Britain: comparing itself to Germany

Is the UK an inadequate competitor, or is it playing on an uneven pitch?

Germany is resurgent.  Its economy is bouyant and its businesses optimistic.  Despite the ongoing costs of bailing out Europe's debt-ridden periphery, the Federal Republic is profitable and expansive.  Thanks largely to China, which is importing products rapidly to meet domestic demand and global ambition.  The UK by comparison is debt-ridden, finding it hard to expand its export-base and languishing in pessimism as it struggles to reduce the cost of providing services while at the same time stimulating growth.  Goods and services produced by Britain are less attractive to high-speed economies.

In the UK, the Labour Opposition attempts to make political capital out of this competition.  And the Conservative-Liberal Democrat Coalition government is holding fast in its plans.  They are one year into a five-year parliament and have already earmarked exports as key to the British revival.  One Labour charge compares the UK's economic predicament to the Eurozone's overall favourable position.  Which means Germany's - as being by far its biggest economy, the Federal Republic's situation determines the pace of growth across Euroland.  But is this fair?

It's hard for British exporters to export to Germany - the UK sends around US$54.88bn worth of goods and services there each year.  By contrast, Britain imports approximately US$88.24bn from Germany.  So the UK is in serious deficit.  While British firms are vulnerable to acquisition by German (and other European) companies, German firms are protected by cross-shareholdings which shield them from foreign predators.  The British pursue an Anglo-Saxon open-economy model, while continental Europe is guarded.

So the Brits must look further afield for gain.  Hence the major push by William Hague, the British Foreign Secretary, to expand the network of diplomatic missions outside Europe, while scaling back representation inside the EU.  These missions incorporate trade elements, and several markets have been identified as growth targets:  India, together with Brazil and the rest of Latin America foremost amongst them.

The bounce-back by Britain will inevitably take time.  But it occurs to me that continued EU membership is looking like a liability, especially as reasons for entry are now so old-hat.  The internet and globalisation have seen to that, as Germany's successful penetration of the Chinese market equally demonstrates.

Will the British public give the Coalition time to re-engineer the British economy, to bolster manufacturing capability and to gain traction in the Sub-Continent and South America?  Or will the drubbing of the Liberal Democrats in recent local elections panic that party's top brass into pushing for domestic expansion, a slowing down in the pace of debt reduction and a calamitous Coalition split forcing an early general election?

The terrain is tough, and the competition fierce, so a steadfast approach is required.  The LibDems should see this through to fruition and will be rewarded by the electorate for their pains.

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