As Donald Trump continues to delight, astound and horrify the world – all depending on your outlook – it seems likely that we are moving into a world of greater nationalism in terms of both politics and economics. Trump appears to see international trade as much more of a contest than an opportunity for win:win outcomes. He feels that countries like China and Mexico have gained more from the US than vice versa, and maybe he is right.
Other countries will no doubt respond though if he does take action, and then we have the risk of falling into a trade war that ultimately won’t benefit anyone. Trump does not explain how slapping an import tax on to goods coming into the US is going to help the lower income families in his country who will be faced by higher prices – not all factories can instantly re-locate to Texas.
Closer to home, in the UK, the recent Building Our Industrial Strategy “Green Paper” from the government contained a few good ideas and worthwhile suggestions. But the section on public procurement also contained some slightly disturbing comments. It starts well – it is hard to argue with this.
“This means creating the right conditions to put UK supply chains in the strongest possible position to compete for contracts on the basis of best value for the taxpayer”.
But it is the use of the “balanced scorecard” that raises some alarm bells.
“We are going further by ensuring that all major government procurement projects are structured in a way that supports productivity improvements, so that UK-based suppliers are in the best position to compete for contracts throughout the supply chain. To do this, we are extending the “balanced scorecard” approach recently developed by the Cabinet Office across all major construction, infrastructure and capital investment projects over £10 million … “
The scorecard (which we need to look at here in more detail) includes social value factors, which is fine, but this talk of “productivity improvements” is interesting. It is not clear how seeking that goal – which if it leads to better contract performance and value is fine – puts UK-based suppliers in a better position though? Which raises the suspicion it is shorthand for some sort of favouritism.
Anyway, as you might expect, the whole thrust of the Industrial Strategy is about helping UK businesses, and while you can totally understand this from a politician’s perspective, it does seem to be only a little short of Trump’s “America First” pronouncements. It also raises some interesting questions about what is really meant by local, regional or national firms. Is the Industrial Policy aimed at supporting investment and jobs in the UK, or real, indigenous British owned firms? The UK barely has any nationally owned large IT firms these days, for instance, so who is the policy aimed at supporting? IBM, Siemens, Fujitsu? None of them British owned of course but all employ thousands of people in the UK.
That was the irony around the fuss a couple of years back when a contract for railway rolling stock went to Siemens instead of Bombardier, who were presented as a “British” firm because they had a factory in Derby. But they’re Canadian, and we believe employ fewer people in the UK than Siemens!
As Professor Sue Arrowsmith said the other day, there is a lot to be said for using means other than public procurement to implement wider government policies, whether social or economic. We’re beginning to miss Francis Maude, the Minister with responsibility for public procurement from 2010-15, who (apart from a fairly half-hearted smaller firms programme) saw public contracting as being very much about the best value for the taxpayer from the deals put in place – not a mechanism to achieve other goals.
All this is cyclical of course, so we predict that sometime in the next few years, there will be some analysis to show all this has not paid off, and back we will go to straightforward value for money. We do think though that the Commission and others who support the principles of openness, free trade and fair competition need to make their views known and heard. At the moment, they are being easily drowned out by bigger and louder voices, as nationalism and protectionism become more prevalent.