Home » International Trade
Category Archives: International Trade
Post-Brexit: Building a License-Based UK Manufacturing Sector
One of the great things about Brexit will be the opportunity for the UK to sign trade deals with any country in the world and some of those trade deals may be quite innovative in nature. Novel trade opportunities shouldn’t be discounted simply because no one has ever done them, but such deals should be judged on their own merits.
In the age of the 3D-printing technology for example, there’s no reason why a company in America can’t electronically transmit code to a 3D-printer in the UK, allowing the UK company to manufacture the item there. Of course, this means paying a license fee to the American company, but think of the convenience for that UK manufacturer! Not to mention instant access to the item for the UK customer, and it means jobs at both ends of the equation. If you’re concerned about the CO2 emissions involved in shipping something from America to the UK, you’ll appreciate that transmitting a few hundred lines of computer code creates only a fractional amount of CO2.
Even better, is the case for cars and trucks to be built in the UK under license from American automakers.
For example, Ford Motor Company may choose to sell millions of automobile VIN numbers (basically, the serial number of each car or truck) and the complete instruction set for building and assembling each car or truck, to a UK company that specializes in building Ford vehicles. The UK company would pay a per-vehicle license fee to Ford Motor Company U.S.A. and agree to maintain the same high manufacturing standards of the American automaker and it would be required by Ford U.S.A. to adhere to the same warranty terms and conditions.
But still! Think of the CO2 savings, think of the jobs created in the UK, think about the UK building all Ford cars and trucks in the UK for the domestic market and exporting millions of those built-under-license vehicles to Commonwealth countries that have right-hand drive cars. That market, the right-hand drive car and truck market in the Commonwealth of Nations, would become the UK’s ‘beat’ and Ford would grant exclusive rights to the UK company to sell millions of Ford cars and trucks throughout the entire Commonwealth. (Note: Canada drives left-hand drive cars like the U.S., so Canadian cars would continue to be produced in the NAFTA countries)
So far, I’ve only talked about Ford vehicles. But what if it was all vehicles?
What if all American, Japanese, Korean and EU car manufacturers decided to make the same amount of profit per car as they do now, but only needed to sell a VIN number and the ‘vehicle blueprint’/computer code for each car to a UK manufacturer in order to do so? Ergo, all right-hand drive cars destined for UK and Commonwealth customers would be built in the UK and exported, where necessary, from Bristol.
What if it was more than cars and trucks?
What if Airbus, Boeing and Lockheed Martin sold per unit license fees to UK manufacturers, along with Bombardier and Embraer? What if Caterpillar heavy equipment and Toshiba and Hyundai Heavy Industries sold per unit license fees to UK companies? Yes, those companies would earn the same profit per unit as they do now — by selling only the license fee and VIN number and the technical aspects to the UK company — which, in turn, would manufacture those units within the UK and offer them for sale in the UK and to Commonwealth of Nations countries exclusively.
I’m still not done! What if everything sold in the UK was manufactured in the UK? How many jobs would that create?
What if you wanted a right-hand drive Mercedes CLA 250 4MATIC coupe? And what if you could simply order it from Mercedes online, and the Mercedes Benz approved manufacturer would fly you from anywhere in the UK to the factory in Bristol to pick up your new car, right off the assembly line. Some people might like to arrive a day early to watch their own car being built to their own option specifications. Then, you could take a nice leisurely drive home in your brand new car and not have to pay £2000 in shipping costs to get the car delivered from Germany, as is the case now.
What if you wanted an ACER computer, or a Lazy-Boy brand reclining chair? What if you wanted a Texas A&M hoodie for walks with your dog in cool weather? Get one for the dog too, is my advice, you’ll look great together! Or, what if you wanted the latest Italian cookware? Now, what if you could simply buy what you wanted, but it was manufactured in the UK under license from the original manufacturer, and in so doing, you received it sooner, with lower shipping costs, and far lower CO2 emissions — compared to the item being manufactured overseas and then shipped to the UK?
And what about companies in the UK making those items (and many more!) for Commonwealth of Nations consumers — which will number 2.5 billion by 2022?
