Central to my union’s concerns about the single currency is its impact and the impact of preparing for it on manufacturing. We simply cannot pay our way in the world or for vibrant public services without a diverse manufacturing base. Somehow trade unions have generally drawn exactly the opposite conclusions saying the euro would be good for manufacturing. The facts do not bear this out, nor does twenty-five years of ever-closer integration in to the European Union, from Coal and Steel Community to the Nice Treaty. In this article I look at some of the recent facts to emerge. Some of the statistics, mainly revealed by the Office for National Statistics, are quite startling and do not immediately measure up to how it feels out there, especially on the threatened shop floor, nevertheless they are incontrovertible and help us see the wood from the trees.
Firstly, between 1992 and 1999 manufacturing employment in Britain rose by 0.5 percent, while in France it fell by 10.2 per cent and in Germany by a staggering 17.3 per cent. As an illustration, Vauxhalls (General Motors) has shed 11,000 jobs in Germany as a result of global over capacity. Never forget unemployment in the eurozone is twice that of Britain. Giving up control of your exchange rates and interest rates as the single currency demands means a national government is only left with wages and unemployment levels to massage the economy with. Furthermore, the key interest rates, the long term ones required by manufacturing investors, have always been lower in Britain than the rest of Europe, where lower short term interest rates partly reflect the lower levels of home ownership on the continent.
Overall British exports to the European Union have risen substantially despite the fall in the value of the euro. In the second quarter of 1999, British exports of goods and services were worth nearly £29,566 million. They were worth £33,713 million in the third quarter of 2000. Britain recorded a trade surplus with the eurozone in September 2000 for the second consecutive month, the first time this has been achieved since statistics were gathered in 1988. Kate Barker, Chief Economist at the CBI said that although profit margins of British manufacturers were being squeezed because of the collapsing euro, “Exports to the eurozone have held up much better than anyone expected.”
Inward investment continues to flood into Britain. In December 2000, the ONS reported that the quarter to September 2000 recorded a forty per cent increase over the year before creating record levels of inward investment of £311 billion. Interestingly investment into Britain from countries in the eurozone actually tripled in this period. In a huge poll undertaken recently for financiers Ernst and Young in France it was revealed that only 45% of inward investors in France believed membership of the euro gave business a competitive advantage. 56% of the companies surveyed incidentally said they intended to move investments out of France and favoured Britain as the alternative.
While staple and bedrock industries like textiles and clothing and metal working continue to be hit desperately hard and there is a clear lack of an industrial strategy to deal with this, high tech manufacturing industries in Britain, always less exposed to short term currency fluctuations, have boomed, electronics output for example has risen by almost half in the last three years. Between 1997 and September 2000, output in the overall engineering sector rose by 13 per cent, and in manufacturing as a whole by 7.9%. Some, notably the CBI, have said that the relative success of manufacturing means that we could even join the euro at a higher rate than their previous guesstimate of 2.70 DM. A dangerous prospect indeed, but an indication of the continued strength of the British economy outside the euro.
As Gordon Brown reminded us recently “mistaking exchange rate stability for stability across the economy” could be dangerous and we should remember that only 15% of British companies trade directly with the eurozone and would benefit from a fixed exchange rate.
This is in stark contrast to the economies within the eurozone which are exporting capital at a rate of knots. In the year to June 2000, there was a net outflow of capital from the European Union of £125 billion. Most of this went to the United States to purchase corporate assets.
Those who have argued that the strong pound is the problem, have got it back to front. The German mark strengthened against sterling for decades yet the German export markets expanded. No German industrialists at that time argued that they should abolish the mark.
For trade unionists faced with redundancies and the pain and suffering of poverty and uncertainty at work every day, statistics do not provide comfort and there is no consolation in the fact that Britain remains the fourth largest economy in the world. But the consequences of continuing to prepare for a euro which will demand an end to our ability to produce across a band of manufactured goods and an end to our ability as a nation to exercise democratic control over the key levers of the economy would clearly reverse our fortunes. In addition, manufacturing trade unions should take note that one of the many vetoes Britain lost in Nice was that over industrial policy.
This bodes badly and partly explains the inability of the government to commit to a clear domestic industrial policy. The Japanese government’s increase in research and development investment last year, its increase alone, out stripped Britain’s total spending on this vital area. The Roundtable of Industrialists from the large multinational corporations who run the European Union will no doubt be looking at Britain’s successes outside of their currency zone as an increasing problem and we can expect shortly more whining about the advantages of giving up our national self determination and independent manufacturing capacity – in other words a Gaderene rush for the euro. Trade Unions above all others should not be fooled.
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