Bombardier Bombarded: A Lesson for Brexiteers

The Canadian aircraft manufacturer, Bombardier, has suffered a huge blow at the hands of the US regulatory system: a tariff of 220% has been imposed on imports of its new aircraft to the USA: one of whose airlines has ordered 75 of the planes, with a further order pending. Both the British and Canadian governments have made grants to the company, to maintain its technological capabilities and to protect employment in Canada and in Northern Ireland; and Boeing, the US aircraft builder has cried 'foul' even though the new planes will not compete directly with any of their products.

Boeing has massive contracts with the US military and with NASA. The prices set on such products are necessarily sufficient to support the research and development that is necessary to design and build the craft and devices: thus giving Boeing a comfortable profit base that exempts the firm from any need openly to seek subsidies for its civil aviation sections. Bombardier - the former Short Brothers in Northern Ireland - now has little demand from the British defence sector, which is so strapped for funds that the national defences have been excessively depleted and the country only manages to present figures showing that it meets the NATO target of 2% of GNP on defence by cooking the books rather brazenly. It is absolutely essential that a country purporting to be any sort of power invests hugely in defence technologies, which are expensive. The more innovative the defences are, the more they are likely to cost: and the more effective they are likely to be. It is a quaint paradox that some of Corbyn's 'loony-left' colleagues are more likely to see this than are Tory Brexiteers, because they can see the linkage between economic development and military might in Russia, China and the USA.

On the same day as the US decision was taken on the new tariff, the British train building section of Bombardier also received very bad news. A long-planned consortium arrangement with Siemens to build a new generation of trains for the world market was abandoned by the German firm in favour of an alliance with the French firm, Alstom. This has, allegedly, been engineered at the behest of President Macron, whose government is reviewing all major sectors of the economy with a view to ensuring that the French presence in each, within a European context, is the best that it can be from a chauvinistic French viewpoint. Brexit Britain can expect many more similar snubs from the Macron regime.

Both these stories teach the lesson that an isolated Britain depending on free trade agreements under WTO rules cannot succeed. WTO rules do not prevent the US paying Boeing top prices for research of incalculable value. WTO rules will not stop President Macron's chauvinistic plans from coming into effect. Cash tariffs are trivial obstacles to trade, compared with regulations on product standards and safety that can be manipulated in to assist favoured products, and the 'needs of national defence'. The naive optimism of 'hard' Brexiteers is a form of idiocy. Unless the UK remains within the European Economic Area, with all its common standards and definitions, British firms and their products will be picked off [by being deemed not to meet standards] one by one, as their European competitors develop their capacity to supply the equivalent of their former exports.

British airlines and train companies are under no pressure to buy British: so the demise of the bombardier plant in Belfast and Derby is threatened. British jobs can be lost, and with them generations of accumulated knowledge: and the dimmer Tories won't even weep into their whiskies. Of course, there are intelligent people of conservative cast of mind: but few of them are content with the present deeply-riven government, and even fewer are comfortable about the prospect of a 'hard Brexit'. Despite his Marxist blinkers, John McDonnell shows some awareness of these issues. As the parties stand at the end of the Labour Conference today, Labour has the best of the bad arguments. I do not expect the Tories to gain any ground when they meet in conference next week.

Straws in the Wind

The extreme Tory Brexiteers are not quite so thick that they all fail to realise that once the nation understands the extent of the damage that a 'hard Brexit' will do to the economy, the government will have to back away from that option. So their tactic has been to push as hard as possible for the government to adopt positions from which a complete retreat would be impossible.

As the government has started to publish slightly more precise position papers as a basis for negotiations with the extremely well-prepared team around M Barnier it is clear than common sense is still present in most of the arguments and suggestions that are appearing. And while this moderate position is developing, so the events in the economy - and the predictions to which they trend - show that the UK would be ruined to an incalculable extent if it withdrew from the European Free Trade Area. Mrs May has made sticking-points [or 'red lines'] on immigration and the the ECJ [the European Court of Justice]. The immigration issue has been somewhat clarified by the discovery that the number of international students remaining in the UK when their visas expire each year is certainly less than 20,000: not the hundred thousand of the May myth. Also, the largest flows of immigrants by country of origin are India, Poland and Pakistan: the immigration that has been unaffected by the European policy of freedom of movement - that has always been under British control - is massive; and it is that migration that is of most concern to many people. On the issue of the European Court it is evident that some compromise will be made, that allows the ECJ a role in Britain that is not 'above' the British courts.

Meanwhile, the economic data stack up against the idiotic assertion that the UK can survive as an economic power, and maintain the people's living standards, outside the cocoon of the European Economic Area. Britain's growth is lowest among the G8, productivity is not improving, the decline of the pound [now 18% against the euro, since the referendum] more than offsets any benefit that the UK gets from its exports seeming cheaper in other countries; and government policy continues to be hurtful to firms and their capacity to invest. Today the Chambers of Commerce point out that three policy initiatives that lie within Mrs May's concept of a caring society are laying a heavy toll on business and on employment. The living wage has been increased, while the productivity of labour generally is not increasing. Mandatory workplace pensions are part payable by employers, and employees who have their share of the contribution to pay are seeking wage increases to pay it, so it is a double-whammy for employers. And in addition, the introduction of the apprenticeship levy on firms [according to the number of people they employ] will better educate those who could well become unemployed in coming years, as technological change makes the skill that the apprentices acquire become redundant]. An economy that should be training the young in the mathematics and in the principles of engineering and coding that support IT and AI [artificial intelligence] is instead preparing young people for jobs whose obsolescence is virtually inevitable.

The economy's capability to employ the whole available population increasingly depends on investment, adaptation and the rising productiveness of industry and commerce, on which productivity improvements depend. Living standards are now falling, and people are feeling it. Real wages are still lower than before the crash of 2008; and although the USA has begun to rein in Quantitative Easing and raise interest rates, and the European Central Bank is expected to so the same soon [it may announce steps in that direction at Jackson Hole this weekend] there is no sign that the Bank of England under Mr Carney - who is to be absent from Jackson Hole - has the opportunity of the bottle to do similar things.

As the extreme fragility of the British economy becomes more apparent, the idiocy of the Cameron-Clegg-Osborne gang and of their 'project fear' becomes more obvious. One can have slender sympathy for Mrs May as the inheritor of the mess and the inheritor of Brexiteer bullying, but not very much. She is grown up, and should be able to recognise the weakness of her negotiating stance. If she does not act on that basis, she will attract odium even greater than that which has settled in the Cameron clique.