Great for exports and great for those countries! Why? Well, assuming the UK government doesn’t blow this once-in-a-lifetime opportunity, there won’t be enough labourers in the UK to build all those cars, trucks, forklifts, computers, furniture, t-shirts, medical instruments, dishwashers, etc., etc., etc., and the UK will need to import Commonwealth workers to keep up with demand. Which itself, will help Commonwealth nations improve their per capita, disposable income — meaning, they’ll have more opportunity to afford such items.
Yes, via the UK hiring Commonwealth workers for UK assembly plants, people from Commonwealth nations will then have more money to spend on UK-manufactured goods, goods that might well be assembled by their very own children who work in the UK during their gap year between high school and university. Even mature workers from Commonwealth nations should be able to gain a UK work visa for one-year, to earn some British sterling, thereby advancing their own family finances, and find themselves better able to purchase a UK manufactured car or other item once they return home.
Just because it hasn’t been done before, doesn’t mean it can’t be done.
Just look at what JFK did… he promised America would put a man on the Moon by the end of the decade, and he succeeded in that. Nobody else was doing it, but that didn’t mean it couldn’t be done.
All the UK needs now is for a JFK-like leader (either in UK politics or a captain of industry) to do what nobody else is doing and make this thing fly. Many will say it can’t be done, but I don’t believe it for a second. Only mediocre people say things can’t be done.
So, stop talking about it, and get it done!
Because if you think you can dither and delay for 3.5 years like you did with Brexit, don’t bother trying, as you’ll soon find that every country in the world has beaten you to the punch and it will no longer be worth doing.
It Couldn’t Be Done
by Edgar Albert Guest
Somebody said that it couldn’t be done
But he with a chuckle replied
That “maybe it couldn’t,” but he would be one
Who wouldn’t say so till he’d tried.
So he buckled right in with the trace of a grin
On his face. If he worried he hid it.
He started to sing as he tackled the thing
That couldn’t be done, and he did it!
Somebody scoffed: “Oh, you’ll never do that;
At least no one ever has done it;”
But he took off his coat and he took off his hat
And the first thing we knew he’d begun it.
With a lift of his chin and a bit of a grin,
Without any doubting or quiddit,
He started to sing as he tackled the thing
That couldn’t be done, and he did it.
There are thousands to tell you it cannot be done,
There are thousands to prophesy failure,
There are thousands to point out to you one by one,
The dangers that wait to assail you.
But just buckle in with a bit of a grin,
Just take off your coat and get to it;
Just start in to sing as you tackle the thing
That “cannot be done,” and you’ll do it!
And this is the attitude sorely lacking in recent generations. In my generation (yes, I know what that sounds like) our generation arrived at the best plan and got right to it.
We left our egos at the door, we left our personal lives at home, and we got the job done on-time and on-budget — or we were judged by our peers to be ‘not worth spit’.
And while that modality may seem harsh to some, it’s the best way to build a rocketing middle class economy, it’s the best way to create a thriving family lifestyle, and it’s the best way to stay ahead of our competitors who aren’t in the business of working for our best interests.
‘All for one and one for all, must henceforth be Britain’s clarion call’ if post-Brexit Britain is to succeed!
How Canada and the UK Could Work Together post-Brexit
Until the official Brexit date of March 29, 2019 the UK remains in the European Union — which means that Britain remains a party to the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada.
And the CETA accord is a very fine agreement (as it should be, because it took 7-years to negotiate) but it may take another year or two to become fully implemented. At the moment CETA is only partially implemented, but eventually 98% of tariffs between Canada and the EU will be eliminated.
Once Brexit happens on March 29, 2019, the UK will cease to be a CETA signatory and something else (a ‘drop-in’ agreement) will need to replace it.
That is the topic of this blog post.
Enter the United States, Canada, and NAFTA.
Where’s Canada on the International Trade Map?
Canada is a surprisingly strong exporting country. With a population of only 36 million and a territory that measures 3.855 million square miles, it means the country is practically empty.
Across this huge landscape are fields of crops larger than the entire UK, but Canada’s few cities are large. In fact, the Greater Toronto Area (the GTA) is larger and has a greater population than the New York Metropolitan Area.
