16 Nov 2018
More Turkey and Toyota next Christmas?
Trade is a huge part of the withdrawal debate, but the country is no more certain today, than it was the morning after the referendum, about who its post-Brexit economic partners will be.
Dr Jon Seaton looks ahead to next Christmas, and how Turkey (the country) could be our biggest trading ally and how consumers could soon be ditching trusted European cars and turning more to Japanese models.
TRADE is a funny thing, writes Dr Seaton.
In the past, you tended to trade with countries who produced very different products – say Turkey produces olive oil but no fighter aircraft – the UK produces fighter aircraft but no olives – so a clear reason for trade.
This indeed was a pattern.
Manufactured products went to countries producing primary products and vice versa.
So, now, why does the UK trade with Germany?
Because although we produce pretty much the same sort – or similar – products, consumers in both countries enjoy slight differences.
Although we produce cars here, we still buy from Germany and Japan, and vice versa.
If we severely reduce our trade with Germany we either make more here, which is good for employment, or we buy more from Japan or US.
Even now, we export more to the US than any other country (13 per cent of total UK exports) – although the EU as a whole receives more than the US – and it’s likely our trade with America will increase.
However, Donald Trump is notoriously fickle – in most areas of his presidency – and predicting what he will do in the future with regard to trade is next to impossible.
On the one hand, I believe, Trump would not spend a second thought on reneging on his promises of a great trade deal and become rather ‘sticky’ with the UK.
Saying that… he could quite easily show how brilliant life is outside the EU by giving the UK a good deal in order, perhaps, to further break up the EU.
If Trump does dump the UK, China is the obvious next candidate at number six in the trade table.
And, given the nation’s particular economic problems at the moment, it will be keen to increase trade anyway it can.
This would benefit the UK in terms of much cheaper goods, but in turn our own manufacturing could suffer.
What could happen is our manufacturing base will decline more and we will concentrate even increasingly on the service sector.
So, with all of this mind, Turkey is our prime candidate for trade at number 11, because it produces many of the Mediterranean foods – fruit and veg, olive oil, olives – that we enjoy and could become a much more involved part of our lives following Brexit.
Looking back east for trade… Hong Kong, Japan and South Korea will be favoured more once we leave the EU.
It is the car markets that are important here.
Our choice of car could move away from European manufacturers to favour Japanese vehicles, or, if we are still in-favour with Donald Trump, we could be driving American cars rather than European.
International trade is super-massively cheap for numerous goods, because of the economies of scale – where the enormous container ships and quantities we receive mean prices can be kept extremely low.
Overseas goods are so cheap, in fact, that locally produced foods are often more expensive than mass-produced imports grown hundreds or even thousands of miles away.
The balance here is to maintain equilibrium between supporting UK manufacturers/producers and making sure they’re not driven out of business and providing cheap and affordable goods for consumers.
At the minute, we have some massive ports like Felixstowe, which is one of the largest in Europe.
The port of Felixstowe, in Suffolk, welcomes more than 3,000 ships a year
But in order to maintain lower prices for consumers, we would need to improve the size and structure of our other ports around the country and bolster the accompanying infrastructure.
The simplistic tone of the Brexit campaign is not credible for a short-term all in one break with Europe, despite the temptation to finally end the Brexit debate once and for all.
The transformative changes needed to develop appropriate infrastructure, the right trading partners, cope with the inevitable impacts on primary, manufacturing and service sectors as well as the failures to invest in transport infrastructural during the last decade remain incredible barriers to our future success.
Over the last few years, we’ve learned a very important lesson, the economic arguments for engaging in trade between countries is not only governed by a difference in basic resources, specialisation in production or consumer valuation of product variety, but first and foremost by the short term motivations of our political leaders.