Trade Agreements: Why do they matter??

RideOnTime

So blar, blar, why do trade agreements matter?
In this pre-post-pre-post etc Brexit situation a lot seems to be being made of this.
Obamamram says we Brits are now at the back of the queue?

But why doth it matter sooo much?

Is it only important for public sector contracts? and big ticket stuff like Power Stations? surely most trade can go on regardless of trade agreements and it's difficult to know when your buying something where it was made! Most goods have components and processes in different parts of the world.... Is it standards? Is it health and safety? Is it import and export duties? Why does it matter? Is it this tendering in Europe thing for contracts over £10k or summat.
Should I give a hoot? hoot hoot :shock: :shock:

ballysmate

The EU and South Korea are important trading partners. South Korea is the EU's ninth largest export destination for goods, whereas the EU is South Korea's third largest export market.

http://ec.europa.eu/trade/policy/countr ... uth-korea/

EU negotiates a FTA with its 9th largest market, so I assume that it would welcome a deal with its largest.
Not much mention of free movement either...

slowmart

so your company or employer has been trading for the last 20 years and growing revenues in the UK and Europe.

Now free access to Europe is in question. It could be no change or alternatively your products or services will attract a tariff when exported which suddenly makes them more expensive. Factor in currency fluctuations means another uncertainty. Ok you can hedge on currency movements but it's another risk but still a cost to cap.

I doubt any UK manufacturers will invest with the current landscape so clouded and any UK subsidiary of a European entity will no doubt look to focus and grow areas of certainty.

look at the tax revenues by UK region https://www.gov.uk/government/uploads/s ... 13_14.xlsx and you'll see a disproportionate amount from London and the SE when compared to the rest of the U.K.

Lots of people rightly view the financial markets and economy as unworthy but as a tax generator for industry sector, it remains a significant contributor to HMG. If London starts to lose traction as a financial centre then we need to find tax revenues from elsewhere or reduce spending.

I know of one start up bank which has been seriously hit by funding issues post brexit, simply because of the uncertainty or next steps.

With LIam Fox denouncing UK business as fat and lazy doesn't bode well for business friendly outcomes as he seems as much in touch with reality as Donald, expect Donald has has a proper job. Unlike that censored Fox.

Let's hope ISIS raid the residence of Boris, Fox and Davies and do us all a favour.

orraloon

RoT, you ARE David Davis, minister for Brexit, and I claim my £5. Except can I have it in € or $ please.

4kicks

Because freer trade creates jobs, creating new consumers to buy the products we make.
It also, curiously, can provide a framework for talks so that countries like China cant "dump" products into an international market (dumping = selling products abroad at less that production costs to kill of competition and use up surplus capacity), nor can they create artificially complicated local legislation which unfarely penalizes importers. It also, if you believe people like Frances Fukuyama, is a driver for stability as countries that trade together dont go to war with each other and an open worldwide free trade represents the "end of history". Or not.

jawooga

slowmart wrote:

With LIam Fox denouncing UK business as fat and lazy doesn't bode well for business friendly outcomes as he seems as much in touch with reality as Donald, expect Donald has has a proper job. Unlike that **** Fox.

Cunning?

RideOnTime

slowmart wrote:

so your company or employer has been trading for the last 20 years and growing revenues in the UK and Europe.

Now free access to Europe is in question. It could be no change or alternatively your products or services will attract a tariff when exported which suddenly makes them more expensive. Factor in currency fluctuations means another uncertainty. Ok you can hedge on currency movements but it's another risk but still a cost to cap.
we're not in the Euro though so currency fluctuations have always been an issue.
I doubt any UK manufacturers will invest with the current landscape so clouded and any UK subsidiary of a European entity will no doubt look to focus and grow areas of certainty.
why?
look at the tax revenues by UK region https://www.gov.uk/government/uploads/s ... 13_14.xlsx and you'll see a disproportionate amount from London and the SE when compared to the rest of the U.K.

