4th February 2020: The Post-Brexit Dawn
I think globalization cannot be stopped. Nobody can stop globalization. Nobody can stop trade. And I believe, if trade stops, war starts. Trade is the way to dissolve the war, not cause the wars.
Co-founder and Executive Chairman, Alibaba Group.
The Big Picture
In his February 2020 ‘Greenwich Speech’ laying down the foundations of the United Kingdom’s position in the post-Brexit transition trade negotiations with the EU, Prime Minister Boris Johnson referred to a philosophy which had its origins in 18th and 19th Century political economy with the publication of Adam Smith’s 1776 five-book treatise on market economics and free trade, An Inquiry into the Nature and Causes of the Wealth of Nations, concepts subsequently developed with far greater explanatory power by David Ricardo in his 1817 seminal text, On the Principles of Political Economy: And Taxation.
In the Wealth of Nations, Smith observed that a nation can maximise its economic prosperity by specialising in the production of goods where it has an absolute advantage over other countries and exchanging these for goods from other countries with which it is disadvantaged, resource-wise.
Regarding Ricardo, no discussion of international trade is complete without introducing his law of comparative advantage, which Boris Johnson did in the opening remarks of his speech. Ricardo’s fundamental argument was equally in favour of free trade between nations but he also demonstrated that, under most conditions, a country would still benefit from trade even if it had an absolute advantage over every product category than that of another country.
Ricardo was a fierce opponent of protectionism and the ‘talking points’ of his day resonate loudly 200 years on, with President Trump’s tweets using the same language on trade wars as those leading up to the repeal of the British Corn Laws in 1846, particularly amongst those factions opposing and/or fearing its progressive impact.
Both Smith and Ricardo were vehemently opposed to the predominant trade mechanism of their times, mercantilism, which was based upon state-backed encouragement of exporting goods matched with the imposition of punitive tariffs to stifle imports, this supported by warships and the implicit and/or real threat of hostility (aka gunboat diplomacy). Mr Johnson also alluded to this mode of international trade in his speech, a subtle sideswipe at Donald Trump’s ‘America First’ trade policy verbosity and increasingly random behaviours in this regard. Less subtle was his direct allusion to Churchill’s famous Sinews of Peace speech, in which the great war leader coined the phrase ‘iron curtain’ in 1946.
Johnson saw “mercantilists” everywhere:
From Brussels to China to Washington tariffs are being waved around like cudgels even in debates on foreign policy where frankly they have no place.
We have the opportunity, we have the newly recaptured powers, we know where we want to go, and that is out into the world.
… this country is leaving its chrysalis… We are re-emerging after decades of hibernation as a campaigner for global free trade.
In his speech on the same day as that given by Mr Johnson, Michel Barnier, the European Commission’s Head of Task Force for Relations with the United Kingdom, spoke in the same universal vocabulary of international trade relations as he presented the platform for the EU’s Brexit transition roadmap.
Both Mr Johnson and Mr Barnier were speaking in the language of ‘macroeconomics’, the lexicon of choice amongst politicians when discussing the business of business in the context of international trade negotiations. Translating this in a meaningful way to the real world of markets, companies and management has proved elusive during the Brexit hiatus, leaving a potentially dangerous knowledge vacuum for British businesses, especially those in the small and medium-sized sector (SMEs) for whom this vocabulary fails to translate in any meaningful, practical way.
Now that the Brexit arrangement has been ratified and as the transition discussions progress, the benefits to all parties of fair and free global trade should frame the negotiations. But there also needs to be a step-change shift amongst politicians and commentators away from the often opaque and impenetrable language of macroeconomics towards the key ‘microeconomic’ arenas of competitive markets and company strategies. Simply stated, ‘front-line’ issues of international trade relate directly to the ‘Three Cs’ of competitive markets: Customers; Competitors; Capabilities.
From this perspective, extensive research has proven that a deep understanding of the following areas of management theory and practice can significantly contribute to long-term global and domestic business strategy success, as this British Business Manifesto: Strategies for Profitable Growth book demonstrates:
- Business environment sensitivity: Identifying opportunities and off-setting threats.
- Analysing global & domestic markets: Customer insights and competitor intelligence.
- Innovation & entrepreneurship: Dynamic pathways for growth and high performance.
- Strategic marketing: Selecting and serving target market segments effectively and efficiently.
- Strategic brand management: Building and sustaining a competitive edge.
- Integrated marketing communications: Managing customer relationships.
- Planning processes for business strategy success: A practical framework and ‘go-to-market’ tools.
- Building customer-focused organisational capabilities: Developing distinctive capabilities, exploiting strengths and neutralising weaknesses. Implementing creative strategies.
In British Business Manifesto: Strategies for Profitable Growth we dedicate a chapter to each of these key strategic management subject areas. We discuss the concepts, frameworks, methodologies, processes and tools which will guide smart managers building intelligent companies towards current and post-Brexit global and domestic business strategy success, regardless of industry sector or company size.
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All content © Colin Edward Egan, 2021