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Brexit + Commonwealth & NAFTA Trade = Economic Powerhouse

by John Brian Shannon

Timid minds are wondering whether the UK should continue along the Brexit path that British voters approved in 2016.

But just imagine what kind of world it would be today if Winston Churchill had given in to timidity during WWII, or if Albert Einstein was too small a man for the job, or if Franklin Delano Roosevelt was too afraid of failing and thereby didn’t pursue his plan to ‘put a chicken in every pot’ in Depression-era America? We’d be living in a far different world now, wouldn’t we?

There is a thing about leaders and it’s this, if they don’t actually Lead they are useless baggage. And that’s all that needs to be said about that.

Prime Minister Theresa May was given a mandate by voters to take the UK out of the European Union, and whether it rains too hard on Sunday, or if Manchester United can’t seem to win a game, or even if the Russians are scaring us, Brexit must remain at the forefront of Britain’s To-Do List and everything else must be considered a distraction until the job is done.


How the UK can fulfill its proper role in the world

With a strong UK government the chips would fall into place rather quickly and completely bereft of excuses, the following would occur:

  1. Brexit (even a WTO or so-called ‘Hard Brexit’) or a sweet-for-both-sides Brexit would occur by the designated date of March 29, 2019.
  2. The UK would apply to join the (by then) recently renegotiated NAFTA accord — or perhaps all the parties would agree they’d be better served by partial UK membership in NAFTA. Hey, you never know until you try, but magic occurs when people of goodwill meet-up to plan mutual success!
  3. The UK would enter into trade negotiations with every Commonwealth member nation to see what the UK can offer those nations (expertise, financial services, high-tech) and what those nations can offer the UK (agricultural products, oil and gas, metals and minerals, perhaps even a source of low-cost seasonal labour for UK farms) and so much more! Again, you never know until you try!
  4. And remember, Theresa… the goal isn’t to say; “Well, at least we tried.” The goal is to secure a standardized free trade agreement, or a standardized low-tariff trade agreement with the Commonwealth nations and every non-Commonwealth nation — especially the NAFTA ones.

What’s to Gain?

By accomplishing those steps in the proper order, the UK economy would grow 5% over existing projections — or the government is doing it all wrong.

India alone will have 1.3 billion consumers by 2019, and the United States, the highest-consuming nation in the world, will have 331 million consumers by 2019.

Post-Brexit does not mean five or ten years after Brexit — it means one year after Brexit.

These goals are eminently achievable and there can be no excuses for not hitting these metrics by 2020.

Orchards full of apples will be missed for the sake of handfuls of grapes if the UK government is too ‘small’ for the job, or if it suffers from low ambition, or if because of timidity, it can’t grab the brass ring of destiny.

The time is now for the UK to take control of its future and to stop being distracted from the oft-stated goal of Building a Better Britain.

More power to Theresa May’s government for as many days, months or years they strive to meet the will of voters and continue to work to fulfill the UK’s rather obvious destiny!

Is NAFTA a ‘Bad Deal’ for America?

by John Brian Shannon

There seems to be only one man in all of America who thinks the NAFTA agreement between the three North American economies is a bad deal for the United States. Which would be a very ordinary thing except that man happens to be the president of the United States of America. At least for now.

The one great thing about the American electoral system is that U.S. presidents can serve only two concurrent terms in office, so no matter how bad or popular a U.S. president is, he or she can stay in office for a maximum of 8 years. Although nothing prevents them from running for their old job once another president has served, other than the fact that American voters have never returned a previous two-term president to office.

That law is a tiny part of what makes the United States exceptional in the world. The most meritorious or most popular presidential candidates rise to the top — but unlike other countries where leaders can serve several terms in office — the American system is refreshed by new leadership every 4 or 8 years. And that’s what makes America great.

‘New blood’, a ‘new vision’, a ‘breath of fresh air’, or however you wish to describe it, occurs at regular intervals. No wonder America is exceptional! It’s too bad they don’t do the same thing with members of the Senate and Congress — and yes, even the office of Mayor in every U.S. city. If they did, the United States would be twice as exceptional on account of all that new blood and fresh enthusiasm.

