Trading delusions

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They had something on the BBC the other night about the possible impact of brexit on trade, in particular on food prices and the UK food industry. Here’s a summary article from the BBC news website.

As I’ve mentioned before, one of the problems with the BBC, is that in the interest of “balance” and “fairness” they’ll have some expert on telling us what’s likely to happen, then they’ll turn to some swivel eyed right wing loon, to give the opposing view.

Two terms that keep cropping up with the brexiters are “new and exciting trade deals” and “push into new emerging markets”. Well first of all, why do you need a new trade deal with the other countries? Via the EU the UK already HAS a perfectly good set of trade deals. Brexit means the UK will have to spend several decades renegotiating those deals. The idea that a country of 60 million is going to get a better deal than a trading block of 400 million is clearly absurd.

Granted the TTIP trade deal between the EU and US looks like its dead, but to be honest that was kind of tainted to begin with. Its demise is probably a good thing. The danger now is that the UK will find itself forced to sign up to some version of that which blatantly favours the US, which could see the sell off of the NHS.

As for “new and emerging markets”, where exactly are these places? Have we found a new continent recently? I know we’ve been finding exoplanets recently, but its a bit early to be thinking of trade deals. Granted, as most brexiters seem to live in the 19th century to them “the orient” or “the south seas” might be a new and mysterious place, but we’ve been trading with these countries for years.

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Is this this what the brexiters mean by a new emerging market?

Given that the bulk of this TV programme seemed to be about food and beef, I can tell you, having been to Argentina and China in the last 12 months, they have a perfectly adequate supply of food and its very cheap. Indeed, that’s the problem, they don’t know the meaning of the word “small portions” in either country. There is no way the UK could undercut local prices. And given how much of the UK is owned by foreign multinationals, its not as if it will ever be a straight “us” versus “them”. It will be one UK based but Chinese owned firm, against an American owned firm in China.

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The new iconic London taxi….owned by a Chinese firm…who bought it off a Malaysian company

Indeed the danger is the other way around, that these countries with there lower production costs will flood the UK market with cheap produce and bankrupt UK industry. One of the things about trade deals is that if everyone wanted a perfectly free trade deal, then all you’d have to do is get both sides to sign a single piece of paper with “no tariffs” written on it. But nobody wants that because it would decimate their industry as the other side dumps goods at ultra-low costs (in some cases made at below the cost of production thanks to state subsidies). This is why the devil in any trade deal is in the detail. And inevitably the UK is going to struggle to get anything more favourable than the EU has managed to get.

Even competing against the US presents problems. Their farmers use all sorts of practices banned in the UK, growth hormones in cattle, feedlots, chlorinated chicken. Its enough to make you want to go veggie….until you realise how much of America’s cereal crop is of full of GMO’s. And US farmers receive very high levels of farm subsidies. Indeed, even US industry is heavily subsidised in some sectors (usually in the form of massive sweat heart deals to supply equipment to the military, FEMA or USACE), such as construction equipment, aircraft and vehicles, the very industries the UK is anxious to defend.

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Far from being the land of small government and free enterprise, the US is one of the most interventionist and protectionist regimes in the world

The idea of UK firms like JCB competing against titans like Caterpillar (America) or LiuGong (China), both with the backing of world superpower behind them is just laughable. And UK beef farmers with a few hundred acres competing against an Argentinian farm half the size of Wales, don’t think that’s going to work…particularly after anyone abroad google’s “British beef” and the first thing that comes up is “mad cow disease”.

The only way that UK firms could compete is by copying the same tactics. E.g. After these pro-brexit farmers go to the wall, the local laird (who helped bankroll the leave campaign) buys up their farms, rips up the hedges and country side and turns the entire county into one massive feedlot. Now if we are lucky he might hire a couple of destitute farmers on as farm hands. But then again, he might just sneak in some migrant workers instead. It depends who is suitably desperate for work.

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2 thoughts on “Trading delusions

  1. Pingback: The trouble with trade: Walmart | daryanblog

  2. Pingback: La la brexit land | daryanblog

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