Lots of people rightly view the financial markets and economy as unworthy but as a tax generator for industry sector, it remains a significant contributor to HMG. If London starts to lose traction as a financial centre then we need to find tax revenues from elsewhere or reduce spending.
but London's markets have always traded against/with sterling and there's no change.
I know of one start up bank which has been seriously hit by funding issues post brexit, simply because of the uncertainty or next steps.

With LIam Fox denouncing UK business as fat and lazy doesn't bode well for business friendly outcomes as he seems as much in touch with reality as Donald, expect Donald has has a proper job. Unlike that **** Fox.

Let's hope ISIS raid the residence of Boris, Fox and Davies and do us all a favour.

tangled_metal

Take the car industry. EU car companies are set up for a supply chain based across the EU. You make a widget in the UK from raw materials made in Czech republic. Then you ship the product to a Polish company who puts it into a thingymajig. That comes back to UK to go into a bigger assembly that then goes back to Germany to go into your nice shiny new BMW that comes back to UK for you to buy.

That's all set up because all these nations are in the EU with free movement of goods without tariffs between each country. The worst you'll get is the certificate Germans insist you fill in if you buy anything that goes through Germany. It's a simple form to say the goods came from EU country and is being used in an EU country.

So Britain leaves without free trade agreement. WTO trade tariffs are most likely until trade agreement is signed. With tariffs dropping to not very high levels compared with the past they're not an issue for you buying goods in. What is the issue the movement back and forth with the paperwork needed. That will cause significant costs that will result in car industry based in EU deciding to leave British companies out of new supply chains for new models. That is unless.the UK companies are big enough to absorb.the costs. Smaller companies in the large UK automotive sector might not win the OEM work.

I'm sure there other industries that'll have EU wide supply chains.

This might not affect you but the automotive sector has been a great success over recent years. Brexit could really hit hard but will probably do ok once an agreement is made. Fortunately not so much stress yet because we're still in.the free trade zone. Plus the pound vs the euro makes product cheaper in the rest of the EU right now.

It'll all come out in the wash, eventually. British economy is big enough to be sufficiently important for other nations and supranational groupings to want to get an agreement with. It's just how far up the priority list we are. I doubt very much we're bottom of USA list like Obama said. EU won't end up being too difficult I think. Business wants the stability of free trade and all governments dance to industrial lobby in the end.

Besides there's enough EU countries with large Euro-sceptic political groupings. There's other nations with issues over the EU as it is I'm sure. Reality will kick in and those politicians spouting threats about making the UK plead for agreements, beg or suffer will disappear under the stones they came out from. It's just how long we'll see the issues over being out of all free trade agreements affect the economy and industries that trade around Europe and rest of the world.

Stevo_666

Tangled Metal wrote:

Take the car industry. EU car companies are set up for a supply chain based across the EU. You make a widget in the UK from raw materials made in Czech republic. Then you ship the product to a Polish company who puts it into a thingymajig. That comes back to UK to go into a bigger assembly that then goes back to Germany to go into your nice shiny new BMW that comes back to UK for you to buy.

That's all set up because all these nations are in the EU with free movement of goods without tariffs between each country. The worst you'll get is the certificate Germans insist you fill in if you buy anything that goes through Germany. It's a simple form to say the goods came from EU country and is being used in an EU country.

So Britain leaves without free trade agreement. WTO trade tariffs are most likely until trade agreement is signed. With tariffs dropping to not very high levels compared with the past they're not an issue for you buying goods in. What is the issue the movement back and forth with the paperwork needed. That will cause significant costs that will result in car industry based in EU deciding to leave British companies out of new supply chains for new models. That is unless.the UK companies are big enough to absorb.the costs. Smaller companies in the large UK automotive sector might not win the OEM work.

I'm sure there other industries that'll have EU wide supply chains.

This might not affect you but the automotive sector has been a great success over recent years. Brexit could really hit hard but will probably do ok once an agreement is made. Fortunately not so much stress yet because we're still in.the free trade zone. Plus the pound vs the euro makes product cheaper in the rest of the EU right now.

