Globalisation, the EU and British jobs

We’ve heard a lot in the EU debate about how European immigration pushes British people out of good jobs in Britain, and how competition with European workers on the ground pushes down British wages. I disagree with this analysis here, but inasmuch as it is true in specific circumstances, it is a general symptom of the globalisation triangle.

Vote Leave, Leave.EU and Ukip are very critical of migration for the reasons above, but tend to be confused when it comes to the other points of the triangle. They promise bigger, faster free trade deals with the world’s developing economies, while keeping free trade with the rest of the EU and retaining London’s position of dominance as a global financial centre. This goes against the idea of protecting British jobs.

In simple terms, as far as free-trade logic goes, British jobs are equally at risk from :
1) competition from immigrants,
2) competition from workers abroad freely trading with Britain, and
3) the free movement of capital allowing British firms to offshore their operations.

The first scenario is much more visible, because British workers on the ground actually see migrants doing the jobs they used to do, or doing similar jobs, at the same time as they feel they are wages are depressed or they hear their friends are struggling to find work. However, the other two have the exact same effect on jobavailability, and the three horsemen of Brexit promise to turbo boost the second and third elements of free-trade.

If we trade freely with other economies, especially if all nontariff barriers (technical obstacles) are removed along with tariffs, the effect is that a British factory worker producing widget X is competing directly with a Chinese or Polish factory worker producing widget X. That’s the whole point, that’s what free marketeers love.

The more efficient producer, say China, should be able to produce widget X at a lower price and outcompete her foreign rivals. Eventually this leads to the foreign rivals adapting or going bust. At a national level this benefits all parties, since consumers in both countries have access to the cheapest (yet same quality) version of widget X, while there will inevitably be a widget Y that some British firm is the most competitive at producing. Widget way is likely to be a specialised service or highly technical product. Nevertheless, opening Britain to free-trade with lots of countries, especially with developing countries with weaker labour laws and a cheaper labour pool, inescapably means that a lot of British manufacturing jobs will be displaced.

New jobs might spring up in financial services, digital or other new industries, but that is cold comfort to the British worker whose manufacturing job has ended along with his factory. Most senior Brexit supporters know this, but obscure it in their discussion of leaving.

Another worry we often see in the news is British jobs being lost to offshoring, in which a British or foreign company closes it UK factories and opens some in a country where labour or materials are cheaper. Leave’s proposals implicitly make this easier: modern trade agreements include extensive investment chapters which facilitate, even encourage, this kind of offshoring. It is already easy to offshore to the EU and Brexit supporters claim our economic relations with Europe would remain the same; any trade agreement with China or India would allow this to expand into developing markets. Brexit supporters decry how long it takes the EU to hammer out new free-trade deals. One of the reasons it takes them a long time is that they try (with limited success) to include provisions to reform the partner countries’ labour rights, to avoid this happening.

The Vote Leave position seems extremely contradictory. On the one hand they want to limit migration to stop non-Britons taking UK jobs. On the other hand, they promise a vast bouquet of free-trade deals which would have the exact same effect. There is nothing wrong with free trade per se, but the swashbuckling case for leave feels dishonest if it does not concede that its two main economic tactics cancel each other out.

 

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