulk buying’ is building materials, plant and machinery. They need this to house their exploding population and to build and equip the factories and sweat shops where these people will slave away to produce our cheap T-shirts, jeans and flip-flops. No wonder that Germany, who produces a lot of manufacturing equipment, is doing so well selling into these fast growing economies, while we export but a value fraction to those same countries. The fact that a UK company like JCB does well in those developing economies therefor should not surprise us. It rather confirms the point I’m making rather than disputes it! Let me tell you kippers, brexit ain’t gonna fix our trade deficit with the World in a hurry!

Coming back to Foxy fox and his doomed Brexit trade speech, he has this morning been savaged on BBCRadio4 by one of his own top-aides who used to run his International Trade department.

“Sir Martin Donnelly, who was the permanent secretary at Liam Fox’s Department of International Trade until last year, told Radio 4’s Today programme that attempting to replace the UK’s current trading relationship with the EU with new free trade deals elsewhere was like “giving up a three-course meal now for the promise of a packet of crisps in the future.”

Leave EU three course meal for the promise of a packet of crisps in the future

Politicians like Liam Fox do not enable trade

I’d like to leave you with another point to ponder. I made this point before in this blog post.

“Politicians do not enable trade to start flowing simply by signing a trade deal with a lot of pomp and ceremony. If there were deals to be signed in 1973, Heath did this to protect trade with Europe that already existed. Certainly more so than wishful thinking EU trade would take off overnight! When Queen Victoria opened the Grand Union Canal between London and Liverpool, it was safe to assume trade would start flowing on it the very next day. If today a UK Prime Minister signs a piece of paper purporting to be some new Free Trade Agreement (FTA) with another country, you can bet your sweet bottom dollar he is already way behind the times. Nothing much will happen the next day. He’s just mopping up glory after the prior hard graft of private sector entrepreneurs who negotiated the deals in the first place. The ones who saw a new market opportunity abroad and jumped on it.”

The case of our beloved (or disgraced) International Trade Secretary flying around the world to line up all these incredible trade deals for budding UK entrepreneurs to take advantage off, is a case in point of the delusion he likes to foist upon us all. Take the case of this press photo I stumbled across of Dr. Liam witnessing the signing of a new Maggie & Rose business venture during his trade visit to China in January this year. The actual deal was already signed in November and I know for a fact Maggie Bolger has been working flat out on this deal long before Fox stuck his oar in. But Flying her in at her Majesty’s expense for another photo opportunity (to put DR. Liam Fox in the picture), is that good use of our tax-payers’ money?


About lasancmt

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

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