It'll all come out in the wash, eventually. British economy is big enough to be sufficiently important for other nations and supranational groupings to want to get an agreement with. It's just how far up the priority list we are. I doubt very much we're bottom of USA list like Obama said. EU won't end up being too difficult I think. Business wants the stability of free trade and all governments dance to industrial lobby in the end.

Besides there's enough EU countries with large Euro-sceptic political groupings. There's other nations with issues over the EU as it is I'm sure. Reality will kick in and those politicians spouting threats about making the UK plead for agreements, beg or suffer will disappear under the stones they came out from. It's just how long we'll see the issues over being out of all free trade agreements affect the economy and industries that trade around Europe and rest of the world.

Good post. Saves me typing a bit.

The automotive sector is a good example. The pressure is already being applied on both sides of the channel. My opposite number at the UK arm of a large German car manufacturer told me that his parent company was already lobbying hard in the EU corridors of power (as well as lobbying the German Govt) and also that here in the UK a delegation from the auto manufacturers association (including some of the substantial Japanese concerns over here) have been meeting with UK officials responsible for BREXIT negotiations.

finchy

It all depends on migration. If the government prioritises cutting immigration over a trade deal, we'll be made to suffer. If we accept something along the lines of a deal such as Norway and Switzerland have, things will get back on track.

So the government need to stop f**king around and tell the people of this country that they can't deliver on both cutting immigration AND access to the single market, the government is going to have to choose one or the other.

RideOnTime

Tangled Metal wrote:

Take the car industry. EU car companies are set up for a supply chain based across the EU. You make a widget in the UK from raw materials made in Czech republic. Then you ship the product to a Polish company who puts it into a thingymajig. That comes back to UK to go into a bigger assembly that then goes back to Germany to go into your nice shiny new BMW that comes back to UK for you to buy.

That's all set up because all these nations are in the EU with free movement of goods without tariffs between each country. The worst you'll get is the certificate Germans insist you fill in if you buy anything that goes through Germany. It's a simple form to say the goods came from EU country and is being used in an EU country.

So Britain leaves without free trade agreement. WTO trade tariffs are most likely until trade agreement is signed. With tariffs dropping to not very high levels compared with the past they're not an issue for you buying goods in. What is the issue the movement back and forth with the paperwork needed. That will cause significant costs that will result in car industry based in EU deciding to leave British companies out of new supply chains for new models. That is unless.the UK companies are big enough to absorb.the costs. Smaller companies in the large UK automotive sector might not win the OEM work.

I'm sure there other industries that'll have EU wide supply chains.

This might not affect you but the automotive sector has been a great success over recent years. Brexit could really hit hard but will probably do ok once an agreement is made. Fortunately not so much stress yet because we're still in.the free trade zone. Plus the pound vs the euro makes product cheaper in the rest of the EU right now.

It'll all come out in the wash, eventually. British economy is big enough to be sufficiently important for other nations and supranational groupings to want to get an agreement with. It's just how far up the priority list we are. I doubt very much we're bottom of USA list like Obama said. EU won't end up being too difficult I think. Business wants the stability of free trade and all governments dance to industrial lobby in the end.

Besides there's enough EU countries with large Euro-sceptic political groupings. There's other nations with issues over the EU as it is I'm sure. Reality will kick in and those politicians spouting threats about making the UK plead for agreements, beg or suffer will disappear under the stones they came out from. It's just how long we'll see the issues over being out of all free trade agreements affect the economy and industries that trade around Europe and rest of the world.

but these tariffs, are they not relatively small %'s, and are they not cancelled out by the general fall in the £, ie we remain competative...

slowmart

It looks like Boris, Davies and Fox have dropped the pledge for £350 million a week into the NHS.

The Japanese governments open letter asked for

Maintenance of trade in goods with no burdens of customs duties and procedures
Unfettered investment
Maintenance of an environment in which services and financial transactions across Europe can be provided and carried out smoothly
Access to workforces with the necessary skills
Harmonised regulations and standards between the UK and the EU

The demands are framed for certainty in a business context. Japanese car manufacturers employ 140k UK workers and for the Japanese government to send an open letter with such direct language shows the level of concern that's being felt by foreign companies with UK subsidiaries.