Alas, because only one office in the land is refreshed regularly, America is great from the top down only — not up and down and in the middle — at least where governance is concerned.


Where Donald Trump is Wrong

President Trump arrived on the scene 13 months ago and with no particular government experience behind him, declared that many things are wrong with America and he’s just the man to fix it. And he may be that man, but only time will tell.

Yet, we’re seeing a man who sees symptoms and sincerely wants to treat the symptoms instead of wanting to solve the underlying condition that created the symptoms in the first place.

Certainly no one can fault Donald Trump for being enthusiastic about America, about America’s history in the world, and no one can deny he’s a breath of fresh air to the Oval Office.

But we need to have a conversation about the present symptoms in order to ascertain what the underlying condition may be in present-day America, and for that, we must travel back in time to see how America lost its way.


When Henry Ford was right: Creating the American middle class by filling a transportation need

Henry thought that ‘everyman’ should own an automobile, instead of only railway barons with their obscene personal wealth able to afford motorized transportation. During a downturn in Ford company fortunes, Henry decided to increase the pay of his workers to $5.00 per day, and was thereafter able to cherry-pick whatever workers he wanted from Louis Chevrolet, Buick, General Motors, Cord, Packard, and others.

Once Henry had created a whole new economic classification which later came to be called ‘the American middle class’ so many people bought Ford vehicles that 16.5 million Model T’s were produced in less than 20 years of production.


The moral of this story? Paying higher wages created ‘the middle class’ — a growing cohort of workers earning good wages and able to afford a car, which catapulted Ford’s fortunes into the stratosphere.


The Post-war Boom

Early in the 20th-century, the U.S. became the most powerful manufacturing nation in the world and surpassed even longtime patent leader Germany as the country that received the most annual patent applications.

This occurred only because of strong patent law in the United States. Any inventor with a worthwhile invention brought their idea to America for one reason — because out of all the countries in the world only the U.S. offered the maximum level of legal protection for their idea, design, system, or machine.

Even German scientists brought their ideas to America to have them registered with the U.S. Patent Office!

For countries other than America, the existence of a strong U.S. Patent Office created a ‘brain drain’ in their own countries, meaning that all their scientists and inventors headed to America instead of registering their contraptions in their home country.

Having received their patent protection in the United States, it was a natural step to have their inventions manufactured in America. Although not its primary mandate, the U.S. Patent Office was often excellent at matching inventors with such suppliers or manufacturers as they required.

It was a clear case of the American government passing the right legislation at the right time to attract the best and brightest in the world.


The moral of this story? Not a tariff in sight!


Because the postwar economy was booming and expectations were high, the Baby Boom generation went on a buying spree that is unparalleled in history

All of which worked to make all those patent-holders and their manufacturing companies obscenely rich. And good for them! When you work hard, you should see a positive return for your effort.

The favourable consequence of powerful U.S. patent protection combined with a huge and growing manufacturing base, created a booming economy and concomitant high consumer confidence which provided an unexpected result — usually about 9 months later.

Yes, during the boom times when one family member earned enough to support an entire family, the birthrate in America skyrocketed, creating even more demand as Americans began to have more children per fertile woman.


The moral of this story? When one breadwinner could support a spouse and up to 4 children, afford a new car every 3 years, a couple could own their own home via a 10-year mortgage and enjoy a refreshing vacation every year, the American economy was operating at full output!


American Foreign Policy in the Postwar Era

In the 41 years leading up to 1974, the Saudi government had been selling their oil to America for only the price of production (sans profit) as their contribution to the Cold War effort.

Interestingly, they were allowed to reinvest their cost of production payments in crude oil deliveries and refined oil products — so although they made zero profit on the crude oil as it came out of the ground — they were able to amass considerable wealth by speculating on oil stocks.

But that ended when it was perceived by the Saudis in 1973 that America was favouring Israel, a country that had never delivered billions of barrels of free oil to America.

When America’s oil supplier felt slighted, they decided that they wanted to get paid for their oil after all. ‘Oh, and, we’re pulling back on our Cold War commitment too.’

Which is why the Soviets thought they could successfully invade Afghanistan and tone the world’s opium supply down to almost zero.

