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Current Account Deficits (Balance of Payments) Revision videos This topic video looks at the structural and cyclical causes of current account deficits and also why a current account deficit can matter for an economy

Balance of Payments - Current Account Surpluses Revision videos This topic video looks at countries who run current account surpluses on their balance of payments. It focuses on the structural and cyclical causes of surpluses and the economic significance...

Introduction to the Balance of Payments Accounts Revision videos This Year 2 Macroeconomics topic video looks at the make up of the balance of payments and in particular the difference between the current account and the financial account.

Price Elasticity of Demand Revision videos This topic video looks at the basics of price elasticity of demand and the factors that influence the coefficient of elasticity.

Consumer and Producer Surplus Revision videos This topic video introduces students to consumer and producer surplus and looks at how shifts in market demand and supply affect consumer and producer surplus.

Explaining Price Elasticity of Demand Study notes Price elasticity of demand measures the responsiveness of demand after a change in a product's own price.This is perhaps the most important microeconomic concept that you will come across...

Income Elasticity of Demand Revision videos This topic video looks at income elasticity of demand and in particular the distinction between normal and inferior goods.

Positive and Normative Statements Revision videos This short topic video makes a distinction between positive and normative statements

Applying Game Theory in A Level Economics Revision videos This video looks at some applications of game theory to issues in A level economics

Short video on the negative impacts of the new Living Wage

and a longer discussion of both sides:

What's so great about free trade? Evaluation material:

In a nutshell, this blog posits the idea that using consumption as a measure of welfare disregards the real world facts of people's wellbeing being made up of many other things - for example, meaningful work. Someone who loses their job as a result of a shift in trade does not feel OK because someone else has got cheaper goods. A very strong evaluation point for a final paragraph - there is a short version of this in 8th April Moneyweek:

What’s so Great about Free Trade?

Published March 31, 2016 intangible infrastructural capital , welfare economics42 Comments 

Free trade is about as close to a sacred tenet as can be found in classical and neoclassical economic theory. And there is no economic heresy more sacrilegious than protectionism. An important part of what endears free trade to economists, it seems to me, is that it is both logically compelling and counter-intuitive. There is something both self-evident, yet paradoxical, about saying that the gains from trade consist in what you receive not in what you give up, in what you import not in what you export. And there is something even more paradoxical and counter-intuitive — and logically inescapable — in the idea of comparative advantage which teaches that every country, no matter how meager its resources and how unproductive its workers, will always be the lowest-cost producer of something, while every country, no matter how well-endowed with resources and how productive its workers, will always be the highest-cost producer of something.

Despite the love and devotion that the doctrine of free trade inspires in economists, the doctrine has had indifferent success in rallying public opinion to its side. Free trade has never been popular among the masses. Supporting free trade has sometimes been a way for politicians to establish that they are “serious,” high-minded, and principled, and therefore worthy of the support those who fancy themselves as “serious,” high-minded and principled. And so there is a kind of moral pressure on politicians to pronounce themselves as free traders, though with the immediate qualification tacked on that they also believe in fair trade. So even that scourge of political correctness, and you know who I mean, felt obligated to say “I’m a free-trader.”

Although free trade has never been a position calculated to attract a popular following, protectionism has usually not been a winning issue either. But it has, on occasion, been an effective strategy by which political outsiders, or those like Pat Buchanan and Ross Perot, posing as political outsiders, could attract a following. In fact, it is remarkable how closely the message of economic nationalism, control of the borders, disengagement from international treaties and alliances, trumpeted by the Politically Incorrect One resembles the message propagated by Buchanan in his 1992 and 1996 campaigns.

And the protectionist anti-free-trade message clearly appeals to both ends of the political spectrum. Opposition to NAFTA and other free-trade agreements has been fueling the Sanders campaign just as much as it has fueled the campaign of the Golden-Haired One. The latter, of course, has benefited from being able to push a number of other hot-button issues that Sanders would not want to be associated with, and, above all, from having shrewdly chosen a group of incredibly weak opponents (AKA the deep Republican bench that we used to hear so much about) to run against. So the question that I want to explore is why there is such a disconnect between the public and professional economists (with a few noteworthy exceptions to be sure, but they are just that — exceptional) about free trade?

