Free trade agreement.

[Corcory]

People keep going on about the fact that we can't be in the single market without agreeing to freedom of movement but why can't we negotiate a free trade agreement like the other countries in the world that are not in the EU?

The problem with "quintessentially British" products, mainly luxury goods, is the size of the market.

Scotch whisky exports were worth around £4 billion a year. If that can be increased and matched by gin exports (a big if), we could be talking £10 billion a year.

The UK's exports to the EU are currently £220 billion a year (including two fifths of its Scotch whisky exports). If we lose any proportion of that, we're going to have to flog a lot of gin, cars and tweed to other countries just to stay in the same place.

whatwouldrondo

The recent 2 months retail sales figure confirmed that the Chinese (and others) do take advantage of the cheap pound to shop.

If you look at the independent schools, the places where full tax paying British residence cannot afford are now being filled by the Chinese and Russian despite us being unnecessarily difficult in granting the appropriate visas.

That was supposed to say "Scotch whisky exports were worth around £4 billion a year in 2015".

The UK is not awkward about child visas to study at an independent school. The conditions are that you must:
• be between 4 and 17 years old
• have a place on a course at an independent school in the UK.
• have the consent of your parent or guardian
• have enough money to cover your course fees and living costs

18-plus education is a different matter.

Mistigri

I appreciate your expertise and please correct if I made an error.

I too observed that (some) manufacturers locates closer to their markets. However, I see this as a trend that diminishes the importance of the 'single market'. They are just not going to have one plant in the UK to serve the entire europe. They will have several - a few in EE to serve areas closer to the EE etc. So, UK may serve mainly a smaller corner of the NorthWest europe.

If you look at Hwa Wei office list - they have offices in many EU country. That pie in the sky idea of having one office in one EU country to serve the entire single market is just a fantasy.

As for Nissan specifically, they adopt a model specific approach and the cars do get exported BACK into Japan.
And of course we already export to China and US. The challenge is to export more. My observation is that NTB are seldom the main issue either. The single issue is to find customers who want to buy, and then the rest are resolved in due course. It looks as though NTB normally relates to certification - which we do have the technical capabilities to meet those standards.

PattyPenguin

Schools

The visa forms part of the 'ten of thousands' quota.

In the real world, there is no appeal procedure for T4. So when that out sourcing Visa contractor made an error, the process has to be restarted rather than corrected. The system is stupid.

Parents for child over 12 are not allowed to tag along either (so day schools out of question).

PattyPenguin

" I've said it before and I'll say it again, countries who seem keen on free trade agreements with the UK by and large want to sell us stuff. "

So sounds like EU (Germany particularly) should be very enthusiastic about a FTA then?

I am not really worried about manufactured goods. Some high regulated services (such as financial) and agricultural may be more tricky.

We don't just sell cars to the EU.

UK exports of goods to China have more than doubled since 2010. They were worth £14.1 billion in 2014, doubling over the term of the last UK parliament and making China the UK’s sixth largest export market.

The UK is now the second biggest (Germany = 1st obviously) European exporter to China. 35% of our goods exports are cars. One third of our exports to China are services.

Top UK exports to China in 2014:

road vehicles
medicinal and pharmaceutical products
power generating machinery / equipment
metalliferous ores and scrap metal
general industrial machinery, equipment and parts

Topsy, nearly 60% of UK car exports are to Europe, and UK vehicle exports to China fell quite sharply last year - most of the UK's car exports to non-EU countries are luxury vehicles, and this is not the segment of the Chinese market that is growing. In time, most of the Chinese market will be served locally as manufacturers set up JVs and transplants.

None of this is as easy as you think it is. If UK car exports to the EU were to fall, there is close to zero opportunity to replace those exports by selling vehicles to the US or China. Toyota for example makes most of its US vehicles at its US transplants, and it has JVs in China which produce for the local market there. As a general rule, it makes little sense to ship mass market vehicles around the world, although luxury brands like JLR and BMW do of course get exported worldwide. But the market for this sort of vehicle is inherently rather limited.

