Siemens sums up what UK manufacturing is and the export market with Europe and the rest of the world.
"Siemens employs 14,000 people in Britain, from wind power, to turbo-machinery, transport signals, MRI scanners, and health care diagnostics, mostly in highly-skilled jobs. It is a central pillar of Britain’s manufacturing and hi-tech sector, crucial to a nexus of sub-contractors.
Mr Kaeser said the company would
step up investments in UK research and innovation regardless of whether there is any trade deal, and would build a new factory to manufacture railway rolling stock “in a heartbeat”
if it won the order. Less clear is whether any trains would be for the export market, and exports are what the UK vitally needs to plug a current account deficit of 7pc of GDP.
Juergen Maier, head of Siemens UK, said the company is not calling for a Norway-style trade deal within the European Economic Area, or for any specific formula that would
safeguard UK access to the EU single market. “Obviously, the closer we can get to free trade, the better it will be,” he said.
"The company warned before the referendum that plans to expand its wind turbine plant in Hull might be frozen if there was a vote to leave, but Mr Kaeser was careful to stress that it was far too early to reach any conclusion. “The Hull investment is not in trouble at all. It was built for the projects we have and for those we anticipate getting,” he said.
"The problem could arise later with the
Phase II expansion of the plant intended to serve the export market and create a manufacturing hub large enough to serve a 70 gigawatt capacity of renewable energy, and to drive down costs by 30pc to 40pc.
Blades would still be built in the UK for the local market but it might no longer be worth trying to ship them to Denmark and Germany. “If there were trade barriers, it would lead straight to higher costs. We would lose economies of scale,” he said. Telegraph
Ambrose Evans-Pritchard 11 JULY 2016.
Siemens would not be wanting any sort of tariff trade war that will lead to higher costs and this will affect their investment plans in Hull, for instance. Also, Siemens are clear, as are most foreign firms, 'if you give us the contracts we will invest. If not we wont'. They hold a good hand due to the lack of UK manufacturers.
A tariff war would not help Germany or the UK. Many jobs in Britain are dependent of German companies who have built plants here to send parts back to Germany for say German cars. Tariffs would make the parts more expensive and the Uk would lose economies of scale.
"In the UK, 37% of the total value of spend in the supply chain (£33 billion in 2012) is currently sourced locally. Depending on the manufacturer, between 20-50% is imported from the EU and the rest from outside the EU".
A tariff would increase the cost of components for UK made cars which would make them more expensive. Also protectionist measures by the likes of China and Brazil will hinder the UKs ability to strike up trade deals in cars.
"However, growth is impeded by protectionism and trade barriers Emerging markets have been increasing the use of trade barriers to defend themselves against free trade, particularly through the economic downturn.
In June 2013, the ACEA, the European Automotive Manufacturers Association, highlighted 154 new tariffs and restrictive measures that had been introduced over the previous 12 months. China is an important growth market for UK built premium and luxury cars. However, growth is hindered by trade and tariff barriers. For instance, the Range Rover Evoque currently attracts a 25% import tariff, 17% sales tax and 9% consumption tax in China.
Brazil also increased its import tariff across a range of imported goods in October 2012 including vehicles. It has targeted the car industry through the Inovar-Auto programme, which incentivises OEMs to establish local manufacturing plants through reduced import tariffs2". The UK Automotive Industry and the EU An economic assessment of the interaction of the UK’s Automotive Industry with the European Union April 2014 kpmg.co.uk
Protectionism is being partly blamed for a slow down in the world economy. Attempting to overcome protectionism measures in very difficult indeed. A UK trade negotiator would have to be able to offer China and Brazil something in return for lowering their tariffs on cars for instance. Allowing China to 'dump' steel in the UK would be a hot topic of conversation.
There is no guarantee that trade talks with the US will run smoothly if Trump is elected. He is very keen on protectionist measures for US industry and commerce.
The financial sector is the UKs Achilles heel when it comes to trade deals with Europe.
"In the EU, the UK has by far the largest financial sector and the British financial industry has strongly benefited from access to the single financial market. According to
data from TheCityUK, a financial sector lobby group, the EU is the biggest market for UK exports of financial services, generating a trade surplus of £15 billion, a third of the UK’s total trade surplus in financial services, which totalled £46 billion in 2012. The UK’s financial services trade surplus with the EU has more than doubled over the past decade.
About 70% of the EU’s foreign-exchange trading and 40% of global trading in euros takes place in the UK. The UK
hosts 85% of the EU’s hedge-fund assets, 42% of EU private-equity funds, half of EU investment bank activity, half of EU pension assets and international insurance premiums".
Frankfurt and Paris have already started the charm offensive towards the financial sector to move to their cities. As long as the UK is/was in EU it was able to fend off, not completely mind, overtures by Paris and Frankfurt to tax UK financial sector.
Neither Germany nor the UK has the upper hand when it is to do with tariffs/trade deals. Germany is interested in trade in goods and the UK is more interested in protecting its financial services.
It will be interesting to see what compromise the UK and the EU arrive at regarding trade and migrants. Maybe, it will be let those migrants here already stay. And future migration with limits -a points based or employer based system on new arrivals. But if David Davis' comments about, 'not wanting another internal border, between England and Scotland, as there is between Northern Ireland and the Republic' is anything to go by then the UK is being led by a person out of their depth.
