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Getting Brexit Done Will Allow the UK to Get onto ‘the Good Stuff’

by John Brian Shannon

‘What Could be Better than Brexit?’ You Ask

Once Brexit is completed, the UK will be perfectly positioned to sign free trade deals with every country in the world. Indeed, some countries are eagerly anticipating signing free trade agreements with the United Kingdom post-Brexit.

Here in Canada, free trade with Britain is viewed as nothing more than the natural and obvious progression in our centuries-old relationship, and Australia, New Zealand, Singapore and India see free trade with the UK as a true Win-Win situation where all sides benefit from membership in that free trading relationship.

But in the UK for some inexplicable reason, free trade with Commonwealth nations is seen as a long-shot, something Britons would like to have but feel is almost impossible, and some seem to think the UK is ‘unworthy’ of such treatment by other Commonwealth countries and their 2.3 billion citizens.

‘The British really need to get out more, and see the world for what it is instead of seeing it through the prism of an imperial guilt trip’ seems to be the prevailing wisdom in the former colonies.

Get out there, UK! And, welcome to the 21st-century. We need to trade with you.


The Post-Brexit Domestic Agenda

Once freedom is established across the land, the UK government can rightly turn its attention to how citizens are faring. Spending on the NHS, education, housing, the manufacturing sector, agriculture and transportation networks can be improved from the present (underfunded) model.

How? Easy!

Presently, UK taxpayers dutifully send their money off to the government, which then sends a substantial portion of it on to Brussels. And every month, UK taxpayers send £1 billion more than they receive back from the EU. Which, as you’ve guessed, means that UK taxpayers send £12 billion more annually to the EU than they receive in return.

With an extra £12 billion a year to spend on the NHS post-Brexit — that’s £230 million a week — the NHS would eventually recover from being cash-starved since 2010 or thereabout.

But if the government elected to spend that £12 billion per year on education — British students would be in for a world-class education where no student gets left behind and every one of them would receive a tuition-free PhD-level education or tuition-free trade-certificate education — just as many European and some South American countries already offer. What a great leg-up for the country! Every British student turns into a highly-educated intellectual or tradesperson with the relevant documentation to prove their dedication to their profession or trade.

Or, if the government decided to solve the UK housing crisis by building tens-of-thousands of low-income homes for Britons. Which (housing crisis) is in the process of being solved anyway, as thousands of EU citizens return to the continent prior to the final Brexit date — thereby freeing-up housing in the UK market — whether rental or purchased.


And similar applies to other sectors of the UK economy. Once Brexit finally happens, the UK will have an extra £12 billion to spend annually. How the UK government chooses to spend it, is down to the priorities of the post-election government.

One thing is for certain, leaving the EU will allow an extra £12 billion to be spent every year in the UK economy. Which means that ONE major problem can be solved per year (NHS, education, housing, manufacturing, agriculture, transportation networks, high taxation) but not ALL major problems at once!


The Piecemeal Approach is the Wrong Approach!

To my mind, dropping a few billion here and there throughout the economy in an attempt to please everyone… definitely ISN’T the way to proceed.

With an extra £12 billion, the next government should decide which problem to solve in year-1 (£12 billion) then, in year-2, another major problem can be nailed-down to a satisfying conclusion (the second £12 billion spend), and in the 3rd-year something else can be solved once and for all time with the third £12 billion spend.

Typically, democratic governments seek to please the largest number of voters by dispersing such economic windfalls (a £12 billion annual windfall in this case) relatively evenly throughout the economy. But in the UK, each major problem in the country could be permanently solved via a single-year £12 billion spend in each problem area.

And that should galvanize British minds into prioritizing the next 5-year spending round.


How Would YOU Spend It?

Maybe you’re an overworked healthcare worker. We know how you’d spend the money. And we don’t blame you. Thank you again! for all the great work you do saving lives and dramatically improving the lives of the sick and elderly with your fulsome commitment. We salute you!

