Trade after BREXIT? Mmm Balance of Payments please!

Jon Stanley April 14, 2016 0
Trade after BREXIT? Mmm Balance of Payments please!

1997 was a great year. There was harmony throughout Europe, the economy was strong, this crazy MmmBOP song was on the radio (no Youtube back then) and Eurosceptics from London and the South East were telling us that the WTO would protect us all from nasty tariffs and we’d boom outside the EU.

A lot of that has changed but sadly not enough. The Uruguay round of GATT has now been in force for 20 years. The effects on manual workers in the OECD is pretty clear. So why are the most vocal conservative Eurosceptics still in love the WTO as their guardian against the EU?

They aren’t worried about tariffs affecting the UK’s manufacturing industry. They wouldn’t. They are worried about tariffs from the UK affecting what we buy from abroad and that’s because they hail from the South East of England.

We are told two untruths with remarkable frequency; that we don’t make anything anymore and that we are a massive net importer of goods from abroad. Neither of these are true really, unless you think London and the South East are Britain.

This region hardly makes anything anymore, yet it’s still a pretty big carmarker and produces lots of manufactured foods and finery. Its trade deficit is incredible though; imports outstrip exports by almost 2.5 to 1 in the South East, truly remarkable. London isn’t much better to be fair, and because these two regions are so powerful they distort the whole trade argument.

The North East of England is a net exporter and most of the rest of the UK is pretty well balanced. High debt levels and salaries from the City and the State fuel consumption in the LSE region and this region would pay the bulk of tariffs on imported goods, ostensibily to protect our own industries in Wales, Yorkshire and Scotland.

Balance of Payments has long been neglected as an economic metric in place of GDP which tells us we are richer as country because our housing is more expensive when it’s obvious to many that this is fact means we are poorer as people.

Wealth accumulation is seen as economic growth and a debt-fuelled boom in consumption is labeled as trade. Both of these concepts deserve ridicule but these are what so many Brexiters base their arguments.

The real economy, outside of booming London real estate, is in high quality manufacturing and services. Any trade policy worth its salt must focus on what we sell, not what we buy. Barriers to imports into the UK are controlled by the UK post Brexit so what barriers to trade threaten UK exports?

What is stopping us selling stuff and what do we do about it? There’s a list of things and most of them are pretty simple. We tax too much on production and not enough on economic potential. We impose laws to suit the south east that ruin the north, such as fuel duty an carbon taxes. We give tax relief to rich people on renting out very nice houses. We tax steel mills when they make improvements to their capital stock. We must comply with various overseas regulations, not all of which are bad. We have an energy policy that considers an academic switching on his kettle a power surge and wonder why we don’t have an aluminium industry.

Finally we give £7.5 billion a year in cash to pensioners with a net worth greater than a million pounds, because it’s expected. This is not small beer. £7.5billion ripped out of Chelsea and Orpington could revolutionise manufacturing by buying British trains, buses, prefab housing and nuclear power stations. £75 billion instead goes into the arse pocket of relatives of the rich and famous every decade. This is austerity. This is why our non-LSE economy is reeling.

We need to take a whole of UK approach to our currency and our balance of payments. Consumption in the LSE is very high and massive payouts to the rich and wealthy, concentrated in this region, funded by UK level taxation really cannot be justified by anyone, unless they are just middleclass snobby rentseekers who couldn’t give a damn. Is that really I party Hannan and I are members of? Answers, please. on the back of that leaflet you got today.

Tariffs for the rest of the UK are not such a big issue. The taxes and red tape we level on manufacturing are higher than the 16% tariff the EU levies on Chinese steel, we’d be better making our own stuff cheaper to sell rather than adding tariffs to everyone else’s.

There are many reasons why our manufacturing sector is weaker than it need be and much of this lies at home. Germany and France have much stronger engineering sectors than ours and both are in the EU and the Eurozone. No more excuses please.

Balance of payments does matter to the Brexit debate. That some parts of our country are out of whack with the rest does not mean we have to follow them. We borrow way too much. That borrowing is most funded by inflated housing equity. It may well be a sign that redistribution of wealth within the UK is increasingly in a southerly direction and the size of the state is to blame. It’s easier blaming Brussels for everything but it isn’t honest. We have plenty of morons of our own wrecking the joint.

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