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For all the talk about negotiating a reasonable Brexit deal with the EU, not much negotiating has happened almost 2 1/2 years on from the EU referendum in which a majority of UK voters informed the government to make preparations to leave the European Union.
Any Brexit negotiations have taken one of two forms; Theresa May endlessly negotiating with her own party over the terms, or the Europeans saying a polite but firm ‘No’ to any proposals put forward by the UK Prime Minister.
And when we look at the results of Theresa’s well-intentioned attempts to obtain a Brexit deal, we see the results have been disappointing.
Although as we near the official Brexit date of March 29, 2019 it’s likely to change for the better. Assuming responsible leaders on both sides of the English Channel, each month from September 2018 onward should see increasingly frantic negotiations culminating in a reasonable Brexit deal for both sides.
Even if some sectors of the economy are left off the table until later in the year, responsible negotiators will guarantee that EU cars can continue to be sold in Britain and that UK services can continue to be sold on the continent without punishing tariffs or other trade barriers on either side of the Channel.
If May, Merkel, Macron, etc., can’t meet that low definition of success, the lot of them should be thrown from power at the next election and never be returned to political office as that failure would represent the worst-yet political failure of the 21st century.
Only in ‘low ambition Europe’ could such a thing occur. Nowhere else in the world could politicians set such a low bar… and then fail to meet even that (low) challenge.
How to get the EU to the Negotiating Table
Again calling on the wisdom of Winston Churchill who said, “However beautiful the strategy, you should occasionally look at the results,” we see the results of Theresa May’s negotiating strategy — which has consisted of Theresa negotiating with her party, the government opposition benches, and various lobby groups (some of dubious credentials) and highly placed individuals who work directly or indirectly for HM government.
While it can appear that the Prime Minister has done everything ‘right’ it can sometimes occur that you can do everything ‘right’ and still fail.
It’s time to try a new strategy to get the Europeans to the negotiating table — but that doesn’t mean dropping the truly excellent speeches, the traipsing around Europe to discuss Brexit with EU leaders, nor does it mean ending the quiet but competent diplomacy that’s been a hallmark of Theresa May’s premiership. What it means is adding a new strategy to the existing strategy, henceforth a ‘two-track’ plan designed to cause EU leaders to run (not walk) to the table to begin earnest ‘Win-Win’ discussions on the matter of Brexit.
And it’s so easy to cause that to happen. It means employing the one factor that Theresa May hasn’t employed thus far — political courage. (OK, the Chequers ultimatum was pretty cool. I think we saw a smattering of Theresa May’s potential there)
Some might counter that ‘courage’ has no place in delicate discussions, that diplomacy is always a ‘risk little/gain little’ proposition. But it’s only that if you make it that. Full stop.
The Americans didn’t win the Cold War using the ‘risk little/gain little’ diplomatic modality, the Americans ended the Cold War soon after President Reagan employed political courage in America’s negotiations with the Soviet Union by announcing the vastly expensive Strategic Defense Initiative (SDI) that would’ve been prohibitively costly for the Soviets to match and counter. So costly in fact, it would have bankrupted the former Soviet Union to meet the perceived threat of SDI.
In reality, SDI was nothing more than a policy wonk’s vision. Thankfully, SDI never saw the light of day.
The one thing that we must note is that President Reagan’s team didn’t end the polite diplomatic rapport with the Soviets during that tense period — on the contrary, they ramped-up their diplomatic efforts as never before and employed political courage (courtesy of the SDI gambit) to achieve the results they wanted all along.
In short, it worked.
“If you keep on doing what you’ve been doing, you’re going to keep on getting what you’ve been getting.” — Jackie B. Cooper
What Theresa May needs to do now is to employ a gambit, a play to make EU leaders actually see value in a reasonable Brexit deal, a device designed from its inception to guarantee a ‘Win-Win’ result for both sides. If it isn’t seen as a ‘Win-Win’ from both sides, there’s no point in employing it for it will surely fail.
Therefore, whatever frustration May must be feeling with EU leaders, now is the time to drop it and move forward with a two-track plan; One; get the EU to the table, Two; continue with the excellent diplomacy she’s employed until now.
Make ‘a Brexit Deal’ a Better Option for the EU than ‘a Hard Brexit’
Using the same sort of gambit that President Reagan employed so well to help end the Cold War, Theresa May should likewise (and very diplomatically) create a gambit that helps the EU see the value of signing a Brexit accord in advance of March 29, 2019.
- At present, the UK sources 30.35% of its total food demand from the EU (ONS statistics) but other jurisdictions want to purchase EU produce and meats too, so let them! That 30.35% stat has fallen in recent years anyway.
- Begin replacing EU food imports to the UK by growing those foods in the UK or changing to non-EU suppliers at a fractional rate. (North America’s agriculture belt is so massive it could easily supply 100% of the UK’s food let alone the 30.35% that the EU presently supplies)
- Starting September 2018, Theresa May’s government could direct the UK to buy 1/5th less food from the EU per month. That sounds like a lot of effort, but during WWII (over a period of a few months) a much larger scale of change was forced on Great Britain, and both the United States and The Commonwealth of Nations stepped in to supply Britain with everything it formerly purchased from the continent (not only food, but everything!) and it worked.