Or, maybe you’re a social worker who sees lives being wasted because there aren’t enough entry-level jobs, or safe housing, or supports in place to help the young, the elderly, the infirm, or the marginalized, to help them progress out of their poverty-based existence. In such cases, even relatively small amounts of money can make a huge difference in their lives — lifting them out of poverty and into work in a matter of weeks.

Every country needs more taxpayers and lifting people from UC to employment results in a double benefit for the economy — instead of the government paying such people to basically stay alive until they’re needed in the workforce, those people will then begin to pay into the tax revenue stream. Entire towns and boroughs could be revolutionized by the addition of a relatively inexpensive 1-year spending programme to the mix.


Brexit Can Work for Farmers!

Maybe you’re a farmer/rancher worrying about your EU subsidies going away. (And they will) Of course it would be great if the UK government decided to pay you the same subsidies that you enjoyed when the UK was a member of the EU.

But even better solutions await.

Why grow a crop that doesn’t earn any money? Why continue to stay in the dairy business competing with the heavily-subsidized EU, U.S., and Canadian dairy industries? Maybe it’s time to switch gears and raise animals or grow crops that don’t need subsidies.

Or, maybe it’s time for you to rent your land to the utility companies for the installation of wind turbines for £4000. per year/per turbine? In that way, you’re earning income instead of waiting for government subsidies to suddenly fall, as we’ve seen over the decades.

In the case of wind turbine installations, most of your land remains available to you, it’s just that you lose the footprint of the turbine tower and the utility company needs a gravel access laneway to each turbine which translates to an average loss of 1-acre of land per turbine for the farmer.

Some land is too rocky to grow crops/graze cattle anyway, so that isn’t much of a loss in some cases. Certainly, receiving £4000. per year/per acre from a utility company in land lease fees beats all the work that goes into growing crops, only to gain £800. to £1200. per acre annually! And, as for grazing cattle or sheep on marginal land, an acre of that land might only be worth £60. to £100. annually to your farm. Or less.

Yes, you can tell that I love farmers and ranchers because I’ve devoted all this space to them. But it illustrates how Britons and the government need to think differently in the post-Brexit world.

Instead of competing against highly-subsidized countries (and bigger countries will always win as they have more taxpayers to pay those high subsidies) it’s time to change gears and switch towards a more sustainable and more profitable economic model.

Grow those high-demand/no-subsidy crops! Raise those animals that don’t require subsidies! Rent your less-productive farmland to utility companies for more profitable wind turbine or solar panel installations — where your profits aren’t decided in a closed-door backroom in the EU, America, or Canada.


Britons: Compete on Your Strengths, Not on Your Weaknesses!

In short, dear Britons, compete on your strengths and cease competing on your weaknesses against much larger and more highly-subsidized blocs. The degree to which you can succeed in that is the degree to which you, your family, and the UK itself, will prosper.

And in case I didn’t make it clear enough, above;

In a post-Brexit UK economy, innovation ruled by merit-based thinking is the best way for individual Britons, British families, and the UK to succeed.

Free Trade or Protectionism for a Strong UK Economy?

by John Brian Shannon | January 17, 2017

Prime Minister Theresa May says that Britain must be a free trading nation to boost the UK economy and to better serve the aspirations of millions of Britons.

And Britain’s leader is correct, as history has proven that free trading nations outperform non-free-trading nations. From the seafaring Phoenicians of classical antiquity to the former British colony that became a superpower called the United States of America; Free trade and hard work have built our shared civilization, and any country that withdrew from free trade or liberalized trade agreements, consequently declined.

READ: Between Free Trade and Protectionism: Strategic Trade Policy and a Theory of Corporate Trade Demands by Helen V. Milner and David B. Yoffie | Published by MIT Press

That’s not to say that other economic practices don’t have merit, because they do. However, a group of non-free-trade nations will always be surpassed by a comparable group of free trade nations — due to the symbiotic nature of free trading relationships which produce small but measurable amounts of synergy that accumulate over time.

