04/07/2015
I've been doing a bit of thinking. Instead of always reacting to the Europhile arguments, we should be taking the initiative and breaking open their claims with some in-depth studies of our own. But we can only do this is we can get past the basics and start focusing on these instead of rehearsing ancient arguments.
With some powerful minds in play - and with Owen Paterson beginning take control of the agenda - I am at last a little hopeful that we can see an end to some of the internal squabbling, and the next few weeks could be pivotal. If some semblance of unity is possible, it will be these people, with the ExCom (as we much now call it), who will make it possible.
But our own group, the Referendum Planning Group (RPG) will also have had an important part to play. Niall Warry, of The Harrogate Agenda, Edward Spalton of the CIB, Robert Oulds of the Bruges Group, and Anthony Scholefield, with his
Futurus think tank, have all been putting in a massive amount of unpaid work, all directed at making an effective campaign happen.
That said, we will continue to see creative tensions, and it is the constant flow and exchange of ideas on this blog which gives me so much encouragement and inspiration. That's even (or especially) when I'm dealing with my own "black dog", or in throat-ripping mode with the sheer frustration of trying to overcome the obstacles and push the agenda forward.
But what brings all this to a head is a piece in yesterday's
Financial Times, one picked over on twitter, as it is another of those FUD pieces on the car industry, this one headed: "German carmakers raise fears over Brexit".
The article itself has carmakers worried about disruption of supply chains, and then lets Matthias Wissmann, president of the VDA, the German carmakers' association, tell us that:
Britain would no longer be part of the single market. And questions of regulation would have to be negotiated, as we do now with Switzerland, between the UK and the EU. This could lead to difficulties on both sides.
This is entirely typical of the genre but, if the Eurosceptic community were united behind a determination to continue participation in the single market after we leave the EU, then this sort of claim, by now, would have withered on the vine. Instead, in the face of so many Eurosceptic factions which actually want us out of the single market, we are left with the weary task of shouting from the margins that we can maintain the single market, and none of the manufacturers' concerns would materialise.
Furthermore, when it comes to regulatory issues, we know full well that the bulk of vehicle regulation is now coming from
UNECE, and the WP.29 agreements, to which both the EU and the UK are contracting parties. There is little chance under any circumstances, therefore, that we will lose regulatory convergence, so there would be few "questions of regulation" which would arise.
Given the
Flexcit scenario, therefore, the effects on the car industry if Britain left the EU would be neutral â and that applies to continental car-makers as well.
However, over term, we have seen endless propaganda from the pro-EU press, such as in the
Guardian and the
Financial Times, with a thoroughly dishonest report commissioned by the
SMMT arguing that "Europe is fundamental to the current and future success of the UK automotive industry".
When I was researching for this piece, though, I started to get a glimmer of a different vision which, far from supporting this claim, actually completely contradicts it. The UK car industry could very well be much better off outside the EU. Leaving would not be neutral but actively beneficial.
Nevertheless, the essence of this argument is complex. As it stands, the volume market in Europe is vastly over-supplied and competition is high, while car owners, taking advantage of improved manufacturing standards, are keeping their cars longer. As a result, there is enormous price pressure and, while production is expanding,
overall profitability is poor.
For the industry, there are different ways of addressing this, but one way is to take advantage of the EU's single market (which for tariff purposes also includes Turkey) and move production to low-cost plants in eastern or central Europe of to Turkey. This is a trend which is
expected to continue. It is even happening with
high end production.
On the other hand, a way Britain can improve national revenue is to re-shore component manufacture, as we see from the
Telegraph which tells us that only about a third of the parts that go into cars made in Britain are sourced here. By comparison, we are told, the figure in Germany is about 60 percent.
The German situation is presented as if this was a good thing, and efforts
are being made to grow the UK supply chain. But one gets a clue from
this report from the European Centre for International Political Economy (ECIPE) that it is not such a good idea.
ECIPE sees that lack of globalisation as a bad thing, partially explained by EU tariffs on car components and manufacturing equipment. Tariffs, it says, have more prohibitive effects on car supply chains due to the low margins and the vast number of technologies and components that are involved.
Given the variety of components and the vast number in each car (up to 30,000), it is unlikely that components are best sourced from one country or even one region. Tariffs put EU manufacturers "in a disadvantaged position".
Rather than protecting EU components and machinery manufacturers - since the R&D efficiency in the EU on average is lower, and better technologies are available from subcontractors abroad â we end up paying more for less-advanced components.
By leaving the EU, we are able to widen our sourcing and take advantage of the global supply chain. The net result is that we are able to make better, cheaper cars, improving our competitive position. And there is
good evidence that, by transferring work to global suppliers, competitiveness improves. It also improves access to emerging markets - if we buy components from emerging markets, they tend to be more inclined to buy our cars.
What we lose in low-value component production, therefore, we gain in increased sales of finished vehicles and improved profitability. It is the need to improve profitability which is
the greatest challenge and, if the UK industry can do that, we stand a better chance of keeping indigenous production. If plants are profitable, there is less temptation to move them to low-cost production centres.
Absolutely to nail this case would vastly strengthen the "no" campaign, but instead of doing this type of ground-breaking research, we and others are constantly having to devote our energies on revisiting the same issues, and going back to fight the same battles, all because there is no agreement on the basics.
Essentially, therefore, there is an urgent need to settle the basics, so that we can widen our own research base, and start doing real damage to the opposition. But if we keep getting dragged back to rehearse the same old arguments, instead of moving on, this ain't going to happen.
As for the scaremongering on the car industry, the
evidence indicates that we are more like to lose our industry than keep it, if we stay in the EU.
