Why the bigger members are going to restructure the UE

in #infowar3 years ago (edited)

After the event in Italy, most of people keeps hoping the EU will clash (which is very unlikely to happen, for several reasons)  , but I see some unanswered question going on, almost on all newspapers. The question is: After UK, now France and Italy, and the next is Germany. 

So the interesting question is: why is the bigger countries in the UE being pushing for the exit, or at least to send a strong signal for it? Why by example Austria is not? 

To better answer this question, we need a bit of memory, to understand how it was doing business here before of the UE. First, we had borders. Strong borders. And you weren't entitled to sell a single nail in another country, until there was no AGREEMENT between government, which allowed you to do so.

Now, imagine two government, Finland and Germany, trying to have an agreement, for Finland selling Nokia phones in Germany, but this time WITHOUT the UE and Schengen.

What was happening was, more or less, this:

  • FI: Hey Germany, I would like to sell my Nokia devices there. Could you allow me?
  • DE: What do you offer in exchange? 
  • FI: I offer my market to your mobile phones.
  • DE: ridicolous. First, Siemens is out of this market since ages, and then, you are just 5 millions. Should I offer a 80 million people market to get back 5 millions people? 
  • FI: well, I offer you to enter my market with ANY of your products. Could it work?
  • DE: maybe you didn't got the point: we are 80 millions. You are just 5. Your market is too small. This agreement makes no sense.
  • FI: sooooo... what you would ask for?
  • DE: you can sell Nokia in Germany if you produce them here. So you move your factory here.
  • FI: but... but... german incomes are very high, together with taxes. 
  • DE: ... and?

this was how Europe worked before. Any company coming from a "little" market (little= not Italy, France, Germany, UK) was forced to move the production into the bigger countries. Of course this kept very high the demand of workforce in the countries with a bigger market, which raised the incomes, which made the market even more interesting, and so and so.

So, our example is wrong: Nokia started to sell in the common market just after it was born: which is why it was never producing a lot in other european countries. Before of the common market, schengen and so on, companies like Philips, coming from a market which was relatively small, were having production factories in France, Germany, Italy and UK. So, Nokia was born AFTER the UE started working, and of course it was not even possible for a finnish company to be successful, until no european market was possible at least as a first , fueling step.

As you can understand, the creation of the UE was a huge advantage for small european countries, which where allowed to grow industries inside their borders, and a disadvantage for bigger markets, which were losing workforce.

Now you cannot find those factories around anymore, just because there is no need: big countries are not allowed to enforce such a policies anymore. 

Of course, if the UE collapses (which is not likely, exactly for this reason) this will go back in time, the little countries will be spoiled of their industries: even if there are many other markets, still to use the infrastructures for commerce (harbours, rivers, air spaces, and so) will be needed. So at the end, it will end in 4 countries spoiling completely any country which has little internal market.

How it was with the USA, by example? It could seem that, being the USA a huge market, the USA had a good life in selling here without being forced to move factories. But this was not like that. For a very simple reason: without UE, each country has a different set of "tecnical" standards for everything.

So, when the american company (let's say "Ford") wanted to sell in Europe, everybody was saying: "you're welcome: just respect our standards, and you can sell here". 

Unfortunately, standards were 100% incompatible , country by country. So that, Ford had a factory in Germany, and one (for assembling) in France and Italy. What was happening was that the main regulators were adopting different standards for each country, from power plugs to size of wheels, from security of cars to food safety. An american company was forced to build, let's say, the product up to 60%, and then to assemble different parts for each country in Europe.

The phone networks were different, using often different standards, frequencies and so. The same TV which was working in Italy was not able to work in Germany, so each producer must have made different models. Phones were not working the same: if you put a german landline phone into the italian plug, or a french plug, or a british plug, it won't have worked. (first, the plug would not have fitted at all).

So the american company needed "a sponsor in Europe". Let's imagine General motor opened then a factory in Germany (as it was) for doing cars. Then the German government was "the sponsor" to ensure cars were allowed to flow in Europe.  And Ford must "pay" Germany moving a bit of production there.

Of course, the next american producer would have to place in France,  which was then the sponsor for the remaining part of the Europe. And produce a bit in France, to pay the "sponsorship". 

What would happened if any country wanted to sell anything in Europe without "paying" the fee? Well, many american companies (Chrysler, Chevrolet, Jeep, John Deere, Boeing,  and others) were literally mobbed taking advantage of different standards , regulations and others. Those companies , after checking the cost of outsource production in Europe, simply gave up, just because the jeopardy of regulations and standards was too expensive for them.

Of course, lot of conservative people in Europe wants the mess back. Both the WTO and the EU are preventing states to play with different standards and regulations, which "opened" a bit the european market (all together, still the second richer in the planet) to foreign competition.

If the EU clashes, what will happen is that the european market will start using the good old tricks: Apple will need to produce at least 4 types of phones, just because each country will start to change how their mobile network is working. It is just a matter to do small changes here and there, to apply some regulator's restriction, and any foreign company will find the european market to be a hell.

Of course, those 4 governments will be very easy to discuss each others: then, somehow the EU "sort-of-existed" before. The point is, before it was made of the 4 bigger markets, which where (sort of) easy to find agreements between them, and the little countries were somehow following (willing or not).

Who eat the cake and ho paid the bill of that all?

Who eat the cake were the countries with a bigger market: the cake was a terrible workforce demand, which raised the average incomes again and again. This was the period where the germans incomes were the higher in the planet, companies were urged to have internal kindergarten, physician,  dentist, and so and so. Also, local companies were protected, so that Siemens was doing mobile phones at those times, and so and so.

Who paid the bill were the small european countries, which were depauperate (a company like Nokia had a little chance to develope from Finland, or Sweden, or whatever little market) , and the non-european companies, which were forced to rally into a jeopardy of different standards and regulations.

Could this be back? 

Well, yes. In most of the planet, before of exporting to the local market, you must find an agreement with the country itself. And the jeopardy of regulation is still in the mindset of the european countries, just remember how the european regulator works (the right to be forgotten) and multiply by 27, or at least by 4. 

 The difference is, the european market is the second one by size in the planet. If it jeopardizes like that, there is a little chance for , by example, american companies to do anything. A company like amazon had no chance to exist before: only the logistic part was impossible with 28 borders.  So you would have otto.de and thalia.de in Germany, and the local ones for Italy and others. No way (or little way) to have Amazon everywhere.

A company like IKEA, in the old europe, had zero chances to exist, until not producing almost in 4 countries. 

This was the period when John Deere was almost invisible in Europe, despite of being the bigger producer in the USA. Same for Jeep: we had only Land Rover. No way to see a Limousine, they were ruled too wide for Italian roady, too unsafe in Germany, and so and so.

I have no idea now , the reason people prays in the USA for the UE to clash. For sure UK, IT, DE and FR could take a high advantage of that clash. 

Still unclear to me what the american thinks to achieve, with the clash of UE.... they were paying bills to a load of people, here.