Friday, 14 April 2017

Car wars versus robot wars

The biggest power in the EU - Germany - exports way more cars to the UK than we do to them, so they are not going to allow the erection of tariffs because they would damage their own industry and shoot themselves in the foot.
John Longworth, Director General of the British Chambers of Commerce, summing up one of the Brexiteers' favourite arguments. I'm sure he's right to say that German car exporters don't want to see tariffs on their exports. I'm also sure that the owners of car plants in Britain feel the same. But when it comes to negotiations, the side with the most to lose usually loses and, as Frances Coppola has pointed out, it's the British-based car industry which has by far the most to lose:
When it leaves the EU, the UK will face the EU's WTO "most favoured nation" tariff of 10% on its entire car exports to the EU. In 2015, that was 57% of its total car exports. And British car exports, with few exceptions, do not carry the "luxury" premium of many German marques. It is British car manufacturers, not German ones, who have the most to lose from Brexit. It is British car manufacturers who have lobbied most heavily for UK trade with EU to continue to be tariff-free. And in any trade war over car exports, it is the UK that would suffer most. Ratcheting up tariffs on EU car imports could reasonably be seen by the EU as unfair competition and met with retaliatory action. In a trade war, those that have the greatest exposure suffer the most.

Sterling weakness, if it continues, would also raise the UK price of imported German cars. If the combination of depreciation effects with new import tariffs raised the price enough, German exports to the UK would fall. But just as Brexiteers like to assume that the UK can readily substitute cheaper rest-of-world destinations for the expensive EU after Brexit, so too can Germany. Germany's engineering is respected worldwide. If the UK made exports difficult, Germany would simply seek markets elsewhere. It can well afford the short-term hit to its net exports: it has already weathered worse in the Eurozone crisis. In contrast, even with the assistance of a debauched currency, UK exporters to the EU might find it difficult to find new markets. 57% of total car exports is an awful lot to relocate to lower-tariff destinations. 
All things being equal, I'm sure she's right. But I'm not sure that all things will stay equal in the future. Manufacturing jobs in places like Sunderland, Castle Bromwich and Derby are almost certainly at risk from Brexit, but Brexit isn't the only thing that might wipe out those jobs out in the next few years. Here's Jaroslav Fiala, warning of an alien invasion:
The aliens of whom we speak are not the ‘Muslim invaders’ who have become such a popular (and utterly absurd) media focus in the Czech Republic. We are talking about automation. The threat we face is due to the fact that, of the countries in the EU, we rely most heavily on industry.

Almost fifty per cent of our economy is based on industry, making us more dependent on it than neighbouring Germany. About 1.45 million people – that is a third of Czech employees – work in industry, predominantly the in automobile manufacturing. These workers will be the first to be displaced by the metal aliens. 
You could argue that robots aren't really alien to a culture that invented the word "robot" but, otherwise, the idea of these jobs being automated away seems all too plausible.

There's a lot of R and D and trials between us and the routine use of currently-hyped things like self-driving vehicles, care robots and delivery robots, but in the controlled, predictable environment of the car factory, the concept of robotisation is hardly new. I'm old enough to remember this "Hand built by robots" advert from 1979:

So let's look on the bright side of Brexit. Flouncing out of the EU might destroy the UK's car manufacturing jobs, but the robots would have exterminated them anyway.