You could ask yourself if the demands are met why we have the referendum.


Unfortunately the dickheads we have in charge are more about self advancement than serving the public.

surrey_commuter

Yes trade agreements matter or countries would not join trading blocs or spend several years negotiating them with other countries/blocs. This goes beyond so called experts and reaches the point of universally accepted.

The assumptions that we will be alright because it is the only logical outcome ignores the fact that there are enough complete loonies amongst Tory MPs who would happily vote down their own govt.

tangled_metal

RideOnTime wrote:

but these tariffs, are they not relatively small %'s, and are they not cancelled out by the general fall in the £, ie we remain competative...

Tariffs I believe if you base them on WTO rules may be small but with the automotive sector there is likely to be movement of goods in and out of the UK/EU several times. This can add up. But it's more than that, there's export paperwork. At the moment bringing raw materials in through Germany (as one of the most bureaucratic/rules based nations) you have a certificate to say the goods came from an EU nation and arrived in the UK on a certain date to be used in the UK. After Brexit you'll have a lot more paperwork, possibly needing a chamber of commerce certificate costing £50 a time (possibly more now since it's 10 years since I used to deal with them).

Still, at its worst the EU is unlikely to be as bad as dealing with Russians. Everything in 4 copies. Contracts signed by each party including initialization of each page. Then export documents are lengthy and time consuming. Then you have to send paperwork to the Russian/UK chamber of commerce in London to get checked and a certificate. Then.... well let's just say it's ridiculous. Of course anything is found to be even slightly wrong such as a typo then you start over from scratch. We had one contract delivering to the Russian arm of a UK company. The documentation needed to deliver to Russia cost us so much it ate right into the profit. We never dealt with Russia again. Company decision.

My point is tariffs aren't the only issue or cost. It's possibly the documentation and process of export/ import that's likely to cause cost to the UK business. We have precious little manufacturing compared to Germany so anything successful like automotive sector needs all the help it can get. Brexit isn't a help. We're heavily integrated with the rEU supply chain in the automotive sector. Value of the pound isn't as much of an issue, Brexit costs could be a tipping point though. Many British automotive jobs could go as BMW and others decide to buy from the remaining nations of the EU.

Still it might give opportunities elsewhere but I'm sceptical it will replace automotive sector jobs that could be lost. BTW IME Germans prefer to buy from Germany. French are the same. Any increase in costs could mean German units of global automotive component manufactures take work from the UK unit which means UK suppliers lose out. I'm actually worried.

tangled_metal

BTW Automotive sector work on models. Each model results in work going to the supply chain. They can change suppliers in the middle of a model's lifetime but usually if a small 2nd tier supplier gets a particular job for a model they work very hard to keep it. It's typically up to 10 years work with servicing. During that period cost downs are expected. Export and import costs because of no free trade agreements could be make those cost downs impossible. Work no longer lasts 5 to 10 years but is lost after a year. New model work doesn't come up all the time, they take time to get and to go through planning/development. You lose these big OEM work you've got a big hole to fill. That's jobs gone straight away.

The impact of Brexit hasn't even started to show itself. Seriously, it's all to come. I think I might retrain and get out. Manufacturing might not be the best sector to be in.

TheBigBean

Economists like trade agreements as they reduce barriers to trade freeing up the markets. Free markets solve all problems in the eyes of some economists. There is a range of views e.g. most economists will concede that the free market has not been all that good at tackling environmental concerns. Therein lies the problem with trade agreements - they are often at odds with democracy e.g. if the UK doesn't produce oil and decides to massively subsidise renewables as demanded by the population, the country that currently provides the oil gets in a huff at the perceived protectionism and wants protection against this at the outset.