Exports of ores (really?! I wonder what's included in this category; trade stats can be very misleading) and scrap metal do not generate much in the way of UK employment.

I too observed that (some) manufacturers locates closer to their markets. However, I see this as a trend that diminishes the importance of the 'single market'. They are just not going to have one plant in the UK to serve the entire europe. They will have several - a few in EE to serve areas closer to the EE etc. So, UK may serve mainly a smaller corner of the NorthWest europe.

I think the problem here is that you are commenting about an industry that you have no direct knowledge of. "Close to market" can mean inside a particular trading bloc as well as physically close to the end-user. So many US cars are now made in Mexico (under NAFTA), even though Mexico is half a continent away from many US buyers.

Also, big manufacturers already typically have more than one European plant: some a European Toyota models, for example, are produced in France. Usually, production of particular models is concentrated in particular locations, to take advantage of economies of scale.

The actual figures on trade with China are here researchbriefings.files.parliament.uk/documents/CBP-7379/CBP-7379.pdf

Exports £18.7bn of which services £3.2bn

Imports £38.3bn (2.6% of China's exports)

Our trade deficit with China is greater than our exports to it.

So yes they want a trade agreement so they can sell us things but even then we are not that significant and most of China's trade is with it's near neighbours www.worldstopexports.com/chinas-top-import-partners/

United States: US$410.8 billion (18% of total China exports)
Hong Kong: $334.3 billion (14.6%)
Japan: $135.9 billion (6%)
South Korea: $101.5 billion (4.4%)
Germany: $69.2 billion (3%)
Vietnam: $66.4 billion (2.9%)
United Kingdom: $59.7 billion (2.6%)
Netherlands: $59.6 billion (2.6%)
India: $58.3 billion (2.6%)
Singapore: $53.1 billion (2.3%)
Taiwan: $45.1 billion (2%)
Malaysia: $44.2 billion (1.9%)
Australia: $40.4 billion (1.8%)
Thailand: $38.3 billion (1.7%)
United Arab Emirates: $37.1 billion (1.6%)

Asia is a de facto trading block

Even the sectors that have achieved growth are starting to find it hard going in the face of the Chinese governments strategies to increase the competitiveness of domestically produced goods in domestic markets, luxury cars are one example. All luxury goods exporters are struggling to maintain the competitive advantage they have by virtue of their branding because China is nurturing its artists p, designers and craftspeople to enable them to meet the consumer needs and they of course are much better at understanding those needs and their cultural context at a time when they are becoming more sophisticated.

That is the issue that we have been highlighting on trade agreements, a trade agreement does not make you good at producing and marketing your goods to meet consumer needs. You have to do that as well.

When I last flew to China I was on a new BA route to a city they had not served before. It was almost empty and I asked how it was going to pay. The purser replied by the cargo on the return leg. On the way out they had filled the hold with smoked salmon but the lucrative cargo was coming back, IPhones and IPads ....... We are going to have to work very hard indeed if BA are going to keep bringing us those iPhones........

wwrondo

Thanks for the statistics. There is a caveat though as a good chunk of the intra-asia trade are actually disguise supply chain that all ended up in the Western Europe and the US. One particularly number should stand up - HK $330bn (HK GDP=280bn).

" a trade agreement does not make you good at producing and marketing your goods to meet consumer needs."

I agree. That apply to a superior form of trade agreement - the single market as well. Germany is doing well, Greece isn't - all part of the single market.

"We are going to have to work very hard indeed if BA are going to keep bringing us those iPhones"

Yes.. we do indeed but we still do if we stay in EU.

Mistigri

Yes I do not have direct knowledge of the car export market. However, the statement was about "various plants" and is not specific to the car market. It is to explain that the idea that a company can have one plant in any part of the EU and then serve the entire 'single market' is a fantasy.

