Some Details Of Brexit's Adverse Effect On Trade

Should you blog when you are angry?  There are lots of things you shouldn't do when you are angry.  Maybe blogging is one of them. Anyway I am angry.  I have just got paid.  That doesn't usually make me angry and I sent of my customary 'received with thanks' e-mail to confirm that the international bank transfer had gone through okay.   But I had priced the job in Australian dollars.  It had made sense to do do so at the time - this was all a long time before Brexit.   As a result now I am getting the money I have rather less than I was anticipating.  The fall in the value of the pound has given my customer a bonus and me a penalty.  I hope it makes him more likely to place business with me in the future, but who knows.


I don't suppose I'd have been overjoyed if the vote had gone the other way and the pound had risen giving me an unexpected win.  Our brains for some reason take the loss of an expected benefit hard and discount a windfall as unimportant.  More practically, it is much easier to do business when there is stability.  So currency variations don't just produce winners and losers amongst people selling into other economies.  They make some deals riskier and so stop them from going ahead at all.

And this is the world that we now live in.  By leaving the EU the pound hasn't just fallen in value, its value has become less reliable.  Britain remains a large and stable economy of course.  We aren't Zimbabwe - though you'd be forgiven for thinking that we were looking at our tabloids.  But outside the EU we are a bigger risk and so the total amount of business done is going to decline.

Offsetting this we can, of course, now negotiate our own trade deals without having to take into consideration the needs of our former partners.  This is an advantage, there is no doubt about it.  This advantage can't be quantified.  I doubt it is going to be worth more than what we have lost, but it is rather hard to quantify it.

The trouble is that when you look around the globe there are relatively few places that we can do mutually advantageous deals with.  The ideal trade partner would be big, rich, have a growing economy and need stuff that we can sell to them.  The closest match is of course the EU.  We should be able to do a pretty good deal with them.  If we had never joined in the first place we might have been able to do a really good deal.  As it is, thanks to the circumstances the politics will probably dictate that we have to have a deal that is less good than what we have currently.

Scanning the globe, the US is a pretty good match.  We want to buy their computers, software and frankly rather better than our own sitcoms.  There is quite a lot of stuff we want to sell them that they want to buy and we have the great advantage of a common language.  Especially if Trump wins in the White House then this looks likes a definite win.  China is a less obvious good fit, but there may be some opportunities.  That is one that will require some work on our part, but it might come off.  China is currently mainly an importer of bulk commodities, but as its economy grows higher value stuff will be needed.  We haven't really done industrial strategy in the UK since the days of Harold Wilson, but if we want to get into places like China we probably need to start taking it seriously again.

But the market that might on the face of it look most tempting of all is India.  This is a big and growing market and the UK has strong links to it, not least of which being a large number of Britons who originate from there.  This one should really be our best shot. So it was very disheartening to read an article where the head of an Indian business organisation who pointed out the uncomfortable truth that the British market is pretty small and that our currency is now worth less - a double hit.  That an opportunity is hard to take advantage of doesn't make it impossible of course.  But it looks like we are going to have to work on this one.  Another news story indicated that one of the things that needs to be in the mix is greater availability of visas for Indian businessmen.  This is something that can be offered, but it won't appeal to the people who voted Brexit because they considered that immigration was the biggest problem facing the UK.

And so it goes on.  Brexit definitely creates opportunities to do things that we aren't currently doing and to enable us to build trade overseas.  I am sure we will have some successes.  If we want to maintain our standard of living we are going to have to.   But it won't be easy.  It will certainly need some planning, and that isn't something the leaders of Brexit have shown much talent for.

http://www.cityam.com/252994/indian-business-chief-warns-brexits-double-hit-uk-india