Let’s assume that after 6-months of zero progress in Brexit negotiations the UK would no longer be buying any produce from the EU, therefore why would anyone spend one moment worrying about EU *food tariffs* or *non-tariff trade barriers* when food is no longer being imported from the EU?
Yes, British farmers would lose the ability to export their produce to the EU. But as EU exports to the UK drop, UK farmers will simply sell more produce to UK customers. Nothing will change for British farmers except the destination of their goods.
But at any time within the 6-month period the EU could agree a Brexit deal and stop the decrease in EU food exports to the UK.
Some crops may need to be sourced elsewhere. Again, the United States agricultural belt is so massive it could supply the UK with 100% of its food needs without any problem. Canada too, has enough arable land to supply 100% of UK food needs — although it doesn’t have the same labour capacity as the United States to produce large quantities of food and harvest it — Canada would need to import UK labourers each harvest season if Canada were supplying 100% of UK food consumption.
However, it’s only 30.35% of the UK’s total food demand that might need replacing, not 100% of Britain’s total food demand — making it a small problem to substitute EU produce with North American produce.
And UK farmers and ranchers are likely to pick up more than half of the 30.35% within one season, leaving less than 15% of the UK’s total food demand for North America to supply to the UK. Such a tiny amount wouldn’t even register as a blip on the financial charts of North American food exporters.
A commitment by HM government to political courage may result in a rather large upside for both the UK and the EU — a true ‘Win-Win’ Brexit deal.
- This week we talked about EU food exports to the UK and how employing some political courage could help drive the EU to the Brexit negotiating table, without ending Theresa May’s excellent diplomatic efforts (which have so far returned zero, but it’s still theoretically possible that diplomacy could yield a positive result) and thereby gain a ‘Win-Win’ Brexit deal.
- Lowering EU food imports to the UK by 1/5th per month might be the incentive needed to get the EU to the table. We’ll know within 6-months.
- Next week, we’ll talk about lowering EU auto imports by 1/5th per month in an attempt to get European Union negotiators to the table to work out a reasonable Brexit deal.
Only 237 days to go until the official Brexit date of March 29, 2019, and only microscopic progress has been made on crafting a ‘Win-Win’ divorce deal.
Such is the state of affairs that exists (1) within the UK, (2) within the EU, and (3) between the two countries. It is to weep.
But whether the United Kingdom or the European Union are ready for Brexit or not, the Brexit baby will be born — therefore, it’s imperative that both sides stop posturing and get on with creating a deal that works for citizens and industry on both sides of the English Channel.
What Else Is There Besides Brexit?
Although it may be difficult for Europeans to see, there are bigger issues in the world than Brexit which is why a deal needs to get done properly and quickly as there are other, more pressing, and more important matters for European politicians to attend to.
If we liken the geopolitical world to an auto race (a Formula One race) while all the other teams are busy prepping for the race and getting to their startup positions, the UK and the EU have found a muddy part of the infield and are playing ‘bumper cars’ with each other like a couple of overly-exuberant teenagers — getting mud all over their sponsor’s brand names and on their respective drivers’ goggles, they’re damaging the tires and composite body of their race cars, and they’re burning up precious fuel reserved for racing against the ‘big boy teams’ of America, China, Japan, India, Brazil and others.
Either the UK and the EU governments already have a deal and just haven’t announced it to the public, or they don’t realize that other more important geopolitical matters will soon bypass the ‘tempest in a teapot’ happening in Europe.
New and important things sometimes start small. Don’t believe it?
The first streetlights were installed in Cleveland, Ohio in 1879 when electric lights (Brush arc lamps) were placed along major roadways. Thomas Edison (who spent most of his day napping in his workshop only to become extremely productive afterward) was a person who toiled away for years inventing and designing a reliable light bulb, manufacturing one bulb at a time. Yet, the lighting industry in its entirety is a multi-trillion dollar business in our day.
George Eastman, right under everyone’s noses created a company in 1888 (Kodak) that eventually made so much money they weren’t always able to count it. New machines had to be built (computers) to keep track of the astronomical number of transactions happening all over the world, every minute of every day. Over the decades Kodak contributed more than a trillion dollars to the global economy and made the company and its shareholders unbelievably wealthy. Kodak’s patents and knowledge are still with us today.
The Wright Brothers ultralight aircraft first flew on December 17, 1903 near Kitty Hawk, North Carolina. At that time, the two men were thought of as odd, even eccentric people with fantastical ideas wasting precious days that could’ve been better spent. Yet, look at what their great invention has created — a multi-trillion dollar civilian airline industry and military aircraft industry.
From tiny beginnings, the first Model T automobile rolled off the assembly line on October 1, 1908 and see the changes the auto industry has brought to the world. Henry Ford is widely credited with the creation of the American middle class, something that propelled America far ahead of its competitors. Today, the world’s auto industry is also a multi-trillion dollar business, yet everyone thought old Henry was a bit of a dreamer.
