TPT July 2024

INDUSTRY 360

First, that long peaceful and prosperous era benefitted some companies and some executives more than others. Many in the industrialised world felt as though they were losing out. These feelings turned into demands for tougher trade policies. Second, the authors note that supply disruptions caused by the pandemic led to more calls for protectionist policies. A third and final disruption concerned the supply of natural gas, distributed from its Eastern European origin to customers in the UK and in Western Europe. The World Trade Report 2023 concurs with “The Growing Threats to Global Trade” in that geopolitical upsets contribute to trends toward isolation. “Viewing interdependence as a vice rather than a virtue, policymakers are now placing greater emphasis on economic independence.” The report cites the number of trade concerns raised in meetings conducted by its Council for Trade in Goods from 2015 to 2022. A total of eight concerns were addressed in its three meetings in 2015. During 2022, it addressed 130 such concerns. The report also tracked the number of policies introduced to hamper trade (“newly imposed countervailing measures”) since 1995. During the first decade of its tally, 1995 to 2005, the report cited a total of 113. From the most recent decade, 2012 to 2022, it found more than twice that amount at 237. The report also examines trade that takes place within formal trade blocs and compares that with trade between formal trade blocs. Throughout 2019 and 2020, trade within exceeded trade between, but the gap narrowed from 2020 to 2022, a sign of greater interdependence. Since February 2022, the gap widened, suggesting independence was again prevailing. Brexit’s aftermath The overarching theme is that international trade is mutually beneficial, offering prosperity and lasting peace. While growing interdependence does have some drawbacks, these are overshadowed by the aggregate, cumulative benefits. It’s a short leap of logic to conclude that the most efficient way to reap the greatest benefits is to join a trade bloc. Membership in a trade bloc isn’t without costs. Members must support the trade bloc’s administration and abide by its rules. Stated another way, members must support a vast, opaque bureaucracy that strangles its members with red tape. Measuring the benefits and weighing them against the drawbacks is difficult,but this didn’t stop the “Leave” contingent from declaring that the UK would benefit from exiting the EU. Four years on, it’s not easy to find any news articles that tout the virtues of leaving. While much of the reporting is straightforward, quite a bit of it seems unnecessarily vicious. In an article published by the Wall Street Journal titled “Britain to world: don’t let what happened to us happen to you”, author Greg Ip hammers away at Britain’s plight mercilessly. He cites inflation, the labour market, the excessive amount of stimulus the government poured into the economy and how little the government has to show for its efforts. An editor-in-chief (emeritus) at Bloomberg News, Matthew A Winkler, is similarly savage in an article titled “Brexit’s Lasting Damage is Looking Inescapable.” Winkler cites a lengthy list of criteria in which the UK was a leader in the EU, listing gross domestic product, GDP per capita growth, the unemployment rate and its debt, equity and currency valuations, and his rant runs three pages. Both authors cite hard data, so the points they make are solid, but they seem to have spent inordinate amounts of time devising ever-more-clever ways to measure Britain’s misery.

Despite the shocks of Brexit, Covid-19, and skyrocketing energy prices in the 2020-2022 timeframe, imports and exports returned to trend in 2022 Sources: The Office for National Statistics

Brexit was a setback, but noteworthy is that the GDP per capita in the UK is still greater than that of the EU. Londoners survived the Blitz; Britons can survive this. Change is never easy, and greater interdependence in trade does leave some wreckage. A detailed look at the history of noteworthy steelmaking centres, such as Pittsburgh in the US and Sheffield in the UK, illustrates the appeal of putting up trade barriers. The job displacements in the 1980s were unbearable to legions of steelworkers and the families they supported. Yet, change is inevitable, and the effects can be tempered if they are managed well. The losses in Pittsburgh and Sheffield bordered on tragic, but both rebounded. Sheffield’s fortunes were on the rise in the early 2000s. The local economy doubled in size from 1997 to 2007, and it garnered accolades for its business-friendly environment. Its population today is greater than it was in 1970. Pittsburgh has gone through a similar revival as its economy diversified away from steel. Watching a traditional industry wither is heartbreaking, but it is a necessary facet of capitalism. Austrian economist Joseph Schumpeter described it succinctly as “creative destruction”. Isolation prolongs the withering process. Britain’s steel output fell from 150.8 in 2015 to a mere 100 in 2019, then surged before falling further still to 29.5 in 2023. Meanwhile, automobile production fell from a recent high of 1.72 million units in 2016 to 0.78 million units in 2022, before climbing again. Sources: Statista Inc and the Office for National Statistics

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JULY 2024