17 Days Remaining

Thursday 12th
posted by Morning Star in Features

JOHN MOORE writes optimistically on the new trading opportunities that leaving the European Union could provide to Britain

I DON’T share Brexit pessimism, with its overblown propaganda of the loss of EU trade and three to four million jobs.

Certainly, in the 21st century exports to the EU have increased, though not as fast as exports to the rest of the world. However, the growth in value of British imports from the EU comfortably exceeds the value of our exports to the EU. It is very likely that a favourable trade agreement can be reached with the EU, because of the advantages it gives to both sides.

Fear of the loss of our biggest trading partner overlooks the importance of the British market to EU suppliers, selling much more to us than we sell to them. Germany exported 810,000 cars to Britain in 2015.

However, even if British exporters faced some extra costs, they would not be a big barrier to trade. There is a world-wide move to reduce tariff barriers. The average EU tariff is high on some goods such as confectionary, tobacco and cereals, but only about 4 per cent on manufactured goods, compared with over 8 per cent 25 years ago.

Such costs would be within the normal range of exchange rate movements. Falling tariffs and Europe’s declining importance in the global economy make it doubtful if our overall exports would be badly affected. There will be opportunities for Britain to form its own trade deals with non-EU countries, which may find negotiations smoother than dealing with the EU’s bureaucratic machinery.

Trade agreement with the five Brics countries (Brazil, Russia, India, China and South Africa), Mexico, South Korea and many others can be negotiated now and implemented when Brexit is concluded. The City of London’s foreign investments might face stiffer competition from Paris and Frankfurt, but it would be a price worth paying.

But the British economy has a serious problem which is partly hidden by the storm of protests coming from the opponents of Brexit. Labour productivity has fallen by more than 10 per cent since preeconomic crisis levels. Its recovery would outweigh the worst estimates of the effect of Brexit on the economy.

The key to the serious productivity fall — the British press has shown images of German workers taking four days to do a job as opposed to British workers’ five days — is the proportion of profits given away to shareholders instead of invested in the business.

The trend of cutting investment is summarised cogently by wellknown economic commentator, Will Hutton: “In 1970, £10 of every £100 of profit was distributed to shareholders: today, under intense pressure from short-term owners, companies pay out £70… Few new companies grow to any significant size before they are taken over.

“Not only the British economy suffers — this process has become the major driver of rising inequality, low pay and insecurity in the workplace.” Hutton calls British capitalism profoundly dysfunctional.

The logic of his analysis is clear: the need of government intervention in the economy to curb profit distribution, to raise taxation on wealth and the incomes of the rich, to borrow as required for housing and other infrastructure investment, and to negotiate planning agreements with companies to revitalise technology and innovation in manufacturing industry, which accounts for only 10 per cent of the national product compared with Germany’s 20 per cent.

The crying need is for the slide in productivity to be reversed, for the benefit of exports and the creation of a plentiful supply of good jobs. Jeremy Corbyn and John McDonnell promote such policies, which defy the EU’s fundamental opposition to budget deficits, government bailouts and intervention in the market, which apply to Britain even though we are not in the eurozone. Brexit opens the gateway to the constructive changes we need.

On the immigration question, Brexit is compatible with flows of immigrants from the EU in accordance with the needs of the economy, as adjudicated by the government, together with the employers and the trade unions.

But EU migrants should not have priority over other foreign students. Existing British immigration policy includes tighter rules for non-EU foreign students, limits on skilled Indian professionals and the requirement that those already in Britain have a higher level of salary for their continuing stay.

Ditching such penalties, as Theresa May failed to do in her recent talks with the Indian Prime Minister, would be good for trade. No element of racial discrimination can have a part in the immigration policies of the next Labour government.