It’s the easier access to raw materials, the lower labour costs, and the ability to access larger export markets that make free trade work so well, but the ‘icing on the cake’ is the synergy produced by the symbiotic relationships which aggregate and thereby increase corporate profits and investor dividends that are often reinvested in the growing corporation. Over time, all this synergistic activity results in far greater outcomes than otherwise would’ve been the case.

Britain economy.

The British Empire in all it’s glory was built on free trade with many partners, but in 2017 it’s even more important for Britain to be a free trading nation.


A perceived problem occurs when vast disparities are present, such as when one nation is blessed with abundant raw resources allowing it to basically dig money out of the ground which eventually accumulates into billions or even trillions of dollars, while another country in the same trading bloc may have few natural resources.

As long as all partners within the trading bloc have equal access to those raw resources, such problems are likely to be nothing more than minor jealousies.

Countries like the United States, Canada, Norway, Saudi Arabia and the United Arab Emirates have vast petroleum reserves, and importantly, good economic stewardship — which allowed them both rapid growth for the economy and a high standard of living for their citizens. It’s telling to note they are free trading nations — while other countries blessed with large petroleum reserves but restrictive international trading arrangements, haven’t prospered. Venezuela (the country with the world’s largest proved oil reserves) along with Libya and Nigeria, have poorer development due to their historically somewhat less than free trade practices. For economists, those nations serve as a warning to politicians considering the adoption of less liberal trade policies or outright protectionism.

Such disparities between nations, unless handled carefully, can result in explosive economic and political consequences.

READ: What does Free Trade mean? | Investopedia


Globalization: Lower-priced goods, but fewer jobs

It’s easy for some to forget that free trade and globalization are two different things. Free trade relates to the removal of tariffs, or at least the standardization of low tariff rates between member nations of the same trading bloc, while globalization refers to a highly interconnected political and economic world of which trade of any kind, whether free or not, is merely part of a large picture.

Those who feel left behind by globalization (and there are millions) tend to blame free trade, when in fact it was free trade that created a booming global economy from 1982 through 2007 (and a somewhat less booming economy) from 2012 through 2016.

Led by global elites, the rush to create high growth and high GDP meant that quality of life fell steeply for millions of Westerners for the first time since WWII due to the offshoring of Western jobs to countries with lower labour costs and non-existent environmental regulations.

Britain must ensure that globalization and free trade work for everyone.

Britain must ensure that globalization and free trade work for every Commonwealth citizen.

READ: You Can’t Feed a Family With G.D.P. | New York Times


It’s Not All Bad

Westerners have enjoyed unprecedented low-cost, quality goods manufactured in other countries.

Two examples of this are; 1) the Apple iPhone, which, if manufactured in the United States would have cost $2800. each, instead of the typical $650.-$950. price range. The iPhone wouldn’t have ever seen production if it hadn’t been manufactured in Asia. Over one billion have been sold since the first iPhone hit the market. And; 2) almost every computer chip in the world was manufactured in Taiwan, an industrious country with a very diligent workforce, but few natural resources. Computer chips have cost an average of $40. since Taiwan’s entry into the semi-conductor business, but if manufactured in the United States those chips would’ve cost hundreds of dollars each.

While low-cost goods are welcome in the West, people in the bottom quintiles now wish for a return to high paying employment and would gladly forego low-priced goods.

Which is exactly what the election of Donald Trump is all about. ‘Cheap goods are great, but we’d rather have jobs!’ — seems to be the main message there.

It’s difficult to blame those who harbour such resentments when 3/5ths of the population are doing less well, while only 2/5ths feel they have progressed in recent years.

Yet to blame the very free trade agreements that brought wealth to Western nations displays a lack of understanding of how globalization works vs. how free trade agreements work.

Free trade creates additional economic activity (with many virtuous cycles, which are always a good thing) while unrestricted globalization (under existing personal tax laws) rewards the top-two quintiles at the expense of the bottom-three quintiles. And it’s this fundamental misunderstanding which have people in an anti-free-trade mood — when instead, they should be protesting against global elites, unfettered globalization, and crass-and-uncaring politicians.