The key to understanding that disconnect is, I suggest, the way in which economists have been trained to think about individual and social welfare, which, it seems to me, is totally different from how most people think about their well-being. In the standard utility-maximization framework, individual well-being is a monotonically increasing function of individual consumption, leisure being one of the “goods” being consumed, so that reductions in hours worked is, when consumption of everything else is held constant, welfare-increasing. Even at a superficial level, this seems totally wrong. While it is certainly true that people do value consumption, and increased consumption does tend to increase overall levels of well-being, I think that changes in consumption have a relatively minor effect on how people perceive the quality of their lives.

What people do is a far more important determinant of their overall estimation of how well-off they are than what they consume. When you meet someone, you are likely, if you are at all interested in finding out about the person, to ask him or her about what he or she does, not about what he or she consumes. Most of the waking hours of an adult person are spent in work-related activities. If people are miserable in their jobs, their estimation of their well-being is likely to be low and if they are happy or fulfilled or challenged in their jobs, their estimation of their well-being is likely to be high.

And maybe I’m clueless, but I find it hard to believe that what makes people happy or unhappy with their lives depends in a really significant way on how much they consume. It seems to me that what matters to most people is the nature of their relationships with their family and friends and the people they work with, and whether they get satisfaction from their jobs or from a sense that they are accomplishing or are on their way to accomplish some important life goals. Compared to the satisfaction derived from their close personal relationships and from a sense of personal accomplishment, levels of consumption don’t seem to matter all that much.

Moreover, insofar as people depend on being employed in order to finance their routine consumption purchases, they know that being employed is a necessary condition for maintaining their current standard of living. For many if not most people, the unplanned loss of their current job would be a personal disaster, which means that being employed is the dominant – the overwhelming – determinant of their well-being. Ordinary people seem to understand how closely their well-being is tied to the stability of their employment, which is why people are so viscerally opposed to policies that, they fear, could increase the likelihood of losing their jobs.

To think that an increased chance of losing one’s job in exchange for a slight gain in purchasing power owing to the availability of low-cost imports is an acceptable trade-off for most workers does not seem at all realistic. Questioning the acceptability of this trade-off doesn’t mean that I am denying that, in principle, free trade increases aggregate income or that there are corresponding employment gains associated with the increased export opportunities created by free trade. Nor does it mean that I deny that, in principle, the gains from free trade are large enough to provide monetary compensation to workers who lose their jobs, but I do question whether such compensation is possible in practice or that the compensation would be adequate for the loss of psychic well-being associated with losing one’s job, even if money income is maintained.

Losing a job may cause a demoralization for which monetary compensation cannot compensate, because the compensation is incommensurate with the loss. The psychic effects of losing a job (an increase in leisure!) are ignored by the standard calculations of welfare effects in which well-being is identified with, and measured by, consumption. And these losses are compounded and amplified when they are concentrated in specific communities and regions, causing substantial further losses to the businesses dependent on the demand of newly unemployed workers. The hollowing out of large parts of the industrial northeast and midwest is sad testimony to these wider effects, which include the irreparable loss of intangible infrastructural capital resulting from the withering away of communities in which complex and extensive social networks formerly thrived.

The goal of this post is not to make an argument for protectionist policies, let alone for any of the candidates arguing for protectionist policies. The aim is to show how inadequate the standard arguments for free trade are in responding to the concerns of the people who feel that they have been hurt by free-trade policies or feel that the jobs that they have now are vulnerable to continued free trade and ever-increasing globalization. I don’t say that responses can’t be made, just that they haven’t been made.

The larger philosophical or methodological point is that although the theory of utility maximization underlying neoclassical theory is certainly useful as a basis for deriving what Samuelson called meaningful theorems – or, in philosophically more defensible terms, refutable predictions — about the effects of changes in specified exogenous variables on prices and output. Thus, economic theory can tell us that an excise tax on sugar tends to cause an increase in the price, and a reduction in output, of sugar. But the idea that we can reliably make welfare comparisons between alternative states of the world when welfare is assumed to be a function of consumption, and that nothing else matters, is simply preposterous. And it’s about time that economists enlarged their notions of what constitutes well-being if they want to make useful recommendations about the welfare implications of public policy, especially trade policy.

