In the real world

In the real world "crashing out" is the EU's problem

by Eben Wilson
article from Monday 21, January, 2019

IN AN INTERVIEW following the hammering of Mrs May’s “deal” Jacob Rees-Mogg took Channel Four’s Krishnan Guru-Murthy to task for using the term “crashing out of the EU”.  Rees-Mogg gave him a quite robust ticking off for being unbalanced in his presumptions. 

I was reminded of this today when our company used four separate delivery mechanisms to trade in goods and services.  We posted something both at the counter (an export) and at the new-fangled “auto” machines in our post office, we sent something by courier and we delivered some kit by company van.  Such variabilities are normal for us – it’s horses for courses to maximise productivity. 

We pondered on how these useful third parties would be affected by “crashing out” and whether we would be affected in turn.  We concluded that neither they nor we would. 

The Post Office, which we try to avoid, as it is the slowest and most ponderous delivery mechanism, is bound by international postal agreements wider than those of the EU.  Customs clearance through them is clearly well honed; how often have you been asked what is in a parcel when posting? 

We know the couriers are ready. They are plugged into the “single window” system of documentation and they have existing customs agent arrangements that have been beefed up over the past year. Physical logistics could be an issue if for some reason our electronics kit gets loaded onto a lorry also carrying live animals, but we think that is unlikely.  Our couriers think so too; they are exasperated by Project Fear, and have even castigated “fake news” about port blockages to us. 

Clearly, we do not deliver using our own vehicles overseas, but there is a point to be made here. A personal delivery of products is part of a supportive service package for today’s technological products. In a world where people work by email and internet, putting one of your staff on site with a customer is a chance to work your market, upsell and check quality. That’s what we love to do because it builds the relationship that ties our customers to us and gets repeat sales that cost no overhead in marketing costs. In an international context, this service element is doubly important because, well, we are foreign to our buyers, but by ensuring a more personalised service through, say, readily available Skype support and a local delivery person trained to our standards we get the same tie in and feedback we need to be good at what we do. 

Where does all this connect to “crashing out”?  Well, it certainly begs the question as to what it means in the context of our trading relationships.  Frankly, it is a completely empty phrase; is the UK Post Office going to start not delivering outside of the UK through its international state-controlled postal networks? No. 

Are our courier companies going to find blank screens de-linked from their international partners and clearing agents? No, they’ve designed their tech to avoid this. 

Do they foresee doors slamming at ports as border customs staff declare their trucks camions-non-grata? No, those days of customs bay checks disappeared decades ago.  

And can any UK/EU disagreements get into the partnerships between traders that put service in the round beyond the mere trivia of getting a box of goods from A to B? Of course not, they’d have to hijack our local delivery agents and drive their vans into the sea to stop them; it’s how they feed their children.

So what is “crashing out?” I can only think that it is a fetishistic enfeeblement of the mind that looks at trade as always being something that governments allow; that business is monitored, evaluated and measured in all its dealings in all places at all times.  This is do-it-yourself economics of the worst kind, where reality is trumped by a politicised view of what international human relations are about. 

In that sense, Jacob Rees-Mogg is right.  Krishnan Guru-Murthy is presuming that trade is a quasi-political act; and imputing that a trading relationship is some sort of conspiratorial agreement between profit-seeking agents that has to be controlled by government. 

No, Mr Guru-Murthy, international trade is about brown sticky tape, and cardboard, and express courier bags with fast-track dockets, and invoices and a bloke with a bashed up van hammering out to Port Glasgow to get the shipment away, fast and efficiently, to a customer who appreciates the service which more often than not he or she will have done it dozens of times before.  

Even in the just-in-time networks for the big corporates such practicalities apply. The unavoidable overhead costs of documenting, protecting, hatching and despatching are substantial; and if the parts are imports to Britain from the EU and we do not charge tariffs on them, there is no extra cost to UK business. In that sense, “crashing out” is a fiction, the EU’s problem, not ours. We can help them with a free trade agreement, but not if they play protectionist with us. 

These trading transactions are done literally billions of time annually – and any idea that any government administered under the discretion of politicians can do anything about these them other than get in the way is simply silly. 

And let’s reveal a political reality; big corporate business loves to moan. That’s because they operate in commoditised markets where margins are cut to the bone through competition. That includes the car industry, where globally today there are too many manufacturers making too many cars.  Two things must be remembered; first, the big guys who live on high volume trade at low margins are those who play politics through their trade associations to set up rules that limit competition. Those associations are used by the corporates to proselytise to the media about how tough Brexit will be for them. The media is taken in because they know the corporate brands, they don’t and cannot know the extended labyrinth of small suppliers and specialist trades that are more than two-thirds of the economy. 

Second, commoditised products are yesterday’s products; they are the dogs that snarl to retain their past market position, not the innovators.  Elon Musk terrifies the car industry and in the UK it is not surprising that Sir James Dyson and Lord Bamford are content with Brexit; they are innovators. And this is important for the UK; Brexit offers the chance to bring such innovators to the fore, to push competition at the commodity corporates – to make them “crash out” of their stupor and think more about what to do tomorrow for consumers worldwide. 

We really are in a never-never land at the moment where the political class are showing that where they have discretion without knowledge, which is most of the time, their interferences with markets through centrally planned administration are, in general, catastrophic to normal trade between economic actors that is a genuinely democratic activity based on votes about prices. 

It’s that catastrophe, embedded in the way the EU likes to do business, that is the real catastrophe of the present media presentation of our options for Brexit. It’s that interference from which we really do need to crash out. Going WTO is the only way to go from here; we can force a new free trade agreement out of the stupor of the EU from there. Anything else threatens to impoverish all but the controlling classes.  The people voted sensibly for their own best interests. 

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