When the Saudis suddenly wanted to be paid for their oil and they simultaneously lowered their Cold War commitment to America, the U.S. economy slowed.

With 20/20 hindsight, the ensuing economic disaster was only a symptom of a bungled foreign policy that caused a dramatic increase in new car registrations of foreign cars (with their better gas mileage) moving from 4% of all U.S. new car registrations in 1970 to 65% of new car registrations by 2017. Not only that, but up to 75% of the parts used in today’s American cars are made in Asia.

Therefore, the problem clearly isn’t NAFTA which came into effect in January 1994.

Here’s how that looks expressed as a math equation:
America -10 trillion dollars Japan +10 trillion dollars
(If you’re not into math, the symbol means ‘therefore’)

It could be argued that the United States took a highly principled stand on account of the people of Israel, but it was America’s decision alone, and it cost America 10 trillion dollars and poisoned relations with their oil-producing and Cold War ally, Saudi Arabia.


The moral of this story? The problem of offshoring American manufacturing jobs began in 1973 due to an American foreign policy decision which took place long before NAFTA had been created. Blaming Japan for American capital flight since 1974, or blaming NAFTA (which wouldn’t be created for 20-years) is disingenuous.


Social problems in 1960’s and 1970’s America: Racism, weak civil rights for women, and the Vietnam War worked to reverse America’s earlier gains

A lost generation occurred in the 1960’s where The People lost faith in their elected representatives, but they didn’t lose faith in the institutions of government.

President Carter worked to restore the faith the American people felt toward the executive branch of government by working on some very noble causes and meeting with some success. President Reagan moved things forward by strengthening the U.S. economy, infusing Americans with newfound confidence by offering loan guarantees to struggling American automobile manufacturers and dramatically increasing military spending.


The moral of this story? President Carter and President Reagan didn’t fix America by blaming other countries — they did it by empowering American citizens with tax changes and supporting American industry with loan guarantees to at-risk corporations, with huge defense spending increases, and plenty of positive exhortations about what made America great in the first place.


Every American, Canadian, or Mexican captain of industry wanted NAFTA back in 1994

If NAFTA was so grievous to be borne, why did almost every CEO in North America want NAFTA?

GDP growth Since 1993 - NAFTA enacted January 1, 1994

GDP growth in NAFTA countries since 1993 – NAFTA enacted January 1, 1994. OECD.

But some American Congressmen and Senators were nervous on account of the many U.S. job losses since 1974 and were concerned that even NAFTA could go wrong. And let’s face it, some members created a negative stir so that new U.S. president Bill Clinton would feel compelled to direct more federal funding to their districts in case NAFTA failed.

In reality, the only U.S. and Canadian companies that lived in fear of NAFTA were ones that didn’t keep up with the times. In the booming 1980’s and 1990’s economy, some companies decided they wouldn’t modernize and consequently continued to spend millions per month on electricity costs (for example) instead of reinvesting their (then record) profits in newer, energy-efficient factories or foundries.

For other corporations in the mergers era, it seemed a time to slow capital spending in order to maintain high profit margins and pay record-high dividends to their shareholders. But when the bull market finally came to its end, many businesses were suddenly cash poor and couldn’t afford a new, energy-efficient factory or foundry. Which was brilliant tactical thinking, but abysmal strategic thinking.

So… the question is; If corporations employ poor strategic thinking, should taxpayers be forced to bail them out?


Why should U.S. taxpayers bail out industries that choose high shareholder returns over sound financial management?

In the 1970’s and 1980’s, some American automakers needed the federal government to subsidize them with billions of taxpayer dollars to save them from implosion. That’s only one example out of thousands of U.S. companies that accepted or have lobbied for federal subsidies. Canada is just as bad as the United States on this point. Governments in both countries spend more on corporate welfare than they do on citizen welfare — times two!

Now in 2018, President Trump wants American taxpayers to pay even more for their cars (and anything else made of steel or aluminum) via a 25% tariff on steel imports and a 10% tariff on aluminum.

