I’ve already concluded that trade is irrelevant to the referendum. But the peddlers of Project Fear won’t let it alone! So it’s now time for a more comprehensive explanation about why fear about trade is so entirely misplaced that trade is irrelevant to the voter’s decision on 23 June 2016.
- Trade does not support Project Fear’s misleading interpretation
- Why so much nonsense emotion in numbers anyway?
- Is the Single Market as useful as it should be?
- 0% interest rates and nationalisation of toxic banks are the real underlying problem anyway
Trade does not support Project Fear’s misleading interpretation
First of all, the current patterns do not support the idiotic assumptions of Project Fear, which are that more-or-less all foreign trade and direct inward investment will stop completely and overnight. Even being excessively cautious, one can reasonably conclude that a complete cessation of all trade immediate on 24 June 2016 is certainly not going to happen.
On the contrary. Continuity of trade is more likely than not. Why? Because no-body in the West’s aging, deflating, declining, debt-laden, adversely-demographic world can afford to stop earning revenue from their customers. Customers are where the money comes from to pay pensions.
Similarly, no-body in the world can afford to pump out carbon emissions for the sake of it when another service provider on the other side of the planet can do a better job for less money, fewer resources and fewer carbon emissions.
Trade patterns and logistics might vary, but trade itself won’t. And as long as trade continues, there will always be opportunities to trade, always be opportunities to get stuck in.
Why so much nonsense emotion in numbers anyway?
Second of all, putting emotion into the numbers is just ludicrous.
Ask a voter how much more, or less, emotional worry and panic he/she would experience if the numbers moved. UK trade with EU and with non-EU is roughly 50:50.
If this ratio is enough to justify emotional worry and panic, how much more emotional worry and panic would be justified if the ratio were, say, 49:51? Or 48:52? Or 47:53? Or 10:90? At which point does emotional worry and panic maximise, and why?
And here’s the killer question: why should inverting the ratio change the amount or direction of emotional worry and panic?
All of these questions are entertaining to ask, because some fool will probably try to calculate them out, but actually, the correct answer is to realise that none of these considerations are relevant to the referendum question.
Is the Single Market as useful as it should be?
Third of all, is the Single Market as useful as it should be?
On reflection, it seems that the European Union’s policies in other matters have impacted the the Single Market as follows:
- A move towards protectionism has halted the widening of scope and drive of the Single Market (i.e. a greater favour to intra-European protectionism);
- The inevitable consequences of Eurozone’s monetary policy (0% interest base, bail-outs for toxic banks instead of having insolvency write the debts off) undermines the whole premise of any market. Current monetary policy cripples both consumers’ net disposable income and limits the scope of productive investment. The American Federal Reserve has done the same, and its horrendous impact on middle-class America is described in this blog;
- ‘Social protection’ policy creates unemployment in perpetuity over the generations, so the available disposable income from citizens stagnates in real-terms. This again undermines the premise of a market.
To illustrate only a few examples:
- Technical barriers to trade remain unchallenged. Even on the red hot issue of data privacy, the most that only some Europeans have only just started to consider is whether data flows are artificially restricted. Of the 28 governments, only 14 governments want data flows on the agenda for marketisation.
- UPDATE: on 03Jun2016, the European Union very belatedly scolded member states for banning innovative and rightfully disruptive business models like Uber taxi and AirBNB accommodation services. Too little, too late from the EU. Sick little tin-pot protectionism has won the law in some nation states. The abolitions of freedom and innovation go hand-in-hand. So much for the Single Market.
- The Single Market for Services doesn’t exist. The holy grail of the Single Market for Services is a single qualification for a general, commercial lawyer, Single-Market-wide, recognised in every territory. I doubt I’ll live long enough to see that happen.
- Agriculture is still a sacred cow that must never be slaughtered on the open market, especially if consumers might benefit from the end of the corrupt Common Agricultural Policy and Common Fisheries Policy.
- Enforcement by the European Commission is inconsistent and of poor quality. Amongst the clearest examples are:
- the contradictory decisions of competition law enforcement relating to telecoms (the case of BT acquiring EE versus the case of O2 acquiring CK Hutchison; see this review of the week); and
- The ruling, via competition law, that two member nations smuggled illegal state aid to listed corporate taxpayers via mis-application of international transfer pricing rules. Sounds great, but international transfer pricing rules have always been open to abuse, not least by governments desperate to ‘buy business’. So why act now and not decades earlier?
- The temporary ban on financial instruments that provide liquidity (“short-selling”) when liquidity dries up, exacerbating short-term problems and turning them into medium-term, avoidable regulatory risks.
- A recent report by the European Security & Markets Authority appears to have materially understated the problem of ‘closet trackers’ because of poor method and sloppy data habits. The resulting report is flawed. [Moneyweek; subscription required.] This is big news, because this is tomorrow’s big mis-selling scandal. Shouldn’t they have got the basics right, and done better? Who is paying ESMA’s salaries? [tech note below]
- Yet, when the fancy takes them, both EU and national governments whinge like cats when China dumps steel onto world markets, but are quite happy to dump agricultural produce onto world markets, thus causing poverty outside the EU [Oxfam 2002, Global Policy Forum, Independent 2006, blog capreform.eu]. The EU doesn’t care about world poverty, it seems, and appears to conceded something about export subsidies for re-absorption by the now-suspended TTIP negotiations.
So the Single Market isn’t necessarily the utopia that it’s proponents like to think. I perceive that the Single Market has grown as large as corrupt politics will allow it. So all European economies need to think extra-Europe, including UK.
0% interest rates and nationalisation of toxic banks are the real underlying problem anyway
Fourth of all, monetary policy is the real villain of the story. If anything is going to lead to economic disaster, it’s monetary policy.
Membership of the European Union - especially for a country outside the Eurozone (like the UK!) - is wholly irrelevant in this respect.
All of which simply re-inforces the plain logic that trade is irrelevant to the voter’s choice on 23 June 2016. If a voter thinks that trade flows and possible doomy consequences are still relevant to the issue, then I would refer the voter to his/her daily horoscope. Horoscopes are just as useful as any ‘forecast’ published by HM Treasury, but a lot shorter to read and a more honest form of entertainment.
Still not convinced that Project Fear is a pack of lies about trade? Peter Lilley negotiated the Uruguay Trade Round and implemented the Single Market. Peter Lilley: Myths about Trade & the Single Market.
A ‘tracker’ is an investment product that you buy into and a robot trades shares on your behalf simply by following numbers (‘momentum investing’). The price of these products should cost less than 1%. A ‘closest tracker’ is an investment product that you buy because the marketing spiel tells you that the fund is ‘actively managed’ and charges way more than 1%... but actually the manager is so lazy, he gets his computer to do all the work… meaning you end up paying a fortune for a clumsy tracker… and it’s not even as good as a proper tracker! If that isn’t bad enough, the UK’s Financial Conduct Authority tried to do a similar study, and flawed its own study in a different way.