King George VI united the modern Commonwealth of Nations under the banner, “Leaders agree that Commonwealth members are free and equal members of the Commonwealth of Nations, freely co-operating in the pursuit of peace, liberty and progress.” The Commonwealth now have 53 members with a total population of over 2.5 billion citizens and ranks near the United States, China, or Japan in GDP and PPP.
Steve Jobs created a company that in relatively few years became a trillion-dollar company, designing a computer operating system that was ahead of his competitors, and designed an astonishing number of world-class products, services and apps that allowed users capabilities they’d never imagined.
All of these great advances slipped completely under the radar at the time of their creation. Governments, industry, and citizens were completely oblivious as to what would follow.
The first flight at Kitty Hawk was seen as a sort of carnival ride item that made you wish you’d live long enough to see it come to your hometown, while Henry Ford famously said, “If I had asked people what they wanted, they would have said faster horses.” Yes, Henry was that far ahead of his contemporaries.
The point is, all these advances and others haven’t stopped at any time during the 20th century — technological advances are happening right now, right under our noses, just as in the time of Henry Ford — and the next Steve Jobs or Henry Ford aren’t going to stop and wait a few years for the UK and the EU to get their Brexit act together.
For all we know, the next trillion-dollar company or multi-trillion dollar industry might be deciding (this week!) where to set-up their ground-breaking operation and such entrepreneurs are likely to avoid regions of the world where economic instability appears or where regulations aren’t finalized. Dragging-out Brexit = European instability.
It’s not against the UK or the EU… it’s against both.
Both will suffer if a stabilized economy and a finalized regulatory environment are seen to be ‘aspirational’ — which is a word entrepreneurs sometimes encounter in developing nations.
UK and EU leaders should rethink their negotiating ‘strategy’ and factor-in the potential for losing the next start-up, disruptive technology, or multi-trillion dollar industry to a different region of the world, whenever they next meet to discuss Brexit.
Imagine if Europe would’ve ‘had it’s act together’ in previous decades… perhaps Thomas Edison, George Eastman, Orville and Wilbur Wright, Henry Ford or Steve Jobs would’ve started their businesses in Europe instead of America.
Put that in your pipe and smoke it, negotiators.
With financing and instant communications available almost everywhere, the global playing field has levelled since the 19th century, so ‘ease of doing business’ and ‘a transparent regulatory environment’ can make all the difference when today’s entrepreneurs meet to choose a location for the next trillion-dollar business.
We’ll soon know if any of this registers with British and European leaders…
Certain pro-EU commentators paint a picture of either a catastrophic Brexit crash-out (Hard Brexit) or a ‘non-Brexit’ where the UK would retain few of the rights gained by a full Brexit but would still be chained to the responsibilities of EU membership (Soft Brexit) whether via the so-called ‘Norway’ model or the ‘Norway-plus’ model, or via any other model such as the ‘Canada’ model.
Those same commentators excitedly cite potential UK manufacturing job losses in the post-Brexit timeframe even though the UK is primarily a service based economy (80.2% in 2014 and rising) and they forget to factor-in the astonishing changes occurring every day in Britain’s manufacturing sector.
UK Manufacturing = Less Than 10% of GDP
Manufacturing in the UK accounts for less than 10% of GDP (2016) and provides jobs for 3.2 million workers (2016) but a recent PwC report says that by 2030 half of all UK manufacturing jobs could be automated. That’s less than 12-years from now. And it could happen much faster and on a much larger scale than that.
Repeat; Up to half of all UK manufacturing jobs will be lost within 12-years. It’s uncertain whether British workers are aware of these looming changes.
What’s Great for UK Businesses Won’t be Great for Foreign Workers
In 2018, of the 3.1 million UK manufacturing workers (a stat that falls with each passing year as automation increases) we find that over half of manufacturing workers in the UK are citizens of other countries — primarily from eastern Europe, but also western Europe.
So, expect UK-based eastern European workers to be replaced by automation.
Increasing automation and Artificial Intelligence (AI) will cause UK companies to choose between UK-born workers and eastern European workers, and it’s likely that hundreds of thousands (perhaps millions) of eastern Europeans will be returning home with plenty of UK coin in their pocket. (And why not, they earned it)
I hope you didn’t expect the UK to lay-off its own British-born workers in order to protect the jobs of eastern European-born workers as automation proceeds, did you? Would EU companies show that level of courtesy to UK workers in the European Union, were the situation reversed?
Profits for UK manufacturing companies are projected to rise significantly as automation and AI become one with the system, while UK-born manufacturing workers should find themselves at 100% employment.
What’s not to like?
UK Manufacturing Job Losses Due to Automation – Not Brexit
If you’re one of the EU elites who fear that hundreds of thousands of eastern European workers in Britain will lose their UK manufacturing jobs due to Brexit you couldn’t be more wrong.
Let’s be perfectly clear; Half of all UK manufacturing jobs will be lost to automation by 2030 — and it won’t be on account of Brexit!
The narrative that says the UK economy will be severely damaged on account of manufacturing job losses due to a Hard Brexit is a complete and utter fantasy.
Every day from now until 2030, automation and AI will replace eastern European workers, Brexit or no Brexit. Meanwhile, British-born manufacturing workers will find themselves at full employment.
It’s all good!