And it’s an exporting superstar; Making it the 11th highest exporting nation in the world.
“Canada is currently the fourth largest exporter of cars in the world and the ninth largest auto producer in the world, making 2.1 million cars a year. Trade with the U.S. is by far the most powerful driver for the automotive sector.” — Export Development Canada
What if There’s No New NAFTA Agreement?
If the NAFTA agreement falters due to insufficient efforts between U.S. and Canadian negotiators Canada will end up producing cars for itself — which means it won’t be exporting 1.8 million cars to the United States annually once NAFTA is terminated (or) once President Trump slaps a 25% tariff on Canadian cars exported to the United States.
Which means a lot of Canadian autoworkers are going to become unemployed the day after that announcement.
Which means that Canada (insert drum roll here) needs a ‘Plan B’.
President Trump Isn’t ‘Being Evil to Canada’ He’s Protecting American Interests Because That’s His Job!
You can’t blame him for that. For goodness sake he’s the President of the United States, not of Canada.
But Canada can’t sit idly by and wait for the world to end. The country must pick itself up and get on with business.
And the best way to do that is to respectfully approach the UK and inform them that it’s likely NAFTA will be terminated or changed in ways that result in Canada having an excess auto manufacturing capacity of up to 1.8 million units per year.
Such manufacturing capacity could be very useful to the UK government and to UK industry.
How Canada and the UK can Work Together for Mutual Benefit
The cost of living in the UK is much higher than it is in Canada, therefore wages in the UK are higher than in Canada.
And it’s the reason why only premium car lines are built in the UK where the high labour cost for exceptional hand-built cars are reflected in the final price and nobody minds paying extra. See; Aston Martin, Jaguar, Land Rover, etc.
Even Rolls Royce and Bentley were forced to move to continental Europe because they couldn’t afford the high labour costs of UK workers and the costly land/building/business costs of manufacturing cars in the United Kingdom.
Post-NAFTA, huge opportunities exist for Canada to export lower-priced GM, Ford, and Fiat Chrysler (FCA) cars and trucks to the UK — freeing-up huge amounts of disposable income for Britons.
Which means that saved money will be spent elsewhere in the UK — whether on home renovations, tuition, school supplies, vacations or investments — because it isn’t going anywhere (it isn’t going to magically vanish!) it will simply be spent on other items.
Any Canadian-built vehicles that are exported to the UK over what the UK market can sustain can be forwarded to Commonwealth of Nations countries by UK re-exporters.
India alone has a population of 1.32 billion and its economy is rising fast to become the third-largest consumer economy in the world. There’s no lack of demand for cars and trucks in the Commonwealth.
A Must Read: India Poised To Be Third Largest Consumer Economy (Forbes)
All of which works to help the UK economy.
Trump Wins, Trudeau Wins and May Wins!
President Trump wins because he will have prevented Canada from exporting 1.8 million vehicles to the United States annually, and American factories (meaning American workers) will need to fill that demand gap, Prime Minister Trudeau wins because he will have saved the Canadian jobs associated with the manufacturing of those 1.8 million cars and trucks, and Prime Minister May wins because she will have ushered in three new lines of lower-priced vehicles for UK consumers and those savings will translate into higher levels of disposable income for British consumers that can be spent elsewhere in the UK economy.
It’s so easy when you know how...
Is There Enough Demand ‘Out There’ to Float a post-Brexit UK Economy?
The China Internet Network Information Center says the country recorded a jump in internet users of 30 million during the first half of 2018 alone
Excerpt from Bloomberg News: “Chinese internet users have crossed the 800 million mark for the first time ever as of June 2018, according to the 42nd China Statistical Report on the Internet Development issued by China Internet Network Information Center. With 802 million internet users, China’s user-base is larger than the combined populations for Japan, Russia, Mexico and the U.S., according to International Monetary Fund data.”
As the graphic above shows, there are more internet users in China than there are citizens in all of the following countries combined: Japan, Russia, Mexico and the United States.
