Monday 28 December 2020

Will Brexit give Britain an advantage - and where?

The dust is starting to settle on the trade deal Johnson has agreed with the EU, with fishermen the first to accuse him of betrayal. They won't be the last either, he seems intent on crippling British industry in pursuit of a crazy notion of independence and sovereignty, which fishermen do not appear to think is a good exchange.  I know it has been said before, but at the root of it all is this sense of exceptionalism that permeates Brexit and Vote Leave agenda. 

Nowhere is this clearer than the belief that in some strange never-properly-explained way Britain is uniquely and negatively impacted by EU regulations and that we not only can and should be allowed to do things differently, we actually need to do them differently.

Tim Shipman, political editor at The Sunday Times tweeted about this yesterday:

Shipman acknowledges our ability to diverge is quite constrained because he talks about only a 'modicum of divergence' being possible. He asks people to "point to places we can now gain with a freer hand."

But it doesn't matter where or by how much we diverge because EU regulations are not the problem. In five decades of working in engineering and manufacturing I have seen a lot of regulatory changes but since they applied to everybody in Europe, they can hardly be a shackle on UK industry alone.  EU regulations were written jointly and I can't remember anybody howling about anything at the time or even being clear since 2015 about what they actually wanted to change.

The problem is the quality of the people running UK industry, from the boardroom to the shop floor. The modern world is built on regulations but even if you could make a bonfire of them it won't help. Too often decisions are the wrong ones. Brexit is not a panacea for anything. It is in fact a badly planned experiment where the result is blindingly obvious before you start. 

Shipman later tweeted:

Brexiteers have been "coy" about what they want to change but the idea that Boris Johnson has any coherent plan for post Brexit Britain is risible. His interview with The Sunday Telegraph: Exclusive Boris Johnson: 'From Bruges to Brexit, this is the end of the UK's 30-year struggle' only hints at what changes are coming, saying:

"... many of the changes he has been planning have been kept under wraps for fear of jeopardising the trade talks. A great Government effort has gone into compiling these and we haven’t necessarily wanted to talk about them much during this period because that perhaps would not have been fruitful. What I say to my colleagues is free ports, yes, free trade deals, fantastic, changing animal welfare regulations, great, new stuff on data or chemicals, let’s have a look at it all.

“We want to see what we can take forward. We don’t want to diverge for the sake of diverging. But we’re going to want to do things differently where that’s useful for the British people.”

I think this means that for five long years, Brexiteers, Vote Leave and a succession of Tory ministers and MPs have kept a big secret under wraps and that is the real reason behind Brexit.  This apparently will soon be revealed. I bet if it is, industry will find a lot of it surprising and not helpful after years of uncertainty.

It is all based on the canard that EU regulations are holding the UK back. Tim Shipman and many other journalists have swallowed it only to keep regurgitating variations of it.  Andrew Neil is another.

A few days ago he posted this:

How this miracle is going to happen, Neil doesn't say but the implication is that Britain will throw off the regulatory strait jacket and suddenly challenge the EU27 for the upper hand in the economic and technological battle ahead. It's obvious he thinks EU regulations are at the heart of the problem.

Neil came under a lot of flack and eventually doubled down on his thinking with another tweet:

Presumably, he meant young Brits would be selling jars of home made jam across Asia.

Neil suggests the German government is worried that Germany is in danger of becoming a "technological backwater" in digital - whatever that means. I have no idea if this is true or not, and I suspect Neil doesn't know either. But even if it is, it doesn't follow that Britain will leapfrog Germany in the technology race.

I would go so far to say, if it is true, we in this country should be absolutely terrified because we actually think we don't have a problem.

Neil might be surprised to learn that European industry is run on Siemens devices (programmable logic controllers or PLCs) which drive processes with incredible reliability.  Personally, in thousands of site visits over thirty years I have never seen or heard of a single failure.  Siemens is a massive German business as well know.

Trying to steal a march on a competitor country by tilting the regulatory environment (the playing field) in your favour is hardly cricket anyway but Johnson, by erecting barriers, especially on services were we have a trade surplus, has tilted the playing field against the UK,

International trade is all about countries using 'comparative advantage' - a theory developed by the British economist David Ricardo in the 19th century. I am not sure this works well in the modern world where Asia is fast catching up with the west and may well have overtaken us already.  But in my experience, the EU has a comparative advantage in attitude, skills, and decision making and whatever Britain does will make no difference.

Until we get to grips with harsh reality instead of fiddling around with magic solutions like lifting a non-existent regulatory burden, we will never succeed.

The CEO of the Resolution Foundation, Torston Bell, has a nice Twitter thread on the same topic this morning in which he says none of the main parties seem to even have  a view about what Britain's comparative advantage should be in the future. It's very interesting:


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