By: Jeremy Fox

Jeremy Fox — Fri, 27 Jan 2017 20:59:00 +0000

Good, instructive piece. A couple of comments. First, if we exit totally and end up trading with Europe under WTO, both imports and exports will become a headache less because of tariffs than because of the associated paperwork – rules of origin, inspections, customs warehousing charges, etc. etc. (endless etceteras). Second, not all major countries play the game with unmarked cards. Germany and France offer examples within the EU. China manipulates its exchange rate to remain absurdly competitive even when maximising the use of labour-saving technology. The idea – propounded by too many economists, politicians and corporate executives – is that labour costs are China’s sole competitive advantage and State action has nothing to do with it. Bunkum. In the USA less transparent forces are in play. The US federal government can negotiate trade deals and – if the deals get through Congress – they are implemented. What the Feds can’t do (the Constitution doesn’t allow it) is interfere with state, county and city trade and investment activities. All of these latter compete with each other for investment through local tax subsidies and tax holidays special infrastructure developments, cheap “spec” buildings, etc. The US federal government also channels subsidies through extremely generous R&D fundiing. Finally, many states and counties operate a buy-American policy that is very difficult to break down. All this affects international competitiveness. US agriculture, of course, is heavily subsidised; and fisheries are closely protected from unwelcome foreign competition. So far as the US is concerned, there are no level playiing fields. By the way, I have first hand experience of the US system having worked over many years with major federal and state organisations on securing direct inward investment into the US. So I’ve seen how it operates from the inside.

Comments on: Can Brexit be a catalyst for change?

By: Jeremy Fox