Tuesday, March 15, 2016

The market environment - political considerations

In recent blogs we have looked at the issues of EU membership that have had an impact on product development. We have noted that global requirements are now increasingly more relevant than national or European ones. Mandatory test standards tend to have evolved from national standards to International standards. Technical barriers have been overcome  so developing products for world markets can be managed in many ways regardless of EU  membership.

This time we look at price penalties in the form of an import duty which may be tougher to deal with. One  current issue being debated is whether Britain's trade with the rest of the world will be more successful by remaining inside the European trading block, or will it flourish outside once free of EU  constraints. A major question is the application or absence of tariff barriers and the prospects of securing alternative trade agreements should Britain opt out of the EU. Having been members of the EU for more than 40 years, many people will have had no experience of business in an independent country despite Britain having traded freely and successfully around the world for centuries.  It is not surprising the 'Remain' in the EU side are playing the 'Fear' card promising all sorts of bad things should voters choose to leave and take a step into the big unknown. But is it really that unknown? Europe is in decline, the currency has had a hard time, some member countries are probably bankrupt, many countries are dealing with immigrants by literally fencing off borders with razor wire, there is growing unrest and political dissent even in Germany and France who along with Britain bank roll the whole show. Eurosceptic parties are gaining support and a British exit could serve to hasten the inevitable collapse of the EU, at least in its present form.

The outcome of the British Prime Minister's renegotiation  of the terms of Britain's membership of the European Union were finalised towards the end of February. They seemed to come down to just four issues which government spin presented as a significant reform of the EU, while others see these proposed changes falling a long way short of any serious reform, in fact marginal at best. The Prime Minister apparently regards these changes sufficient to commend continued membership of what he now calls a reformed  EU to the British public at a referendum slated for June, to let the voters decide if the country stays or leaves.

The concept of a referendum is itself something of a continental expression of public sentiment, whereas Britain has a long established tradition of voting for a party programme or manifesto at a General Election, although local factors such as the popularity of the local Member of Parliament can have an influence in the 'first past the post' winner takes all outcome. Most European countries use a system that correlates the number of seats won to the number of votes cast, so the party with most votes gets most MPs elected and if that is also a majority percentage they get to form the government.The thing is getting over 50% of the popular votes is not what usually happens, so coalition governments are the usual outcome.

But in Britain the local votes determine which party gets the MP in each constituency and  for several decades it has been a two horse race between the Conservative Party and the Labour party. Constituency sizes vary considerably and from time to time are reviewed but typically the 2 parties have see sawed back and forth forming alternate majority governments. It is possible to get a majority of seats without having anything like 50% of the vote; 40% will probably do it. However things have been changing.The two main parties of government have pursued similar policies and all the main political parties support membership of the EU. In fact the so called third party - the Liberals - are even more enthusiastic about Europe than the Labour and Conservative parties which include MPs - the Eurosceptics - who are less enthralled by the European project.

The British voters generally have shown scant interest in Europe until in more recent years there was a growing concern at the increasing number of immigrants from the less affluent eastern states of Europe which became noticed at the day to day level with pressures on services such as health, education and housing. It seemed that nobody really knew how many people from European countries were now in Britain, although it ran into millions. The governments of the day helpfully explained that nothing could be done because of European legislation - an explanation for pretty much everything. For years the popular press more in tune with the public mood had made fun of the European desire to legislate for even the most trivial thing from the curvature of bananas to the classification of carrots as fruits. So  when the  British voter looked for a political party that reflected their concerns there was an electorate ready for an openly Eurosceptic political party. And they didn't have to look far. Waiting in the wings was UKIP with a simple solution to the various concerns with their origins in European inspired laws and that was to leave the EU and govern ourselves.

And so in the 2014 UK election for Members of the European Parliament, UKIP became the largest party with 24 seats from 4.36 million votes, Labour with 20 seats from 4.02 million votes and Conservatives 19 seats from 3.79 million votes. The Scottish Nationalist polled 389 thousand votes and won 2 seats. But using the traditional UK  first past the post electoral system at the 2015 General Election the results were very different. The Conservatives with 36.9% of the vote won 331 seats, Labour with  30.4% won 232 seats, the Scottish Nationalist  with 4.7% won 56 seats while  UKIP's 12.6% as the third biggest party translated into just one seat. Put another way nearly two thirds did not vote for the government. Mind you compared to the EU where the people that run the show are not elected at all, The Democracy Deficit in the UK seems trivial.

So the big issue of whether Britain stays in or opts out comes down to the British electorate in a referendum, a rarely used tool in Britain. With the political establishment campaigning to remain members of the EU and backed by big business and big trade unions all motivated to protect their perks the leave campaign which seems barely visible is in the hands of a few maverick politicians, small businesses and the general public.

No comments: