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Tuesday, 23 April 2019

EU protectionism kills trade and innovation

I have commented before on a deeply protectionist, almost corrupt, culture of business in the EU that appears to offer advantages but in reality strangles innovation, stifles growth and deepens a sclerotic inefficiency that costs jobs. My old example was hairdressers; here a hairdresser must serve a three-year aprenticeship before she can pick up the scissors, whilst in the UK a 16 year old straight from school can hang her shingle without hindrance and get creative with hair. The result is that most women here look like their hair is styled by a Soviet camp tonsorist from a 1950s gulag, whilst Brit girls pioneer the world's most fashionable and glam hairstyles.

Over the Easter weekend I recalled another. I've known about this for three years but for some reason haven't written of it; it is the network of 'business only' suppliers here. It's the way in which buyers in these nations are forced to engage professional tradespersons by restricting or preventing other means of carrying out the work. Many firms simply won't deal with you unless you have a business registration number. There is no equivalent to UK Builders' Merchants for example - just the DIY stores or the 'profi' wholesalers. One can't buy glass at €8/m2 in stock pieces to cut yourself but must order each pane in a finished size at €35/m2 from a glass retailer. You can't have a palette of bags of mortar delivered next day or buy rolls of building membrane except at consumer prices.

There are ways round it for some things - Germans are slightly less constipated than Austrians, and consequently it's been cheaper, including transport cost, to order bulk plasterboard and insulation from Northern Germany than from the local stockists of the same-brand material down the road. It's always worth searching .pl and .si sites as both Poland and Slovenia sometimes carry German and Austrian made materials at a substantial discount.

The most absurd result of local protectionism is Travertine. I'm tiling the new bathrooms in Travertine stone tiles, quarried and cut in Italy, just to the south. You'd think they'd be cheap, then; wrong. You can't buy them for under €65/m2 anywhere here - but I can buy the same tiles from the UK for €22/m2. The transport costs were exactly the same. Now explain to me how it's cheaper to truck stone from Italy to the UK and back to Austria than direct to Austria?

Over the weekend I needed to order some German Häfele ironmongery for a project - you may know the name, we use it widely in the UK. No chance. Häfele only sell to the trade - and helpfully offer to put you in touch with a local profi to do the work for you. They even make their buyers sign a declaration to promise they won't resell the Häfele kit.

Well, you won't be surprised that all of these restrictive practices are unlawful in England - not illegal, but contrary to Common Law. Contracts in restraint of trade are unenforceable. My hinges are available here on the grey market for €24 a pair; I've ordered them openly from Birmingham, from a trade supplier, at £9 a pair and will have them within a week.

It's a small thing perhaps, but an irritating barrier to economic freedom. It's one of the reasons for the zero VAT threshold here - you're either a tradesman or you're not, with no room for the sub-threshold activity we have in the UK. But it will kill them - it's a system that can only work in the absence of the internet.   


DeeDee99 said...

"It's a system that can only work in the absence of the internet."

Ummm .... a bit like authoritarian government by an unaccountable Elite can only survive if the internet is strictly controlled.

Which is why they're already making plans to restrict the internet.

Stephen J said...

Funny innit Raedwald, we want to leave the EU because of the over-regulation which applies to ALL aspects of life in the EU. As a consequence we will be able to deal with places where nobody sensible buys EU goods when you can get them for half the price outside.

Our government is trying to stop that, it would rather keep us all in purgatory and for the ensuing period, wallow in the fact that because our goods and services (as a result of competition) are cheaper, results in us being known as "Treasure Island". You can see why they want to hold on to us...

Remainers say that we leavers didn't know what we were voting for, but I reckon they didn't know why they are remainers, if they knew this stuff, they would change their minds.

Dave_G said...

Raed said:

it's a system that can only work in the absence of the internet.

it's a system that can only work with a controlled internet.


Span Ows said...

DeeDee and Dave_G have just said exactly what i was going to.

Anyway, happy St. George's Day!

Span Ows said...

r-w "Remainers say that we leavers didn't know what we were voting for, but I reckon they didn't know why they are remainers, if they knew this stuff, they would change their minds."

100% true in my experience, still have had NO reason to stay form Remainers. Jack was right to pull me up on my perceptions of what is a good reason but generally they have NO reason just...because...racist!

Mark In Mayenne said...

It won't be so easy to import from Britain once we've let the EU

Sackerson said...

"Common Law: contracts in restraint of trade are unenforceable."

Could you supply a reference, please?

Raedwald said...

erm, start with Mitchel v Reynolds (1711)

"it is the privilege of a trader in a free country, in all matters not contrary to law, to regulate his own mode of carrying it on according to his own discretion and choice. If the law has regulated or restrained his mode of doing this, the law must be obeyed. But no power short of the general law ought to restrain his free discretion."

The 'Nordenfeldt' case is also still important.

The Treaty of Lisbon (Art 10) purports to implement a version of 'Competition Law' but like most EU law it is crooked, ambiguous, subject to infinite bent interpretation by the EU's political court and offers little protection to consumers.

Anonymous said...

Make up what passes for your minds, do.

Is it globalist or is it protectionist?

What about US tariffs?

Herbert said...

I think that you are wide of the mark on this contracts business, Raedwald.

Land covenants, contained in conveyances, are contracts. They often restrain or prohibit the use of the land for trade, for instance.

The general rule in contracts is that the parties are free to agree anything, which does not break the general law. It would be bizarre if it were otherwise.

However, there must be *consideration* for anything which is asked. That is, the beneficiary of a clause must pay or exchange something for it, otherwise, it is not usually enforceable. That could take the form of a discount for wholesale goods, say.

If there were no quid-pro-quo, then the other party would probably not be bound.

Raedwald said...

Herbert - your basic knowledge of property law and of valuable consideration does you credit. However, a little knowledge ...

I am on certain ground here. A contract in restraint of trade is also a restrictive covenant and is void unless it (a) protects legitimate business interests and is (b) legally reasonable. It cannot be vicarious - i.e. to protect a third party. In Häfele's case, it sells the same number of hinges and makes the same profit whether it sells to trade only or private customers. The sales restriction is therefore for one of two reasons - either to protect third party 'trade' customers (vicarious) or to maintain prices and margins (contrary to competition law). Neither I think are legally 'reasonable' or even legitimate.

Herbert said...

Thanks Raedwald. In my work for the Law Commission on this subject, I went rather further than my brief post here, but your recognition is appreciated.

Anonymous said...

There used to be many companies in Britain that would sell only to The Trade.

My impression is that this was mainly a result of old style accounting practice. It's easier to maintain the paperwork for a small number of regular clients than for hundreds or thousands of customer, whose cheques may well bounce, and who are scattered all over the country.

Even when Internet ordering began, there were companies that wanted you to "Open an Account". Gradually they began to see that there was profit in selling to everyone.

I think selling through Amazon helped, and so did PayPal.

Don Cox

Anonymous said...

There still are. Selco for instance.

Domo said...

The general public break stuff and return it and need customer service.
Trade don't.