Therefore, I think we will see a continued push back against them by the population (see TTIP) and continued push forward by corporations. Whether they are a good thing really depends on how much you value the right of the electorate to insist its government does something (minimum price on alcohol, nationalisation etc. etc.) for social good rather than economic gain.

joelsim

Don't worry Pike.

David Davis: Brexit may be “the most complicated negotiation of all time. By comparison, Schleswig-Holstein is an O-Level question."

A mere 2 1/2 months after the ref, Davis has realised what we've known since 24th June (or before if you listened to experts).

He's going to get onto it just as soon as he's learned how to tie his shoelaces.

I'm beginning to think it was a Remain masterpiece putting Huey, Louis and Dewey in charge of Brexit.

surrey_commuter

TheBigBean wrote:

Economists like trade agreements as they reduce barriers to trade freeing up the markets. Free markets solve all problems in the eyes of some economists. There is a range of views e.g. most economists will concede that the free market has not been all that good at tackling environmental concerns. Therein lies the problem with trade agreements - they are often at odds with democracy e.g. if the UK doesn't produce oil and decides to massively subsidise renewables as demanded by the population, the country that currently provides the oil gets in a huff at the perceived protectionism and wants protection against this at the outset.

Therefore, I think we will see a continued push back against them by the population (see TTIP) and continued push forward by corporations. Whether they are a good thing really depends on how much you value the right of the electorate to insist its government does something (minimum price on alcohol, nationalisation etc. etc.) for social good rather than economic gain.

Free trade and free markets are not the same thing.

Economists like free trade because it is proven to increase trade and GDP. Every business gets to sell to a much larger market.

TheBigBean

Surrey Commuter wrote:

TheBigBean wrote:

Economists like trade agreements as they reduce barriers to trade freeing up the markets. Free markets solve all problems in the eyes of some economists. There is a range of views e.g. most economists will concede that the free market has not been all that good at tackling environmental concerns. Therein lies the problem with trade agreements - they are often at odds with democracy e.g. if the UK doesn't produce oil and decides to massively subsidise renewables as demanded by the population, the country that currently provides the oil gets in a huff at the perceived protectionism and wants protection against this at the outset.

Therefore, I think we will see a continued push back against them by the population (see TTIP) and continued push forward by corporations. Whether they are a good thing really depends on how much you value the right of the electorate to insist its government does something (minimum price on alcohol, nationalisation etc. etc.) for social good rather than economic gain.

Free trade and free markets are not the same thing..

It is hard to have one without the other.

Surrey Commuter wrote:

Economists like free trade because it is proven to increase trade and GDP. Every business gets to sell to a much larger market.

It enables specialisation which means each country focuses on producing what it is good at, therefore worldwide production of everything increases and worldwide market prices for products are realised.

kingstongraham

TheBigBean wrote:

Surrey Commuter wrote:

Economists like free trade because it is proven to increase trade and GDP. Every business gets to sell to a much larger market.

It enables specialisation which means each country focuses on producing what it is good at, therefore worldwide production of everything increases and worldwide market prices for products are realised.

Which also has its potential drawbacks as far as an individual country's security is concerned.

TheBigBean

kingstongraham wrote:

TheBigBean wrote:

Surrey Commuter wrote:

Economists like free trade because it is proven to increase trade and GDP. Every business gets to sell to a much larger market.

It enables specialisation which means each country focuses on producing what it is good at, therefore worldwide production of everything increases and worldwide market prices for products are realised.

Which also has its potential drawbacks as far as an individual country's security is concerned.

Indeed. See my comment above about reconciling democratic views with free trade.

Practice isn't always the same as theory. I think this ecomonic / finance question is really revealing.

http://twothirdsofaverage.creativitygames.net/

surrey_commuter

TheBigBean wrote:

Surrey Commuter wrote:

TheBigBean wrote:

Economists like trade agreements as they reduce barriers to trade freeing up the markets. Free markets solve all problems in the eyes of some economists. There is a range of views e.g. most economists will concede that the free market has not been all that good at tackling environmental concerns. Therein lies the problem with trade agreements - they are often at odds with democracy e.g. if the UK doesn't produce oil and decides to massively subsidise renewables as demanded by the population, the country that currently provides the oil gets in a huff at the perceived protectionism and wants protection against this at the outset.