With internet use in China alone growing at an annual rate greater than the entire population of the United Kingdom you’d think that even the most inept exporters in the world would be lining up to trade with the huge moneypot called China.
Yet, because China isn’t selling itself as a huge marketplace for the world’s exporters and because Brexiteers haven’t ventured to research this part of the Brexit equation, it’s left to Bloomberg News (and me) to inform you of these astonishing developments.
Jacob Rees-Mogg’s European Research Group is a fine organization devoted to fleshing-out the political intricacies of Brexit, trade with the EU in the post-Brexit timeframe, and other Eurocentric matters. Yet, when we view charts like the one above it becomes startlingly clear that an Asian Research Group is needed to fully inform us about politics and trade with Asia in the post-Brexit era.
For example: How many Jaguar cars have been sold in the EU over the past 12 months?
And whatever that number is, it will be a static number for the simple reason that only so many EU citizens can afford a Jaguar motorcar and every one of them simply phones the local Jaguar dealership to order the Jag of their dreams and the car is delivered to their home a few days later.
Yet, I can only surmise that *isn’t* the case in China…
How many Jaguars *aren’t* being sold in China
How many Jaguar cars and SUV’s aren’t being sold in Asia because nobody bothered to research the full potential of the Asian market, or if they have, why aren’t Jaguar building three more factories in the UK to meet the demand of the rapidly growing Chinese middle class?
If internet users in China alone have risen from 22.5 million in year 2000 to 802 million partway through 2018, that demonstrates astonishing growth in their middle class. And if those people are ordering goods and services on the internet because their disposable income is rising fast, why isn’t there an entire department of HM government devoted to helping UK companies to get those online orders instead of just standing idly by and allowing other countries to snap up that business?
By 2030, there will be 1.6 billion internet users in China. How many Jaguar sales will have been lost by then?
It’s Not Only Cars…
Millions of pounds sterling are being lost every month since year 2000 because nobody in the UK government was put in charge of this.
Heads should roll over this shameful ‘oversight’ and not only in the government.
Heads also in the Bank of England, London School of Economics, London Stock Exchange and other organizations need to stop whatever they’re doing right this minute and phone whomever it is that can quickly address this stunning oversight.
Driving along the M4 on your way to the LSE right now? Have your driver pull the car over — you’ve got an important call to make — one that’s 18-years overdue.
With the right stewardship of the country, any good or service the UK produces should have seen the same kind of sales increases as the number of Chinese internet users since 2000. Disposable income is disposable income — and it’s better that UK business gets that disposable income rather than businesses from some other country.
From which, I can only assume that there *hasn’t* been proper stewardship of the UK economy since year 2000.
It goes without saying that nobody knew for certain how the internet was going to grow back in the early 2000’s, therefore, policymakers of that era are largely free of blame. But as each subsequent year passed, this should’ve been addressed with increasing urgency. Certainly, everyone on planet Earth knew by 2005 that the Internet of Things (IoT) was going to be a major part of our civilization in a few short years.
But the silence especially in the UK has been deafening.
“The global IoT market will grow from $157B in 2016 to $457B by 2020, attaining a Compound Annual Growth Rate (CAGR) of 28.5%.” — Forbes
Forget About Cars for a Moment – and Think About Everything Else the UK Produces
As noted earlier, it’s not all about the UK-built cars that aren’t being exported to Asia in huge numbers.
Everything that the UK produces or manufactures in a year could be sold to China and the lot of it wouldn’t register a tiny blip on the Chinese financial charts as demand in the country is massive and it continues to grow at a geometric rate.
If the UK tripled its entire annual GDP in goods, services and produce and then shipped all of it to China, it still wouldn’t produce a blip on the charts. And China continues to grow its economy at (artificially held to lower than) double-digit growth rates.
“GDP Annual Growth Rate in China averaged 9.61 percent from 1989 until 2018, reaching an all time high of 15.40 percent in the first quarter of 1993 and a record low of 3.80 percent in the fourth quarter of 1990.” — Trading Economics
Asia is the land of opportunity for all who have eyes to see and ears to hear. There isn’t a reason good enough for the UK government or British business to ignore it one more day.