The pros and cons of being tied to China for trade

A great exposition of how China is changing (particularly that it is pouring public funds into developing a semiconductor industry), and how this is affecting trade as a whole, and (in this case), Taiwan in particular. Consider this in terms of how trade is changing as countries seek to source more and more components (intermediate goods) from within their own economy, and therefore what this means for global trade as a whole, FDI and overlaps with trading partners as China develops further:

Taiwan’s economy

Straitened circumstances

Weaker growth exposes the downside of ties with China

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THE Chinese theory about economic integration with Taiwan is that it will bind the two together politically. Taiwan will become ever more reliant on China for its prosperity, paving the way to eventual unification. Many in Taiwan fear this process is under way. But now the premise of the theory—that closer ties with China are essential for growth—is being tested by a sharp economic slowdown in Taiwan.

Over his nearly eight years in office, Ma Ying-jeou, Taiwan’s president, has pushed for a detente with China. A flurry of deals, including a limited free-trade agreement, has fuelled business ties. Taiwanese exports to China have soared, as has Chinese investment in Taiwan. A recent meeting between Mr Ma and Xi Jinping, China’s president, in Singapore—the first between leaders of the two countries—was meant to show the promise of more co-operation.

Awkwardly, though, Taiwan’s economy is in a slump. GDP shrank by 1% year on year in the third quarter, its first contraction since 2009. Last year Taiwan grew by 3.8%. Many analysts had expected about the same this year. Instead, it will do well to hit 1%, says Gordon Sun of the Taiwan Institute of Economic Research. The global slowdown in trade is partly to blame. Exports are the lifeblood of Taiwan’s economy, accounting for nearly three-quarters of its output. Yet other export-driven economies in Asia such as South Korea and Singapore are not suffering as much.

The benefits from Taiwan’s rapprochement with China appear to be topping out. Taiwan’s trade surplus with China was 18% smaller in the first nine months of this year than in the same period in 2014. Chinese investment is down by nearly two-thirds from a year earlier. Even Chinese tourists, still flocking to Europe and other parts of Asia, are showing less interest in Taiwan: visitor numbers are up by just 5% this year.

One interpretation is that Taiwan is simply a victim of China’s slowing growth. But there is widespread concern that something deeper is at work: that Taiwan is losing ground to China and ill-equipped to fight back. So prevalent is this view that Taiwanese routinely refer to the threat from Chinese firms as the “red supply chain”.

Until a few years ago, the economic relationship between China and Taiwan was symbiotic. Taiwanese firms, among the world’s biggest makers of electronic components, needed China’s cheap labour; China craved Taiwan’s technical know-how. But this complementarity has given way to competition. Chinese producers of petrochemicals, steel, computers and digital displays have moved into terrain once occupied by Taiwan. Taiwanese firms with operations in China are themselves buying more materials and machinery from Chinese suppliers. Chinese firms are now trying to break into semiconductors, Taiwan’s last big industrial redoubt.    

The structural challenge does not come from China alone. Taiwan’s greatest strength is in making parts for computers and mobile phones. But the global markets for both are increasingly saturated. Short of a new consumer craze—some firms pin their hopes on wearables or 3D printers—the hardware industry’s future looks bleak.

For an export-led economy like Taiwan to reinvent itself, it needs to stay immersed in global trade. Here, though, it faces the cold reality of its geopolitical ostracism. Absent China’s express approval, other countries are reluctant to engage in free-trade talks with Taiwan. Yet Japan, South Korea and China—Taiwan’s main competitors—are signing lots of their own deals.

The easiest answer would be for Taiwan to open itself yet wider to trade with China. Politically, though, this is a non-starter. Taiwanese students last year occupied the parliament to protest against a services trade deal with China.

Tsai Ing-wen, Mr Ma’s likely successor , is determined to tilt Taiwan away from China. She wants to foster closer links with South-East Asia and to bring Taiwan into the Trans-Pacific Partnership, an American-led free-trade deal that covers 40% of the global economy but excludes China (see article). It will be very hard for Taiwan to escape China’s economic orbit. If Ms Tsai gets her way, it will not be for lack of trying.

From the print edition: Finance and economics

Economist article on TPP - great material on trade agreements

Free exchange blog

A serviceable deal 

 TPP is intended to spark a boom in trade in services, but it will be decades in the making Nov 14th 2015 | From the print edition Timekeeper IT DID not take long for America’s presidential candidates, busy though they must be, to digest the 6,000 pages of the agreement creating the “Trans-Pacific Partnership” (TPP). America and 11 other countries of the Pacific Rim struck the trade deal in early October, but the full text was not released until November 5th. Within days Bernie Sanders, a Democrat, had rendered judgment: “It’s even worse than I thought.” Donald Trump, a Republican, labelled it “insanity”.