As I mentioned, I am aware that cars manufacturing are model specific. You are also right about the luxury segment to China.

However, the cars export and imports are too way traffic. If there is a FTA then there is no issue. If barriers (Tariff or non tariff) are erected, are we going to just let EU/German cars come in an unfettered manner?

If not, the flip side of where our 1 million cars are going to go question would be how 1 million ish of 'supply shortage' is going to be filled?

are we going to just let EU/German cars come in an unfettered manner?

Not unless there is some sort of reciprocal trade agreement, obviously.

But no one supposes that trade will cease: just that it will take place under less favourable conditions. Buyers of VWs and BMWS and Mercedes are probably less price sensitive than buyers of Nissans, which suggests that under WTO rules it may be easier for German carmakers to maintain their exports to the UK than the other way round.

In addition, it's not possible for UK carmakers to make VWs or BMWs: if you want a German car you have to import it, because they are not made in the UK. However, if a Japanese car maker wishes to sell to the EU market it has a number of options (in the medium to long term) including (for eg) increasing Toyota production in France, at the expense of the UK.

What you've not understood here is that it's perfectly possible (and indeed, in the case of the car market, likely) that we have more to lose than our trading partners. This imbalance is exacerbated by the fact that there is no "UK car industry": there is just some UK car production, at factories owned by Japanese and Indian companies.

Topsy Hong Kongs trading patterns are similarly Asia centric. In spite of our former relationship and the interconnectedness of our financial services sectors we still only rank twelfth in their list of trading partners www.tid.gov.hk/english/trade_relations/mainland/trade.html

"not possible for UK carmakers to make VWs or BMWs: "

Not quite. Chinese VM and BMW are all joint ventures.

"it's perfectly possible more to lose than our trading partners"

Quite possible. The around way round is also perfectly possible - the dynamics are complex. However, in the real world it is never about the absolute level of 'pain' - as long a it is over the 'unacceptable' threshold politically than a deal has to be done.

EU (and the world economy) has enough on their hands, trade war is the last thing anyone wanted.

"Germany maintain their exports to the UK than the other way round."

That poses any often overlook issue - if they make us much poorer, we will be in less in a position to buy from them. They would also be competing with the Japanese, Korean and the American.

Can also do a luxury car financing premium and sales tax if necessary.

I therefore expect a FTA.

It won't be Germany or the EU making us poorer, we're making ourselves poorer.

Germany would be happy for us to stay in the EU or move to an EEA deal. But if we want to go for the full Monty of economic self-harm and leave the single market - there's nothing that Germany can do to stop us.

This is probably the most appropriate place to link to this article:

peterjnorth.blogspot.fr/2016/09/a-brexit-fudge-will-do.html?m=1

It's by a committed brexit supporter who has devoted years of his life to campaigning to leave, but who has realised that the leavers' cluelessness on trade risks either sabotaging the leave project, or sabotaging the country: "I'm not that keen on wrecking British prestige for the sake of keeping out foreigners and indulging Tory children."

Cluelessness - yes, that is frustrating but that is just how the British ruling class are. UK went into WW1 clueless, WW2 unprepared and joined the EEC and cut ties with the Commonwealth in a haphazard manner in 1973 (and growth was weak until Mrs Thatcher 1980s reform + oil).

However, history shows that after the initial set back, we tend to get our act together.

Some other random thoughts:
This FDI stuffs. There are the 'real FDI' and the Financial FDI which invest in funds to invest in other places. I am not sure how true this claim that UK is used as the 'hub' as many foreign businesses (Japan, Chinese) that I saw are structured via lower tax EU states.

His comments about 'pushing to the constraint of the EU and reform it"... well.. not sure if Dave's attempt to ask for a deal to limit migration counts, but anyone of the 28 could have initiated the reforms and EU's solution to problems is always an 'ever closer union'.

