A Canadian View of Brexit
Canada’s name has been mentioned more in the U.K. than at any time I can remember. The free trade deal, CETA, is used as an example, a starting point and a warning in the ferocious Brexit debate that has gripped the U.K. as the deadline grows ever nearer. I squirmed in embarrassment when that mendacious parliamentary clown Boris Johnson labelled his latest fantasy as Super Canada.
I see so much misinformation from people who have never really had to trade across a border with a “free trade” agreement that I feel compelled to tell you what it is really like. I am a Canadian but I was born in the U.K. and have dual citizenship. So I feel a deep pain when I see what is happening in my birth country.
I used to be a half owner of a game company in Vancouver B.C. Vancouver is on the west coast of Canada about a hundred kilometers north of the U.S. border. Our biggest market was the U.S. We imported wooden blocks from Germany and dice from the U.S. and exported finished games around the world but 80% to the U.S.
I hear Brexiteers talking about free trade agreements as if it was similar to the friction-less trade you now enjoy with the EU.
Let me tell you straight out. It is nothing like that. Not even close.
I hear people talk about having zero tariffs as if that makes things easy. It absolutely doesn’t.
We brought in game parts at a zero tariff rate. But it wasn’t the tariff it was all the paper work and expense of clearing things through the border. Our games went into the U.S. at a low tariff rate but again it was all the paperwork and expense of clearing them through the border.
We had to deal with bonded border brokers who charged a steep fee for their services and demanded payment in 10 days.
We were like most small companies in that we were continually strapped for cash. We always were trying to delay our payments to our suppliers while giving discounts and other incentives to get our customers to pay us faster. This is a situation that I am sure is familiar to almost all small businesses.
Having to lay out cash money in 10 days was a giant problem that made our business far more difficult than it would normally be.
I used to look at the stacks of brokerage bills with all their demands for quick payment and become totally depressed. On top of that were the bureaucratic hiccups that happened all the time. If we mistakenly filled in a form incorrectly goods were seized and we were accused of smuggling. It took time and energy to straighten things out — all of which cost us money.
After years of border hassles it just got to be too much. My partner had had the good sense to marry an American girl some twenty years before. So he got a green card and took the company across the border where it is operating today. The few jobs we had created, all the taxes we paid, all the local suppliers we bought from— all of that went with him.
It doesn’t matter about the tariffs. It is the trade friction. The cost of clearing goods. The delays at the border. The hassles that customs officials on both ends give you. It is a business nightmare.
I am amazed and in awe of the intricate timely dance of just in time supplies that occurs between the European continent and the U.K. To someone used to a border governed by a free trade agreement and all the attendant complications this is like a beautiful watch mechanism that purrs away generating jobs and economic benefits.
Brexit will smash this to pieces. A free trade agreement is just not responsive enough to support this kind of sophistication. All of those industries will leave the U.K. to be inside the common market they thought they were in when they located in the U.K.
Some of the more than a third of a million companies in the U.K. that trade with the EU will go out of business. Others will move to be inside their major market. The remainder will be far less efficient, hire less people and buy less goods.
The whole picture is one of a spiraling down of significant parts of the UK economy.
We in Canada are looking at the U.K. wondering why on earth are they doing this? Certainly money isn’t everything, but impoverishing yourself for some sense of independence in the 21st century when no country is really independent is to put it frankly — plain stupidity. Thinking that trade agreements are going to replace a totally integrated customs union without massive job loss and economic disruptions is a ruinous fantasy.
