An exchange of views in the FT discussion columns got me thinking about the sheer stupidity of the way the EU trade rules have been set up in the first place.
This is really an issue of finding a balance between the interests of producers and consumers - and between different EU member countries.
Producers should be able to look after themselves. They should be aware of what the competition is doing and stay ahead, or step sideways - which is what the UK heavy chemical industry did very successfully.
The policy can be changed as interests evolve. Tough discussions on anti-dumping have been going on for years, and will probably continue (as the United States could tell you). So when the UK leaves the EU, your business may indeed be free to import cheap Chinese steel into the UK. But wait and see whether the EU will allow the UK to export anything made of cheap Chinese steel to the EU.
So the EU will get in the way of consumers and producers wishing to purchase UK products because they contain Chinese steel? That's insane.
There is something called « rules of origin » which the UK will have to renegotiate from scratch, and there will be quid quo pros for each concession. If at the UK national level, the UK has chosen to favour financial services over anything to do with steel, do you really think that in the forthcoming negotiations with the EU the UK will trade access for financial services against your sector’s desire to import cheap Chinese steel? I would be very surprised if it did.
There are reasons why financial services have concentrated in London. I don't know what those reasons are, and it does not matter. The point is that firms located in London are able to offer the best services ie those that customers chose by preference. So what you are saying is that the EU will force firms in the EU to purchase inferior or more expensive services. That's insane. It may be that alternative locations will prove equally good as London in time, but at heavy costs in disruption and reorganisation. That's insane too.
These are the sorts of realities the UK is going to be faced with over the coming months. Unless you are importing purely for use and resale within the UK, your situation is not likely to much different - and certainly not much better - than it is now.
Economics theory assumes rational behaviour on the part of the actors - ie that all participants will attempt to to what is best for them. Selling goods at less than the cost of production is an example of such behaviour. The EU's economic and trade policies (VAT, CAP and the Single Market) are another. That is the principal reason why neither the UK nor anyone else should be in an organisation which insists on this irrational behaviour on the part of its members. Hopefully the country where I live will quickly follow the UK out of the lunatic asylum, then the EU will have to do without SKF ball bearings and high grade iron ore since it will have to impose tariffs to keep imports out.
It is of course very difficult to deal with people who insist on behaving in ways that are irrational and against their own interests, but it they are the losers and the only option is to exploit the situation in the best way possible. An open door to imports, and low taxes on goods, services, corporations and individuals are the way to go, post Brexit. This leaves the government with no alternative but to raise most of its revenue through the taxation of real estate, but that is in line with OECD recommendations and it gets rid of the avoidance problem at a stroke. EU politicians will huff and puff but there would be nothing to stop them from following suit.
This is really an issue of finding a balance between the interests of producers and consumers - and between different EU member countries.
Producers should be able to look after themselves. They should be aware of what the competition is doing and stay ahead, or step sideways - which is what the UK heavy chemical industry did very successfully.
The policy can be changed as interests evolve. Tough discussions on anti-dumping have been going on for years, and will probably continue (as the United States could tell you). So when the UK leaves the EU, your business may indeed be free to import cheap Chinese steel into the UK. But wait and see whether the EU will allow the UK to export anything made of cheap Chinese steel to the EU.
So the EU will get in the way of consumers and producers wishing to purchase UK products because they contain Chinese steel? That's insane.
There is something called « rules of origin » which the UK will have to renegotiate from scratch, and there will be quid quo pros for each concession. If at the UK national level, the UK has chosen to favour financial services over anything to do with steel, do you really think that in the forthcoming negotiations with the EU the UK will trade access for financial services against your sector’s desire to import cheap Chinese steel? I would be very surprised if it did.
There are reasons why financial services have concentrated in London. I don't know what those reasons are, and it does not matter. The point is that firms located in London are able to offer the best services ie those that customers chose by preference. So what you are saying is that the EU will force firms in the EU to purchase inferior or more expensive services. That's insane. It may be that alternative locations will prove equally good as London in time, but at heavy costs in disruption and reorganisation. That's insane too.
These are the sorts of realities the UK is going to be faced with over the coming months. Unless you are importing purely for use and resale within the UK, your situation is not likely to much different - and certainly not much better - than it is now.
Economics theory assumes rational behaviour on the part of the actors - ie that all participants will attempt to to what is best for them. Selling goods at less than the cost of production is an example of such behaviour. The EU's economic and trade policies (VAT, CAP and the Single Market) are another. That is the principal reason why neither the UK nor anyone else should be in an organisation which insists on this irrational behaviour on the part of its members. Hopefully the country where I live will quickly follow the UK out of the lunatic asylum, then the EU will have to do without SKF ball bearings and high grade iron ore since it will have to impose tariffs to keep imports out.
It is of course very difficult to deal with people who insist on behaving in ways that are irrational and against their own interests, but it they are the losers and the only option is to exploit the situation in the best way possible. An open door to imports, and low taxes on goods, services, corporations and individuals are the way to go, post Brexit. This leaves the government with no alternative but to raise most of its revenue through the taxation of real estate, but that is in line with OECD recommendations and it gets rid of the avoidance problem at a stroke. EU politicians will huff and puff but there would be nothing to stop them from following suit.
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