Political Realities Dictate New Path Forward

September 2018 – Public policy discussions are difficult because they often cast a known present against a hypothetical future. This problem is seen most dramatically in the United Kingdom, where Theresa May, the Prime Minister, is demonstrating she is totally inept in negotiating Brexit from the European Union. And although she may be inept, she is also responding to the political realities of our time.

In the UK, the political realities are that businesses and business owners for more than 40 years have responded to the economic realities imposed by the European Union, and they have invested in accordance with those realities. In produce, for example, they built operations in Spain, inside the EU’s tariff wall, rather than in, say, Florida.

Prior to the EU, my family had a robust business exporting Florida grapefruit, apples from across America, carrots, iceberg lettuce and much more from the United States to the UK. But tariffs artificially distort trade — and the business mostly disappeared after the EU imposed tariffs on U.S. imports but gave Spain tariff-free access to the UK market.

The right response to Brexit is clear. There are many more people, much more business and a world of opportunities outside the EU than there are in the much smaller EU. So, the whole focus of Brexit should be outward-facing. Maybe the UK should make itself a free port with no tariffs at all. Or, since the EU is not negotiating with the UK on an equitable basis — in fact it wants Brexit to fail and be a misery for the UK and its people — perhaps the UK should play hardball and offer itself as a free port to the whole world — except the EU.

This would change the political calculus within the EU as major business interests, say German automakers, would go running to Chancellor Angela Merkel to complain German cars will be disadvantaged under Brexit because  American, Japanese and Korean vehicles would have tariff-free access to the UK, while German brands would not.

The problem is, politically, nobody in the UK has much of an economic stake in new and hypothetical trade with, say, India or the United States. Since the UK has 40 years of entrenched interests in trade with the EU, the whole focus of political pressure is to preserve those interests, even if the prosperity of the country would best be served by disregarding these vested stakes and focus on the new, larger, world of opportunity.

This tension of the future versus the past plays out across our global political spectrum. All over the world, cities are trying to place limitations on ride-hailing services, such as Uber and Lyft. These services are of such public benefit that they have quickly become giant businesses as consumers responded to their low cost, ease of use and high availability. So why is there such an effort to restrict the services? Simple: taxi drivers have a tremendous vested stake in an old world. They often paid large sums to buy medallions from cities that allow them to operate as taxis, and they have seen the value of those medallions collapse.

Many of these drivers were penniless immigrants who built lives saving money to buy a medallion. In London, taxi drivers famously study for years, riding bicycles throughout the streets, to learn the roadmap of London. They must pass an exhaustive test that includes the examiners naming two obscure points in the city and the applicant is required to identify — turn by turn — the fastest route between two points. Yet, now, we have to tell the poor driver, who invested years of his life in acquiring this knowledge, that it is not valued much. That any layman with a GPS is almost as good.

This is what capitalism is all about. Famous economist Joseph Schumpeter described what is happening here as “creative destruction.” As old things fall apart, the resources that had been invested — the capital, the labor, the land — fall by the wayside and become available for reinvestment to build the new.

But you need visionaries …

When a joint PMA/United Fresh committee developed a new Ethical Charter on Responsible Labor Practices, and it was endorsed by both associations, it was interesting that soon afterward, in speaking to the press, Tom Stenzel, United’s longtime chief executive and a tireless advocate for United’s members, said, “We don’t need another audit in our industry.”

There is no question that such a statement reflects the opinions of United’s grower/packer/shipper membership. Their customers are not yet demanding an additional audit on labor practices. The producers most decidedly don’t want the hassle of executing a labor audit and, certainly, don’t want to pay for it.

The future has its own demands, however, and, intrinsically, initiatives such as “Know Your Farmer” and the general idea that consumers want more transparency and to know where their food comes from means more attention will be paid to things like labor practices.

So, the future will demand a method for a buyer on the procurement desk of a major retailer/distributor or foodservice operator, or a buyer on Hunts Point market or even a consumer in a store to whip out a cell phone and check that the producer has been audited for conformance to responsible labor practices.

The question is whether the industry will, like UK politicians and taxi drivers, resist the future — or prepare for it and embrace the future. pb