For one example, Trans Canada Pipeline will be forced to pay the tariff on the steel pipe for the proposed Keystone XL pipeline. Although steel is a small part of the overall cost of building a pipeline, the cost of the multi-billion dollar project will now rise by 5% or more. Just for comparison, 5% on 10 dollars is 20 cents — but 5% on 5.4 billion dollars adds 270 million dollars to the overall project cost.


The moral of this story? While Donald Trump’s motives are obviously ultra-pure, tariffs are simply a de facto form of taxation that U.S. citizens will pay because a few American corporations preferred high profits/high shareholder returns over competitiveness


Is there ever a good case for tariffs?

In a word, yes. Everything that’s imported into the U.S. (or any country) should face a globally standardized 5% tariff because every government needs money to improve port facilities, to streamline customs, and to maintain the transportation corridors that are essential to trade flows.

Even countries with free trade agreements like the NAFTA countries should institute a standardized 5% tariff on every good that crosses their border — and be required by legislation to use that money to improve transportation corridors and border security.

Consumers would find that presently high tariff items would drop in price, and zero tariff items would rise by 5%, but the trade-off would be astonishingly better roads, bridges, tunnels, rail links, airports and seaports, complete with better security. Every citizen would like to spend fewer hours per week stuck on congested highways, in airports, and enjoy faster and more secure delivery of goods.

Suddenly we wouldn’t be talking about ‘trade wars’ we’d be talking about improved trade, improved infrastructure, and a complete standardization and levelization of tariffs between every country.

And instead of heated rhetoric from politicians, we’d become more efficient throughout our countries and less efficient corporations wouldn’t continue getting rewarded for not re-investing in their businesses.

Why it’s Time to Lower Immigration from non-Commonwealth Nations

by John Brian Shannon

Well, ‘Brexit is Brexit’ as they say, and it looks like it’s going to take a while to finalize details between the UK and the EU. But no need to panic. Brexit will happen and the two sides will be legally divorced within 12-months.

It might turn out to be a good agreement, it might turn out to be a bad agreement, or negotiations might go so awry that the UK leaves without any agreement; In which case WTO rules would automatically apply until superceded by bilateral agreement.

Which wouldn’t be too bad actually, because with no time constraints to worry about post-Brexit, and with no concern about loss of face for politicians (on account of missing the Brexit deadline) powerful industries on both sides of the English Channel could then push their respective governments to create a number of à la carte bilateral agreements pursuant to their sector. Secondary and tertiary industries would then follow the lead of the powerful primary industries.

Eventually, every CEO would be heard by their respective government, and elected representatives on both sides would be compelled by their own political self-interest to present their case to the other side — a very pure way of streamlining trade between Europe’s (by then) newly divorced economies.

Whichever way it goes, in approximately 12-months Britain will be alone in the world save for its Commonwealth partners which it hasn’t cherished enough over the past 86-years, but it’s not to late to change that.

In fact, now is the time for the UK to take huge strides forward with its Commonwealth partners and begin to deliberately favour them over non-Commonwealth nations, especially in regards to trade and immigration.

“The latest net migration statistics show that in the year ending December 2016, net migration to the UK was 248,000.” — Migration Watch UK

The majority of immigrants to the UK since 1999 came from eastern Europe and the benefit for British employers is that these workers accept low-paying jobs and (although it is unethical and in some cases illegal; regardless, it still happens) that a farm or factory could replace all UK-born workers and on the next week hire immigrants who work for far lower wages. This can save companies significant amounts of money especially in the case where the UK-born employees have years of seniority and full benefit plans.

(Want to save 25% on your annual labour expenditure? Fire everyone below the level of General Manager and fill those positions with immigrant workers. Sure, it may be hairy for a while until the newcomers learn their jobs, but think of the money you’ll save! Even with having to pay significant severance pay to UK-born workers that have seniority, and maybe a bit of ‘hush money’ — over time the company will show better profits. If you think this hasn’t been done, you’re naive in the extreme. Whether it’s legal or not, whether it’s ethical or not, or whether it’s the ‘right thing’ for Britons to do to their own countrymen and countrywomen is a completely different matter)

In the end it hurts the UK economy, although it helps UK businesses to earn higher profit, but much of the money earned by the immigrants is sent to their families in eastern Europe or wherever they migrated from.

