By Barry Jotter
Philip Hammond’s statement that the global trade deals promised by Theresa May after Brexit will make little difference to the British economy is the smoking gun of pragmatism.
‘Much of our trade with the world is service trade, where free trade agreements won’t make any particular difference,’ said the Chancellor.
What this statement means is that of the 14.6% of the UK economy that is based on production, very little is of it is exported outside the EU and the US. The economics of exporting more goods to the third world are farcically impractical. It seems inconceivable that because we, the UK, just struck a free trade deal with their country that they are all going to rush out and buy Phillips radios, Kenwood food processors or Henry vacuum cleaner.
Most of the Conservative cabinet keep insisting that a free trade deal with the US would be great for us, neglecting the uncomfortable and obvious facts that US manufacturing is much stronger, diverse and cheaper than ours. In fact the US export much more to the UK in the form of computer technologies than we do to the US. That is if that is what the US wants. The deal that was rejected by the EU, TTIP, was more of an investment protection deal. If adopted, a TTIP style deal would give foreign investors protection from our government changing policy that might affect their profits. This may include green policy or employment policy among others. TTIP proposed erosion of protections from so-called ‘gender-bending’ chemicals, meat washed in lactic acid, and global warming accelerating tar sands oil among other worrying developments. A TTIP style deal would reduce our sovereignty to that of a servant of corporate power.
A large percentage of UK production is arms and supporting defence industries such as uniforms and boots. So maybe their hope is that we could export more arms to Africa or Indonesia? Unfortunately I don’t think that foreign governments charge us import duty when their government buys arms from us. So there is unlikely to be a rush by foreign governments to buy yet more arms.
Another strong sector in UK manufacturing is high-end and bespoke electronics which is an expensive business producing luxury and specialised goods. These goods have to compete against US exports in South America and South Korea, China and India in the East. Now I am not saying that selling goods into these markets is impossible, it is possible, just very difficult.
As nearly all of our manufactured car components and many other goods are exported to the EU Hammond’s pragmatism is a welcomed expression of balance and reality. The current split in the Tory cabinet is the battle between the pragmatic and the ideologues.
https://www.thelondoneconomic.com/news/politics/read-one-speech-theresa-may-election-make/25/04/
https://www.thelondoneconomic.com/news/remain-win-new-brexit-vote-referendum-held-today-poll-reveals/03/07/
https://www.thelondoneconomic.com/news/brexit-woes-industrial-output-declines-trade-deficit-increases/11/05/