Game Consoles and Brexit

It is odd how many people who rarely sell anything are so expert on trade policy. They lead you to think trade is created by regulations and not by a seller meeting a buyer’s need. Germany raised money to fund WW1 on the London market even after war had been declared in 1914. The market made the trade despite the politics. 

Modern markets strongly favour buyers who now have more choice, more information and because transport is cheap, better access to international markets. To the dismay of sellers, most buying is done by professional procurement teams. These teams exist to find buyers the right product or service, by price, risk and quality.

The more apocalyptic forecasts on Brexit trade disruption assume that buyers and sellers are poorly matched; that procurement departments have not found the best supplier and that ready alternatives exist. For example, that someone in Germany buying a washing machine from UK would be just as happy with an American or Chinese one. Or the German reinsurer placing business in London would be just as happy to place it in Bermuda.  In fact, Chinese washing machines and Bermudan re insurance were both available when the original trade with UK was done, but were judged by the buyer’s procurement process to be inferior.  Tarrifs and non tariff barriers will have an effect but they do not change the fact the market preferred the original trade. 

However, some goods rely on regulatory approval otherwise they cannot be traded at all. A regulatory ‘no go’ ends the trade completely unless the seller finds a work around. This is true of financial services, some medicines, food and much else.  The present Brexit debate is not differentiating between regulated and non regulated items. I for one would love to know the proportions. 

Of course, a supposed emphasis on standards can be mis-used in a highly political and protectionist way.  In the 70s France mandated that all imports of video recorders had to be safety checked at Poitiers. The government then employed just two people to do the checks and they each did a few machines a day. In doing so they created a text book example of a ‘non-tarif barrier’ in an effort to protect French producers. It was unsustainable. French consumers were being denied VCRs the rest of the world was enjoying. Markets proved too powerful.

The market is not dumb. If there was disruption of supply chains between UK and Europe, shortage would quickly create opportunities the market would move to fill, in some cases, before consumers had noticed. A few years ago a dockers strike in America threatened the imports of all game consoles just before Christmas. Sellers chartered huge airplanes and solved the problem with a few flights. The buyers barely noticed.

This is not to trivialise the consequences of No Deal/WTO exit which would be substantial. Nevertheless, a more relevant debate is not blanket discussion of ‘disruption’ but how long the market would take to fill what shortages and at what cost to standards and public safety. 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s