Economics · Mind The Gap!

Cutting Off The Continent.

A Very British Brexit.

Britain is, and always will be a very odd place to live for anyone who is used to the way Europeans live. Storms in the English channel that stop the ferries running between Dover and Calais are always headlined as “Continent Cut Off”. The British point of view is nothing if not eccentric. Britain, that small island just off the northern coast of Europe, is something of an afterthought in the mind of the average European.

Now I have lived in Europe for the better part of my life, and if there is one thing that has been consistent to any of the countries I lived in – Denmark, Germany and latterly, the Netherlands – it is the lack of understanding about Britain’s place in Europe. Here in Europe, it is necessary to register one’s place of abode, and on no few occasions, that is to say, in each case of registering, I had been asked to show that I, as a Briton, had the correct papers to allow me to live and work in their country.

I pleaded that Britain was a member of the European Union.

The response was as consistent as it was confused: “Britain is not a member of the European Union” later this changed to “Britain isn’t in the Eurozone.” After all, any European country of any sensible size was a member of the Eurozone, the gathering of countries who use the Euro as their currency. Ergo: if you weren’t in the Eurozone, you weren’t in the European Union.

Naturally I had all the necessary paperwork with me, nothing in Europe works without paper. That Britain doesn’t always need paperwork usually implies that when Britain doesn’t, Britain doesn’t work at all. That, again, is for another time. Anyway, sitting in the registration office, I dig out my passport from the envelope that I keep all my documents in. There, on the front are the words, “European Union.” The bureaucrat’s eyes widen, and the fact is accepted. If a little tentatively.

Even if Britain is known to be part of the Union, it’s seen as something of a misfit. The British simply don’t do things the European way. Their politicians hassle and horse trade with ministers and parliamentary members in a way that suggests they haven’t realized that this kind of thing is left to the political skirmishes that ensue a national election. The sole exception being the latest Conservative government who bribed the Democratic Unionist Party to keep the Conservatives in power. There was no real need for discussion: in British politics, money talks. If it’s not money, it’s an overwhelming majority that allows people not to talk.

But here in Europe, on a quiet September morning, the business of Brexit has, to all intensome purposes, been forgotten. To the Europeans, who think of British politicians as certifiable, are unperturbed at their going. There is work to do in their own governments, there is work to do in Brussels. Why bother themselves over things that only concern the British? Fair enough: the British want to leave the EU. This means that they should deal with the people appointed to deal with them and leave everybody else to get on with their job. It’s how Europe works.

Which is something the egoistic British just cannot grasp. To them, leaving the EU is a happening of the greatest moment. It means that Britain will be freed of European bureaucracy, freed of the need to have an open border and freed of having to pay into European coffers. The British think that since this is the best thing since sliced bread, that everybody will want to join in.

Which only makes the Europeans yawn. Most of them are aware of the shortcomings of the European Union – the ones that aren’t spoken of in the British press because it doesn’t sell newspapers and aren’t in the European press because the American overseers won’t allow it to be published.

Yet the Brits still cajole others to help their plight. The Daily Telegraph, a newspaper that I course through (if not read) every day, had the following in an article:

“Angela Merkel has for the first time signalled that she is willing to compromise on the issue of freedom of movement in the wake of Britain’s Brexit vote.”

Daily Telegraph, 16 November 2016.

Frau Merkel didn’t say that, but this doesn’t stop the British media from peddling some wishful thinking. To a Brit, the head of government – in this case, the German chancellor – is someone who has power over the European Union in the way the British try to. The Germans know that they are part of the union, it seems the British are still learning what this means. They’ve had forty years to get the idea.

This is also a reflection of British politics, where a figurehead politician is representative of all their party stands for – or government, come to that. They see Merkel’s words as being supportive of their cause and she is therefore on the British side.

When all Merkel is doing is making a speech that supports the European Union.

Merkel told a meeting of the German employers’ association BDA: “Were we to make an exception for the free movement of people with Britain, this would mean we would endanger principles of the whole internal market in the European Union, because everyone else will then want these exceptions.”

The Guardian, 16th November 2016.

Divide and conquer doesn’t work in Europe any more: there are still twenty seven nations to choose from. Plus of course, Britain. They all have fair representation to one degree or other, and get to have their say. The problem of one of them wanting to leave means there are clear protocols that need to be met. Britain wants to withdraw from a legally binding treaty which has legally binding elements. Britain must produce some watertight legislation that clarifies the outcome for the other 27 members. Britain has no choice in this matter, they either do this or they’re making some real trouble for themselves.

Britain’s government has a very different attitude to treaties. After all, if they can buy the DUP, they think they can buy anything. What’s more, it’s in the news that people like Merkel are bribable because a German company sold submarines to Greece and the only way to get the job was to bribe a few bribable Greek bureaucrats. But that’s Greece for you, and that’s a German company making a small ‘investment’ to get the contract. That the French didn’t give as much by way of a bribe and weren’t fingered in the news story which means the reader thinks the Germans are guilty. Well, that’s the news for you: it’s the Germans wot did it. The problem here is that this kind of news is music to the British politician’s ear: Germans who bribe can be bribed, bought.