The solution should be a FTA that looks very close to a single market with middle grounds on other issues. If Brexit at all cost isn't sensible, neither is EU all or nothing approach.

Another clulessness example is when the then Labour goverment thought only 15k from the A8 would take up the 'offer'.

However, history shows that after the initial set back, we tend to get our act together.

Well, yes, but getting our act together didn't bring back those killed and injured in the appalling carnage of the Somme and other battles. (It is a digression here, but clearing out my parents' house, I found a report my grandfather had written about one of the Somme battles, which I have kept, and which makes for harrowing reading. He survived WW1 but barely talked about it until the end of his life when he tried to impress upon me and my brother the horror of it all.)

Ditto the appeasement of WW2 - this did not bring back the millions killed, never mind the suffering caused to the injured or displaced.

Yes, Blair was stupid and completely underestimated how many Eastern Europeans would want to come. However, apart from selected areas, where local relief could/should be given immigration is not a problem, but enough hatred has been whipped up against immigrants to cause people to vote against it. With the end result that people in places like Cornwall, who have done very nicely out of the EU, voted Leave. Cornwall County Council asked in the few days after the vote if the EU funding they had received would be made good and got the short answer no.

The solution should be a FTA that looks very close to a single market with middle grounds on other issues. If Brexit at all cost isn't sensible, neither is EU all or nothing approach.

We had opted out of the 'all or nothing' approach like the Euro, Schengen etc. We had a good deal and we (the Tory right wing) were just too stupid to shut up about it. Cameron was too stupid also.

Maybe a a FTA would work. Who knows? So far, not a word of sense has come out of the mouths of Fox, Johnson and Davis. And as for, 'speaking as a mother' Leasdom, she's now very, very quiet. So far the noise is being made by the 'Hard Brexit' camp, who won't give a damn if the country goes to rack and ruin, because they are wealthy and will be OK.

A comment from Peter North's post:

British prestige is already wrecked. We are an international laughing stock already. Anybody with half a brain and an ounce of knowledge realised Leave was a vote only in the abstract, and without a plan or manifesto was unvoteable. That UKIP had 23 years yet no proposal says it all. If you voted leave, Pete, you are equally complicit in the wrecking of our international reputation as Johnson, Gove, Leadsome, Stuart etc. Others perhaps might claim diminished responsibility, but not you I think.
At this point you should be considering apologies. What you are doing above is simply seeking to self justify your reckless behaviour. Perhaps that's helpful or cathartic en route to your apology. Us "Remoaners" never suggested the EU was perfect, but there was no meaningful alternative offered, was there?

At the moment, Hard Brexit looks to be the only deal on offer. So whistle for FTA.

The solution should be a FTA that looks very close to a single market with middle grounds on other issues.

I think this is the sort of cluelessness against which Peter North was railing. It's understandable from a poster on a parenting forum, but downright dangerous from a government minister.

British prestige is already wrecked. We are an international laughing stock already. Anybody with half a brain and an ounce of knowledge realised Leave was a vote only in the abstract, and without a plan or manifesto was unvoteable. That UKIP had 23 years yet no proposal says it all. If you voted leave, Pete, you are equally complicit in the wrecking of our international reputation as Johnson, Gove, Leadsome, Stuart etc. Others perhaps might claim diminished responsibility, but not you I think

In fairness to Peter North (with whom I disagree on nearly everything), some leavers did have a plan of sorts ie the EEA/ flexcit approach. It isn't entirely their fault that brexit has been taken over by the Tory bastards and the racists, although they bear some responsibilty for not calling out the terrible decisions made by otherwise nominally sane parts of the leave campaign.

People like Peter North are not exactly calling out the racists now, are they?
With one or two honourable exceptions, the vast majority of MPs seem to have caved into the Hard Brexiters.

As for those in charge of Brexit - just about every pronouncement made by Johnson, Fox and Davis is immediately denied by No. 10. It would be funny if it wasn't deadly serious.