The name for these kinds of transactions is ‘foreign remittances’ and billions of pounds sterling leave the UK economy for foreign nations every year. That money is gone and is never returning.

The amount of wealth leaving the UK every year via foreign remittances is astonishing and may total as much as £20 billion annually (or more) and as the accounting is imprecise it’s almost always found (years later) that the estimates were extremely low.

The UK is one of the Top-Ten foreign remitting countries in the world

UK - Remittance flows from Britain 2015 - Pew Research
Although foreign remittances are only estimates, at least $24,878,000,000 in remittances were sent from the UK to other countries in 2015. Image courtesy of Pew Research.

In some countries with heavy remittances from the UK, the amounts are so large that certain developing nations receive up to 6% of their GDP via foreign remittances, and the UK is one of the top-ten foreign remitting countries in the world.

Think how much money Britain’s governments (Labour and Conservative) have allowed to leave the UK via foreign remittances over the past quarter century…


Wouldn’t it be smarter to lower immigration from non-Commonwealth nations?

Why, yes it would. It would be much smarter.

Commonwealth nations have historic links with Britain and it looks better when former colonies (and new Commonwealth members that were never colonies of Britain) are faring well thanks to British largesse.

Following is a short list of UK benefits if immigration from non-Commonwealth nations is replaced by Commonwealth nation immigrants:

  • Tens of billions of pounds sterling will no longer leave Britain annually to be used by non-Commonwealth countries
  • Foreign remittances from the UK would go to Commonwealth nations instead of non-Commonwealth nations
  • Commonwealth nations might choose to source more military equipment, machinery, etc. from the UK
  • Commonwealth nations with boosted foreign remittances are more likely to stay within the Commonwealth
  • Immigrants to the UK from Commonwealth nations are more likely to understand the British worldview
  • Commonwealth immigrants are more likely to integrate well into British society
  • Commonwealth nation citizens will have a better opinion of the UK and of Britons
  • Commonwealth nation economies will see a corresponding economic benefit
  • UK GDP would increase, as would GDP in the other Commonwealth nations
  • Commonwealth nations would become politically strengthened
  • Commonwealth links between businesses are likely to increase
  • Links between Commonwealth citizens are certain to increase

And that’s just the short list.

Yes, billions of pounds sterling will still leave the UK but at least it will be going to Commonwealth member nations that have a similar worldview to Britons and are nations that are more likely to support British policies instead of opposing them.

If the money is going to leave anyway, the smart money would arrange to keep it ‘in the family’ with countries that don’t have adversarial relations with the UK.


Why should the UK be adding to the GDP of non-Commonwealth nations, when it could be adding to Commonwealth nations GDP?

The UK is a member of that august organization and membership itself implies that each member should favour other members.

Commonwealth governments, big business and consumers should always try to shop at Commonwealth businesses first, before trying anywhere else. If something can’t be found for sale in your own nation, then try to purchase it in another Commonwealth nation. If it can’t be found at all, then maybe it’s time for another Commonwealth member nation businesses to pool their resources and build/sell that product.

The UK should cut immigration from non-Commonwealth nations and simultaneously make it one order of magnitude easier for Commonwealth nation citizens to immigrate to Britain.

While the total immigration levels might stay the same, the definite bias should move quickly towards Commonwealth nations and NAFTA countries.

Commonwealth citizens should have UK visas fast-tracked after Brexit, MPs argue (The Telegraph)

Up to 200,000 immigration applications from Commonwealth and NAFTA nations should be accepted each year via a simple online form, a successful criminal records background check, and payment of an immigration fee of £100 per year.


One for all, and all for one!

Instead of strengthening people and nations that have no interest for or against the UK, Britain should quickly move to support Commonwealth members and NAFTA countries.

In this way, countries that are pulling for the Britain’s success will be rewarded by Britain — and vice versa.

The UK should respectfully request NAFTA associate membership the moment Britain formally leaves the EU. And within 5-years, all other Commonwealth nations should make the same request of NAFTA.

That’s how you Build a Better Britain, Build a Better Commonwealth and Build a Better NAFTA!