Therefore, I think we will see a continued push back against them by the population (see TTIP) and continued push forward by corporations. Whether they are a good thing really depends on how much you value the right of the electorate to insist its government does something (minimum price on alcohol, nationalisation etc. etc.) for social good rather than economic gain.

Free trade and free markets are not the same thing..

It is hard to have one without the other.

I think the UK would happily do a free trade deal with China

Surrey Commuter wrote:

Economists like free trade because it is proven to increase trade and GDP. Every business gets to sell to a much larger market.

It enables specialisation which means each country focuses on producing what it is good at, therefore worldwide production of everything increases and worldwide market prices for products are realised.

surrey_commuter

kingstongraham wrote:

TheBigBean wrote:

Surrey Commuter wrote:

Economists like free trade because it is proven to increase trade and GDP. Every business gets to sell to a much larger market.

It enables specialisation which means each country focuses on producing what it is good at, therefore worldwide production of everything increases and worldwide market prices for products are realised.

Which also has its potential drawbacks as far as an individual country's security is concerned.

IMHO the security issue is a red herring. It is difficult to envisage a time where were blockaded and needed, for instance, our own domestic steel industry

TheBigBean

Surrey Commuter wrote:

I think the UK would happily do a free trade deal with China

Only one that would allow the market economy of China to compete with the market economy of the UK. It wouldn't allow state subsidised entities to compete against the free market. This is the reason trade agreements take ages to agree, and the reason that the EU, for example, has lots of rules about state aid.

kingstongraham

Surrey Commuter wrote:

kingstongraham wrote:

TheBigBean wrote:

Surrey Commuter wrote:

Economists like free trade because it is proven to increase trade and GDP. Every business gets to sell to a much larger market.

It enables specialisation which means each country focuses on producing what it is good at, therefore worldwide production of everything increases and worldwide market prices for products are realised.

Which also has its potential drawbacks as far as an individual country's security is concerned.

IMHO the security issue is a red herring. It is difficult to envisage a time where were blockaded and needed, for instance, our own domestic steel industry

I must be really good at the envisaging stuff then. It's not necessarily about being blockaded, it's about being beholden.

TheBigBean

Surrey Commuter wrote:

kingstongraham wrote:

TheBigBean wrote:

Surrey Commuter wrote:

Economists like free trade because it is proven to increase trade and GDP. Every business gets to sell to a much larger market.

It enables specialisation which means each country focuses on producing what it is good at, therefore worldwide production of everything increases and worldwide market prices for products are realised.

Which also has its potential drawbacks as far as an individual country's security is concerned.

IMHO the security issue is a red herring. It is difficult to envisage a time where were blockaded and needed, for instance, our own domestic steel industry

Security comes in many forms. It also means that Ghana doesn't want the success of its entire economy to follow the price of cocoa, some people don't like the UK's economy being so exposed to finance, and no one wants a country to have a monopoly on the production of anything.

4kicks

I agree that in the UK/EU example the national security issue is a red herring, if for no other reason than we will, eventually, end up with a trade agreement, how onerous to the UK remains to be seen.
But in a wider context, insular countries, once they have stopped trading with their neighbors, are much more likely to go to war with them, which is one of the reasons an increasingly isolationist US under a Trump presidency is a horse of a different colour.

RideOnTime

4kicks wrote:

I agree that in the UK/EU example the national security issue is a red herring, if for no other reason than we will, eventually, end up with a trade agreement, how onerous to the UK remains to be seen.
But in a wider context, insular countries, once they have stopped trading with their neighbors, are much more likely to go to war with them, which is one of the reasons an increasingly isolationist US under a Trump presidency is a horse of a different colour.

absolutely...

florerider

import duties and access to markets.

RideOnTime

I feel we're straying into Trump thread territory...