Had the global elites applied as much effort to ensuring that globalization worked for every economic quintile instead of the top-two quintiles exclusively, movements such as Occupy Wall Street along with the general disenchantment voiced by the public against politicians and economists wouldn’t have materialized. Ever.

When it works for everyone, there’s no complaining.

READ: In Defense of Globalization | Project Syndicate


Free Trade with a Standardized and Reciprocal Tariff Regime – Instead of Unfettered Globalization

PM Theresa May and Chancellor Philip Hammond should work to obtain a mutually-beneficial free trade agreement between all Commonwealth countries as part of a Tier 1 trade accord.

Such an agreement should ensure there are no tariffs, levies, nor other trade impediments — save for a highly standardized and reciprocal 5% tariff on all goods — except books (in any form) or those medicines that actually save lives, because principles do matter. A more educated and healthier Commonwealth are desirable outcomes. No VAT taxes or tariffs should be levied on books or life-saving medicines, ever. Anywhere on the planet, IMHO.

Why the 5% Tariff?

What the 5% tariff would do for all signatory countries is to pay for upgraded port facilities and enhanced security at ports, railways, and for cargo ships at sea.

Why the 10% Tariff?

A Tier 2 trade accord should be negotiated with nations that aren’t Commonwealth members with a standardized and reciprocal tariff of 10% — except for books and life-saving medicines which should be tariff-free and VAT-free in every case. As long as the trade partners agree to standardized and reciprocal tariffs, such tariffs won’t break WTO tariff rules. And such revenue could enhance port security, of course, but could also be used to pay for additional infrastructure programmes to put millions of workers back on the job.

Why the 25% Tariff?

Finally, a Tier 3 trading scheme could be created for those nations that won’t agree to a standardized list of tariffable items at a standardized and reciprocal rate, and won’t agree to not tariff books and life-saving medicines, and that tariff could be 25% on all imported items until the day arrives that country begins to abide by the Tier 2 trading rules.

In all three scenarios it puts the UK government firmly in the drivers’ seat in regards to imported goods and guides UK trading partners towards Tier 2, or even Tier 1 status.

The goal is to arrive at a situation whereby every nation willingly decides to join The Commonwealth in order to gain free trading status with the Commonwealth and agrees to a nominal, standardized, and reciprocal 5% tariff regime on every good except books and life-saving medicines.

It is still free trade, but with a nominal, built-in tariff designed to enhance port facilities and streamline security in all partner nations.


What to do with the revenue generated by such tariffs?

The main point is to upgrade existing port facilities, to increase security at Britain’s ports, and at reciprocal trade partner ports to ensure the security of ships at sea and the thousands of kilometres of rail lines that carry freight.

Any remaining tariff revenue could be used to soften the economic blows to those in the bottom-two quintiles who have suffered quite enough over the past 16 years.

Whether used to boost social welfare rates (good) or to boost national infrastructure spending (better) or both (best) it will be money well spent, and it would be revenue that arrived in the government hand via imported goods.

Which seems fitting, doesn’t it?

READ: Interview with Theresa May, Prime Minister of the UK, from the World Economic Forum 2017 | CNBC

Brexit: The Trigger for a New Atlantic Alliance

by John Brian Shannon | October 4, 2016

Britain, more than any other Atlantic Ocean nation, would benefit from an Atlantic Alliance free trade zone precisely because it is an island nation, and as such it depends on free trade and movement of goods in order to thrive to it’s full potential.

Since the Roman era Britain has enjoyed a historic presence in the Atlantic Ocean for good reason — island nations need regional trade to survive and international trade to thrive.

For Britain, there is no way forward without enhanced international trade. In principle, islands should always be the strongest proponents of international trade and international law for the very reason that they profoundly need the world to function that way.

Japan set a wonderful example for all island nations in the postwar era, but never moreso since the Arab Oil Embargo of 1973 when U.S. consumers suddenly decided to switch their gas-guzzler cars for lower priced and more fuel efficient Japanese cars.

