Is a Trade Deal a Panacea?

About this Anglo-American trade deal, which John Bolton says will be a reality. Actually, he says we can do a lot of mini ones, sector by sector, sounds good to me, as it does to a lot of Brits. A bit of a dark cloud over it comes from Stumbling and Mumbling via our friends at Notes on Liberty.  They say this:

Brute facts tell us this. As part of the EU, the UK and Germany have the same trading rules. Last year, however, Germany exported $134bn of goods to the US whereas the UK exported only $65.3bn. Per head of population, Germany’s exports to the US were therefore 60% higher than the UK’s. Much the same is true for other non-EU nations. Last year Germany exported $11.8bn to Australia whilst the UK exported just $5.9bn, a per capita difference of over 50%. German exports to Canada were $12bn whilst the UK’s were $7.3bn, a 28% per capita difference. German exports to Japan, at $24.1bn were 2.2 times as great per head as the UK’s. And German exports to China, at $109.9bn were three times as great per capita as the UK’s $27.7bn.

Now, these numbers refer only to goods where Germany has a comparative advantage over the UK. But they tell us something important. Whatever else is holding back UK exports, it is not trade rules. Germany exports far more than the UK under the same rules.

As for what it is that is holding back exports, there are countless candidates – the same ones that help explain the UK’s relative industrial weakness: poor management; a lack of vocational training; lack of finance or entrepreneurship; the diversion of talent from manufacturing to a bloated financial sector; the legacy of an overvalued exchange rate. And so on.

There is truth in that, but I don’t think it’s the whole truth. One, Germany is something of an outlier, it has designed itself to be dependent on exports, in a sense it is like China that way. And also like China, that makes it vulnerable to events elsewhere.

But there is something else that bothers me with the UK, yes, but even more with all of Europe. They appear to have no confidence in themselves, the EU is essentially an economic Maginot line, not designed to make the members more profitable but to prevent them from going broke.

I pay more attention to the UK, so I see it more there, but I think it pervasive. I see few innovations coming out of any of these countries. The British, like us, used to idolize their inventors and entrepreneurs, now they seem to envy them and attempt to destroy them. And above all, they appear to have become welfare babies, completely unwilling to take a risk, no matter how well-considered. This is especially prevalent in the political realm where absolutely no one will call out the politically correct nonsense that Westminster insists on. This is the primary reason for the Brexit debacle, and perhaps including a fair amount of corruption, as well. Even to the point where the British are losing essential freedoms, like speech, as the government tries to protect the useless mouths. And then there is the seditious BBC (and Channel 4), if you think CNN is fake news, you should try these!

Now mind, this is probably not a majority of Britons (or quite a few other nationalities in Europe) but it does appear to be a majority in the City of London/Westminster, in other words in the political/government/big business sphere. For Britain to truly prosper as it once did, it will somehow have to overcome the blob that is holding it back.

That is something a trade deal cannot do for the British. In truth, we’re fighting the same battle.

About NEO
Lineman, Electrician, Industrial Control technician, Staking Engineer, Inspector, Quality Assurance Manager, Chief Operations Officer

19 Responses to Is a Trade Deal a Panacea?

  1. Nicholas says:

    I address some of these points in “Brexit and Reform”, which I published this month. Some of it is addressed in my chapter on free trade and some of it in the chapters on education and finance. This has been a lot on my mind in recent years as I was drawn back into the capitalist fold. The conclusion I came to was that capitalism itself was not the problem, but the individuals – we need more Christians and we need Christians to be smart, and not brainwashed by the socialists.

    A point about the graphic at the top of the post: our magistrates are generally lay people. As you probably know, but your American readers may not, magistrates deal with criminal trials, not civil ones. Generally civil trials come before professional judges (usually people who have served as barristers). Commercial matters generally fall on the civil side of the law (though there are criminal offences that are relevant to business life).

    I would say that, as you yourself observe, one of our many problems in the UK is that our economy is heavily weighted towards real estate and finance and service sectors in general (accountants, lawyers, compliance work, consulting, etc). If another big financial crisis hits before we have had time to reform, we will be in for big trouble.

    Liked by 1 person

  2. Scoop says:

    The UK is also lagging behind the Netherlands, France, Belgium, Italy and Spain in exports as of 2017 anyway.

    When the EU was just starting to take off for real as a market (early to mid-80’s) I remember that the primary focus of the UK was to buy companies elsewhere in the world and run them and headquartering them in the UK for tax purposes. I worked for one of those. They had very good engineers but invariably they shipped them abroad to work where the products were being designed and built. Their strategy did seem to be mostly in the financial sector by my remembrance (though I am no expert).

    From their high point in ownership of companies around the world I have no idea how they fell as low as they have in today’s economy. In the day, it seemed like they owned or had partial ownership in more companies than anyone else on the planet.

    Liked by 2 people

    • Nicholas says:

      Yes, that seems to agree with what I have heard from other people. We develop great products and then build them elsewhere, or even sell the IP, which is crazy. In this day and age there is no excuse for that. In principle we could have a load of smart factories in the UK with minimal staff, but churning out great products, controlled to the demands of the market. By eliminating import tariffs on raw materials, we could make good quality products in this country. This would require large initial investments, but would pay off in the long-term.

      Liked by 2 people

      • Scoop says:

        I would certainly think so. Perhaps the skirmishes around the world did grave damage to their former holdings and as Japan went into financial crisis it seems the UK was overly tied to their productivity . . . which moved to Malaysia and to China and now coming back to the U.S.

        In those early days, the UK was everywhere and they didn’t care too much about the trade balance as they did on the profit they made whether it was from the US to the EU or Japan to the US etc. They made money no matter who was doing the majority of trading. They were sort of like a middle-man or a bank.

        Liked by 2 people

    • NEO says:

      I remember reading about that some. Their engineers have usually been top flight, but they’ve managed to screw their own people, of course, so have we. Good many of the Brits accuse the EU of asset stripping in recent years – to the benefit of eastern Europe. I don’t really doubt them.

      Liked by 2 people

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