 Even people of a less protectionist bent are unimpressed, complaining that TPP’s short-term benefits will be indetectably modest. One estimate suggests that in its first ten years it will cause its members’ exports of goods and services to rise by just $308 billion in total. In 2003-13 global trade in goods and services grew by more than $1 trillion a year on average. A ten-year horizon misses the point, however. TPP’s real promise lies in the liberalisation of trade in services. Just as it took decades for supply-chain integration to flower into the rapid goods-trade growth of the 1990s and 2000s, the pay-off from TPP, and deals like it, is further off. TPP cuts tariffs for some important industries, such as cars and agriculture, but its main concern is to eliminate non-tariff barriers, such as onerous customs procedures, buy-domestic rules for government agencies and regulatory barriers to trade in services. Indeed, Hillary Clinton, another Democratic presidential candidate, who was for TPP before she was against it, once said it set “the gold standard” in this respect.

 Not all services can be traded: outside of border-straddling cities, the international trade in manicures, say, is limited. Yet parts of other service industries, including finance, telecommunications, education and health care, are increasingly tradable thanks to advances in information technology. Such services account for an enormous share of GDP and employment in most rich countries, but only a tiny sliver of trade. Liberalisation could open them up to global competition. Hospitals in America, for instance, could outsource patient monitoring to nurses in Malaysia, diagnostics to technicians in India, and consultations to doctors in Canada, to the benefit of all four countries.

 Fulfilling that hope will be hard. Trade typically grows in step with GDP. It grew rapidly in the decades after the second world war, for example, largely because the world’s big economies were expanding so fast. So TPP’s benefits may be held in check in the short-run by weak demand around the rich world.

 But instigating a trade boom takes time as well as a propitious environment. Beginning in the 1980s trade began behaving strangely, growing twice as fast as GDP. This burst originated in a revolution in supply chains that had been decades in the making. For most of industrial history, countries traded raw materials or finished goods, with the process of turning the one into the other located entirely within a single country, and often within a single factory. From the 1980s, however, a large and rapidly growing share of trade consisted of “intermediate goods”. Rather than produce a computer from scratch in one country, for example, a tech firm would source components from several different countries, bring them together in yet another country for assembly, and then ship the completed good to consumers around the world. As a result, rising GDP led to even greater jumps in trade.

 The great supply-chain revolution was slow in coming, however. Tariff rates fell precipitously from the 1940s to the 1980s, by which time the duties imposed on most goods traded between rich economies had fallen to negligible levels. The shift to container shipping, which made transit by sea much faster and more reliable, was largely over by the early 1980s. From 1950 to 1985 the cost of a long-distance phone call dropped dramatically. Yet it was not until the 1990s that the supply-chain boom really got going, abetted in part by China’s economic opening.

 About half of the current slowdown in trade growth represents the exhaustion of this process. At the turn of the century, for instance, imported parts accounted for nearly 55% of goods exported by China. By 2012, that share had fallen to 35%. Some large economies, like America and China, are keeping more of their supply chains for themselves. As China’s rich coastal cities have progressed from the assembly of electronics to the development of more sophisticated components and designs, assembly work has often moved to poorer inland cities rather than to China’s poorer neighbours. Hence the importance of services.

 Long-haul service 

There are lessons here for those awaiting a service-trade boom. TPP in its present form is just one element of several which must fall into place. Barriers to trading services remain prohibitively high, equivalent to an average tariff of 15-17% in Canada, Australia and Japan and 44% in Mexico, according to the Peterson Institute for International Economics, a think-tank. Provisions within the TPP deal to work toward mutual recognition of some professional certifications still need to be seen through. Adding China, which is currently excluded, would greatly help. So would completion of the Trans-Atlantic Trade and Investment Partnership, a mooted trade pact between America and Europe which is also preoccupied with services, and a multilateral Trade In Services Agreement being negotiated at the World Trade Organisation.

 Technological change is also needed. Cross-border internet traffic grew 18-fold between 2005 and 2012, according to the McKinsey Global Institute, an arm of the consulting firm. Further advances—to enable even better digital translation, for example—would help overcome the cultural and personal barriers to trade in services. One day service industries may be as efficient and as globally integrated as manufacturing is today. TPP is a step toward that ideal, but just one of many that are needed.