Not only were millions of cars imported from Japan over the following years, but because the necessary technology to build cars was transferable to home and personal electronics, Japan received a double boost to it’s economy every day since the Arab Oil Embargo.

From one of the worst performing economies in the world in 1946 to it’s peak as the #2 global economy in the 1990’s — the Japanese economic miracle rode its high quality manufacturing base that catered to the needs of billions of consumers. By any standard it remains an impressive accomplishment.

And now it’s Britain’s turn to shine as the world’s next booming economy.

Although much has changed since the oil supply shocks of 1973, the world economy continues to grow, with developing nation consumers seeing comparatively massive increases in their disposable income, presenting a wonderful opportunity for a Britain suddenly freed from an overly bureaucratic political union.

Therefore, let us count the ways that an Atlantic Ocean trading alliance (a free trade zone, that I propose be restricted to nations that front the Atlantic Ocean) could benefit Britain and the other Atlantic nations.

Atlantic Ocean map

Britain, more than any other Atlantic Ocean nation, would benefit from an Atlantic Alliance free trade zone precisely because it is an island. Atlantic Ocean map. Image courtesy of Geography.name

In the North Atlantic, we have the United States, Canada, Greenland, Iceland, Ireland, the United Kingdom, Norway, France, Spain and Portugal.

In Africa; Morocco, Western Sahara, Mauritania, Senegal, Gambia, Guinea-Bissau, Sierra Leone, Liberia, Côte d’Ivoire, Ghana, Togo, Benin, Nigeria, Cameroon, Equatorial Guinea, São Tomé and Príncipe, Gabon, Central African Republic, Democratic Republic of the Congo, Angola, Namibia, and South Africa, front the Atlantic Ocean.

And in South America, we have the South Atlantic nations of Argentina, Uruguay, and Brazil fronting directly onto the Atlantic Ocean — while French Guiana, Suriname, Guyana, Venezuela, Columbia, Panama, Honduras, Nicaragua, Belize, and Mexico and many island nations reside within the Caribbean Sea — which is of course, easily navigable to the open Atlantic Ocean.

All of these nations should receive a warm invitation to join such a trading block.

It is perhaps the best matchup of nations since the Bretton Woods Agreement of 1944. In the list of Atlantic and Caribbean nations, exist the most developed nations to the least developed, from the most overbuilt tourist locations to vastly underbuilt tourism markets, to the astonishing per capita petroleum and mineral resource base. Such opportunity abounds for those who pursue economic interdependence between Atlantic nations! From the most highly skilled labour to the cheapest labour, and among the highest cost real estate to the cheapest agricultural land in the world, everything that a developed or still developing nation needs can be easily found within this trading area.

The economic opportunities are uncountable, and they are sitting there untapped. At the moment, it’s a criminal waste of opportunity that must rank as a negative for every Atlantic nation whether developed or developing.

The obvious move here is for British Prime Minister Theresa May to voice strong support for an Atlantic free trade zone, contacting representatives of each country to find out what Britain offers, that can mesh with the needs of each Atlantic Alliance trading partner. And vice-versa.

Once some activity generates and some new trade begins to take shape, it would be wise to meet regularly to discuss standardization of regulations, whether shipping or other modes of transportation, financial, tourism, and other ways to work together. Even the baby-steps of working together to protect maritime shipping from at-sea piracy, or to form mutual aid groups designed to streamline hurricane or other natural disaster relief would demonstrate ways that Atlantic nations can work together for mutual benefit.

If the NAFTA model is used as the trading template, some of it’s terms could be adjusted to better suit the preferences of all Atlantic Alliance members, or it could be seen as the eventual goal for all members to reach at some point. At the very least it could be used as a reference point, a place to begin discussions.

By leading such an effort Britain would be well-placed — not to own the Alliance — but to offer it’s expertise and experience, so that the end result is a Win-Win for every nation involved. That is what makes for strong partnerships, and strong partnerships always make economic sense.