To boot, the Germans have a good number of car assembly plants in Britain, all of which mean the Germans really can be bought. The British can use these as a bargaining chip with the Germans to get a better deal from the European negotiators. Which, to tell the truth, is not wide of the mark: German industries, especially powerful ones, have no small influence over the German government. That’s why the Americans funded Hitler, so that corporations – American ones – could get their way. There is a slight problem with this reasoning, though, and it is this: these are German corporations who have invested in Britain, and this is a German government. They’re all pulling for Germany, no matter how much the corporations scream for lower taxes. Which is practically all they want.

Because if the British think that a few assembly plants are going to change the German corporation’s attitude to the German government’s stance, the British really need to get a grip. These are assembly plants, the rag end of motorcar manufacturing. The expensive bits (where the profits are made) are made in Germany; the even more expensive bits (where the profits are made) are made in Japan. You can’t start a German motorcar if you take the Japanese components out, or for that matter, the Japanese software that controls them.

Whatever, the British have a few assembly plants. The entire point of an assembly plant is that it is easy to set up – usually in a country with poor worker regulations, so that hiring and firing mean it’s cheap and little investment is needed. Contrast these to a German manufacturing plant: billions invested over decades, high tech is everywhere along with highly trained professional workers who have secure jobs and good relationships with their managers who they meet at the same table at lunch. The British newspapers can say what they like about the shortcomings of Germany and its industries, but that’s just to please the British who if they were told the truth would buy a different newspaper. But then, they’d probably understand the truth just as much as David Davis understands what he needs to do in order to establish a sensible and orderly Brexit.

The point of all this business about assembling motorcars is that the British think they have a point to lever Germany closer to the British position. This thinking is flawed on two points: firstly that Germany can be levered and secondly that the assembly plants are worth the hassle of dealing with if there’s a hard Brexit. Because there’s something I’ve not mentioned yet, and it’s that Britain – which sees itself as one of the biggest and most important economies in Europe – is fighting a pitched battle to assemble cars…

with Romania.

This is not the high table we’re talking about here, is it? But this really is the problem with the British attitude of “punching above our weight;” it’s all about appearances. Where Germany has always been about realities. The British were appalled by the fact that Germany might have better economic figures than the entire British Empire – this is 1890 we’re talking about here, by the way: things don’t change that much! The British wanted to stop this, the Germans were barely aware of the fact. Business for them is business. For the Britons, appearance of an economy on paper means a great deal more than actually having one.

I told you that paper in Europe means a great deal. It’s more a matter of how a culture regards it.

The problem for the British in 2017 is that these assembly plants can be shifted to Romania, Latvia or Slovakia in a matter of years. Just as Porsche is moving its assembly plant from Leipzig to somewhere in Slovakia. Add eight hours to the time it takes a railway train to get there and the operation is pretty well settled. No borders, no customs checks: logistics as logistics are supposed to be for a corporation able to exploit an open Europe where regulatory frameworks are there to choose from.

Which is where the British have miscalculated on a massive scale. The idiosyncrasies of a hopelessly inefficient customs barrier that’s been set up in the last weeks before a hard Brexit and you can see that a ‘just in time’ assembly plant is not going to work. And the Germans have two years to lay some concrete in a suburb of Bucharest, fix up a cheap Chinese warehouse and lay in some cheap Chinese production equipment. A new assembly plant by any other name. A new railway siding and the place is ready to go. Cheap to hire, poorly skilled and above all, cheap to fire workers complete the argument. Planning permission from a government desperate for new investment and you can see that in the space of a year…

In the face of this kind of competition, Britain’s leverage point will have all the effectiveness of sticking their lever into a bowl of British porridge. What’s more, the British simply don’t get this. Their ideas, all of which are ‘punch above your weight’ tell them that they’re the best and are valuable. I mean, even the British accept that they are in direct competition with a third rate country like Romania.

But that’s only when pressed…

In the meantime, Mrs May and David Davis are trying to get Merkel on one side and Macron on the other so as to create a split in the stance of the European Union. When all the time, the European Union is asking for some sensible, effective and legally binding statements from the British so that they can base Britain’s exit on these facts. The problem for the EU negotiators is that the British have never been the best at this kind of thing, they’ve always seen their goal as getting people on side, in the way they bought the DUP.

If the British don’t buck up, they really are in for a very, very hard Brexit. Made the harder by their lack of preparation… but that’s how the British work, isn’t it? Punching above their weight might just find a stronger party hitting them with a knockout punch. But then, the British are happy to dwell in their illusions and the fantasies peddled in their newspapers, and they don’t have to be ready. And from what I have seen thus far, they’re not even preparing to be ready.



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