By Jack Peat, Editor of The London Economic
One of Britain’s biggest exporters shows the power of the four freedoms.
In July 2011 the decision of the British government to award a £1.4 billion Thameslink contract to German firm Siemens was met with uproar.
To quote the Daily Mail (deplorable but, in this instance, understandable), it was “beggars belief that Bombardier could have lost out to the Germans…. This would never have happened if Britain had put the national and public interest first, as our Continental counterparts do.”
Whether this nationalistic dribble was representative of the nation’s reaction to allow the preferred bidder in a free market the right to build carriages for Brighton to Bedford commuters is debatable, however, in a matter of years Bombardier has demonstrated the short-term outcomes of protectionism and the long-term benefits of a liberal economy.
In the last week the British train manufacturer netted an $89 million order for 16 LRVs in the Netherlands, fought off international competition to win a £1 billion contract to build trains for London’s Crossrail project and secured a US$4.1-billion contract from the State of Queensland in Australia to supply 75 electric passenger trains.
By opening our market up to outside firms, we’ve allowed our firms to compete in outside markets. As we move out of this nationalist haze we see that Britain isn’t a big market if cut adrift from the outside world. Come the European referendum, the camp for a more united Europe can certainly be assured of a vote at the Bombardier factory in Derby.
Nationalist shock
The headlines wrote themselves in July 2011. The British government overlooks a British firm to award a British contract to a foreign firm. Unions condemned the move as ‘the ultimate stupidity’, ‘a scandal’ and ‘a tragedy’ at odds with the Government’s pledge to make ‘made in Britain and created in Britain’ its watchword, the Mail reported.
At the heart of the debate was British jobs. More than 1,400 would be lost in Derby, although this was largely down to the bad timing of the deal amidst an ensuing recession. British jobs should, of course, be at the heart of the procurement process and new measures have been put into place since to ensure that is the case. But even at the time, the press were less keen to report the 2,000 UK jobs that would be created at the Siemens factory in Hebburn, Tyne and Wear, and two planned maintenance depots.
Free market gains
The real question is: ‘what would have been the outcome if we hadn’t allowed Siemens to compete?’ Protectionist Europe would have been less willing to allow Bombardier to compete for crucial contracts and several other nations would likely be hesitant to line the pockets of UK firms when their own firms aren’t allowed a bite of the apple.
As Manmohan Singh said of his reforms in India: “Protectionism is a very real danger. It is understandable that in times of a severe downturn protectionist pressures mount but the lessons of history are clear. If we give in to protectionist pressures, we will only send the world into a downward spiral.”
Europe
Of course, the underlying connotations of the Bombardier tale concerns our impending European vote and the crossroads which Britain faces over the choice of a free market economy and an isolated, protectionist island.
City AM’s Allister Heath says there are two kinds of Eurosceptics, and I would agree as in my experience everyone is sceptical of European integration to a degree. There is, of course, a preferential sceptic, and that is one who favours pro-market, classical liberal economics with legislative reforms from both sides of the English Channel to support that end.
These are the believers of the Four Freedoms – the free movement of goods, services, capital and people – across the countries of the European Union. Of course, subsidies, tax harmonisation and regulatory harmonisation arguably don’t support the concept of Four Freedoms, but these are aspects that can only be reformed from within, and not knocking on the doorstep to one of the biggest markets in the world.
Bombardier has, in the past three years, demonstrated how nationalistic sentiment can cloud good judgement and how long-term visions can be rewarded with long-term gains. The British train manufacturer has now established roots in several lucrative markets that will generate streams of revenue into the distant future, sources of revenue which would not have been afforded without adhering to the principles of free market economics.