Mandy and Hu He leave M&S’s customers to catch a cold in the High Street
The long line of young women outside Marks & Spencer, arms folded modestly across their chests as they wait for their brassieres to arrive, is a standing rebuke to the European Single Market. Even Peter Mandelson, now installed as commissioner in charge of trade, is talking of a glitch. It is, in fact, the by-product of some clumsy diplomatic bluff and counterbluff with Hu He, the Cantonese manufacturer and underclothier to the world. Hu’s European competitors have lobbied their governments, they have contrived to stitch things up in Brussels, and shiploads of containers from the Pearl River are now choking the port of Rotterdam while his customers shiver in Kensington High Street. How happily, all those years ago, we signed up for the single market in the belief that our goods and services could now flow freely across Europe. What we had done was to hand our trading policy over to Brussels. We threw away our advantage as an importer of food, able to buy on the best terms in the world’s markets, and have been paying for that unilateral concession ever since. We also joined a club whose rules, unusually enough, precluded us from joining any others. Nafta, the North American free trade area, is a lively club, and Senator Phil Gramm once offered to put us up for it. He could get our nomination through Congress in a week, he said. There was nothing in Nafta’s rules against it. The Foreign Office went out of its way to snub him. Didn’t he know that this was against the rules of the Treaty of Rome? He would get us expelled. Silly senator.
A world elsewhere
My man keeping watch on the queue outside M&S is Ronald Stewart-Brown, who runs the Trade Policy Research Centre. Even when peace breaks out on this exposed front, we shall still, he says, be paying 12 per cent more than we need to for any clothes that we import from outside Europe. A protective tariff has made sure of that. If we would rather import trucks, that would cost us even more. A 22 per cent tariff protects Mercedes, Iveco and Renault, but not our own producers, for we have none left. We just have to pay over the odds to buy these necessities from other people. As for the commissioner for trade, he is, of course, going native. When we realise what all this costs us, we shall want a better deal. Ours is a country that needs to trade with the world and not just with its neighbours.
Making a market
Think of the City of London as a revolving door: at once static and dynamic. It has been here a long time, but the population keeps changing. In through the door comes a new exchange, complete with real live traders, jumping up and down and making signals. This is Nymex Europe, the London end of the world’s biggest commodity exchange, New York Mercantile, which has been trading butter and eggs since Ulysses Simpson Grant was President. In London it will trade in oil: Brent crude, and gasoil. The traders who were exiled to Dublin when London’s International Petroleum Exchange went over to computers and screen-trading will find their way back, and be lost to Ryanair and Guinness. They will recognise the chairman, Roy Leighton, who built Calyon (its name kept changing) into one of the world’s biggest trading companies in oil and gas, open for business every day except Christmas. An international financial centre, so he said, should be open when its customers were open. The New York Merc, pushing out across the world, must like his thinking, and goes along with his preference for trading face to face. You get better discovery, he says, and tighter prices. Screens and keyboards are for octopuses.
Discounting the bill
So in comes Nymex and back come the traders, but out goes the bit of paper which for centuries financed the trade of the world: the bill on London. A bill was (and still is) a promise to pay at a date in the future. A bill-broker would give you cash for it now, at a discount to its face value. The better the promise, the smaller the discount. Better still to get a City merchant to back the promise with his own. He would accept liability — for a commission, of course. This was how the merchant bankers made their fortunes. They came to form an inner circle of ‘accepting houses’ round the Bank of England, and the best bills of all, including theirs, would be eligible for rediscount at the Bank. Bills drawn, bills backed, bills dishonoured were a part of life. Old Mr Sedley in Vanity Fair protests that Alexander would back his bill — ‘down on the counter, sir’. Alexander’s successors were discounting bills when I came to the City, but they have faded away, and now the Bank itself has closed its counter and the bill on London recedes into financial history. All sorts of ingeniously confected promises to pay have sprung up to succeed it. I hope that the City has not lost the knack of judging them.
Jumbo defies gravity
My aviation correspondent, Jumbo Speedbird, weighs in from Heathrow with some notes on outsourcing. All airlines do it, he says. They lease their aircraft, they refuel them on credit, and the air itself is free. That is why airlines are easy to start, and why they so often go bust, and why, when they do, the creditors have nothing to hang on to but the captain’s cap-badge. This in turn explains why so many insolvent American airlines are still flying. The creditors hope that they will generate some cash. As for outsourcing airline meals, it’s obvious. You don’t want all these cooks and bottle-washers on the payroll, where you can’t get rid of them, and even if you could you might still have to pay their pensions. My own pension (says Jumbo) is quite expensive enough.
Any other business
Wise chairmen know that the last item on the board’s agenda leads to the most argument, which is why they take ‘Any other business’ first. That makes it an apt heading for Martin Vander Weyer’s new column, which will alternate, more or less, with City and Suburban, bringing Martin’s keen and worldly eye to bear on business and finance, and allowing me more time for on-the-spot research into the negroni index. You will find it on the agenda in next week’s Spectator. Take it first.
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