“Also in the Assembly on Monday, Foster welcomed freedom from the EU’s state aid rules, which have constrained Stormont’s ability to subsidise firms. This strays towards the anti-competitive, protectionist “Leave” argument, creating a final point of utter confusion. What economic philosophy are we following now? Does our first minister even know?”
Newton Emerson. Irish News (Belfast).Thursday , June 30, 2016
Arlene Foster spent most of her executive career as effectively the minister for Invest NI, which performed the bulk of her department’s work. Throughout that time, Invest NI faced ever-tightening EU rules against giving grants to businesses, which was the bulk of its work.
So it is not surprising that Foster and Invest NI have responded to Brexit with a certain uniformity.
On the morning of the referendum result, Invest NI said: “As part of the fifth-largest economy in the world we are confident that Northern Ireland will continue to succeed as an attractive location for inward investment and that the reduction in corporation tax will play an invaluable role in creating a business-friendly environment to support job creation, based on the combination of tax, talent and value. As the EU sells more to the UK than we do to them, we are positive that mutually beneficial trading arrangements will ensure continued access to the EU market, whilst also having the freedom to develop new bilateral agreements in emerging markets and other geographies.”
‘Geographies’ is a business word for ‘places’, apparently.
Later that evening, speaking from the United States, Invest NI chief executive Alastair Hamilton said the “vast majority” of overseas investors are not coming to Northern Ireland for access to the European market but for back-office services, so uncertainty over the UK’s trading relationship was “completely disconnected from our sales position.”
In the assembly on Monday, Arlene Foster echoed all of this, explaining: “In terms of foreign direct investment we almost exclusively target cost centre opportunities as we do not yet have a tax/profit advantage.” She added: “You will know that our proposition majors on two key factors – talent and cost.”
So there you have the vision of our buccaneering post-Brexit future. Cheap graduates will do offshore paperwork for multinationals while we cut taxes to stop them re-offshoring it somewhere else.
Local firms that do trade into Europe will have access to the single market again soon, once the EU realises it needs us more than we need it. There will also be exciting new opportunities in Asia, Africa and the Americas as they throw down their tariffs to welcome our products.
If this all sounds familiar that is because it is roughly the party line of the nice half of the Leave campaign – not the nasty, xenophobic, protectionist half, representing globalisation’s losers, but the free-market, instinctively libertarian half, full of talk about ‘the Anglosphere’ and the Swiss model.
Foster is entitled to these views, although she might have been clearer to the electorate about the brutal job market they imply.
Invest NI is a different matter. Its pro-Leave position may be nice but it is still political and highly debatable, far from the objective analysis expected of a public agency.
Boasting that we sell more to the EU than it sells to us is a particularly telling remark. A mainstay of the nice Leave case, this is true in absolute terms – more shipping containers, or equivalent, land on UK docks from Europe than vice versa. However, in relative terms, 45 per cent of UK exports go to the EU while only 7 per cent of EU exports go the other way. So the EU is far more important to us than we are to it, even without considering the political lesson Brussels might want to teach us for leaving the club. To paraphrase a writer in The Economist, you may buy a lot more from Tesco than it buys from you but you do not get to dictate the terms of trade.
It is still reasonable to be “positive” in the long run about mutually beneficial trading arrangements. However, dismissing uncertainty in the interim is a remarkable thing for a business-related body to do. Even if everyone in London and Brussels agreed tomorrow on the most straightforward type of replacement relationship available – joining the European Economic Area and accepting free movement of people – it would take at least a decade to get to where Norway is now. Throw in the possible departure of Scotland plus Northern Ireland’s internal fragilities and there are few investors of any kind who would not be strongly deterred.
Also in the assembly on Monday, Foster welcomed freedom from the EU’s state aid rules, which have constrained Stormont’s ability to subsidise firms. This strays towards the anti-competitive, protectionist “Leave” argument, creating a final point of utter confusion. What economic philosophy are we following now? Does our first minister even know?