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Short video looking at D&S diagrams (micro):

Supply-side - analysis of apprenticeships

If you want to go into detail on a supply-side policy, apprenticeships would be a useful one to use. It encompasses so much that would work in an essay: Comparison with other countries, possible unintended consequences, conflict with Minimum Wage, increased (costly) bureaucracy - and the possibility that some of the Levy may just be a form of taxation.

The first article contains all that information; the second looks at an example of how one company is treating the new methodology - possibly not as useful, but gives good perspective (if you want to take it that far), as well as evaluation points:

‘The apprenticeship levy is a missed opportunity’

Roger Brown

18th March 2016 at 00:00

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Ministers must make a U-turn if they want a skills revolution, writes one expert 

One ironic outcome of the Conservatives’ election victory has been the number of government policies that were espoused by Labour, or easily could have been. The apprenticeship levy – whereby, in effect, employers with annual payrolls of more than £3 million will pay a (reclaimable) 0.5 per cent levy to the government – is a case in point. If Labour had introduced such a measure, the business lobby and the right-wing press would have been up in arms. As it is, although there has been a good deal of grumbling from the CBI and others, there seems to be a general acceptance of the measure. But what is it intended to achieve, and will it meet its aims?

The government’s declared objective is to increase the amount of training so that by 2020, 3 million apprenticeships will have been created across the country. There is a general recognition that British firms’ investment in education and training leaves a good deal to be desired. International surveys repeatedly show the UK at or near the bottom of the skills development league.

It needs only the rumour of an economic recovery for complaints about skills shortages to surface. On some surveys, the amount of employer-funded training has actually fallen since the late 1990s, at a time when corporate profitability and savings have increased.

Various voluntary schemes, such as those promoted in the 2006 Leitch report, have made little difference. Nor have quite generous tax incentives. Will compulsion do the trick, after supply-side reforms have so far failed?

To begin with, the levy only applies to larger firms and it is unclear how smaller ones will respond: they are also having to cope with pension auto-enrolment and a significant increase in the national minimum wage. There are the obvious difficulties: dead weight (firms rebadging jobs as apprenticeships to meet their targets and reclaim the levy, when we know that many existing “apprenticeships” are just conversions of existing jobs); quality (the amount of spend per apprenticeship is only sufficient to pay for low-quality places, unless employers are willing to contribute more); and the mismatch between apprenticeship supply and demand. The supply has so far mainly been at lower skill levels when it is higher-level skills that are increasingly needed.

This, indeed, is one reason why, in spite of the fact that a levy scheme has operated in the sector for many years, two-thirds of construction firms are reported to be suffering from skill shortages.

It has also been suggested that some employers will respond by cutting other spending on workforce training and development and/or on wages, which are still only recovering from the 2008 financial crisis.

Comments have also been made about the amount of bureaucracy that is involved in companies paying money to the government, receiving vouchers for the same amount, using them to pay training providers, and the latter then exchanging these for money from the government.

Finally, it has been pointed out that while the levy is intended to raise £3 billion each year, the Treasury is planning to spend only £900 million on apprenticeships by 2020: is crafty chancellor George Osborne raising revenue by every means that he can without increasing personal taxes?

Better use of funds

All this suggests that a scheme that includes an element of compulsion but is targeted at sectors, areas and types of firm where there is an acute, unsupplied need for higher-level skills – with the initiative closely monitored for numbers, quality and value for money by an independent agency such as the National Audit Office – would be a much better use of the public and private resources involved than a blanket levy.

It would be even better if such a scheme were part of a national strategy to improve the quantity and quality of education and training for all those in – or likely to be employed in – productive work in both the private and the public sectors. What might such a strategy look like? A good start would be to improve the information that we actually have about apprenticeships – not only the actual numbers after allowing for “starts” and “conversions”, but also the numbers of and the types of participating employers.

Another step forward for the government would be to ensure that all apprentices receive the current minimum wage (and, in future, the national living wage).

But the real issue is whether and how far the aim of increasing apprenticeship numbers meshes in with other policies to support the vocational progression of learners.

For example, is it sensible to focus declining levels of state support on apprentices when other areas of adult skills – lower level qualifications, older or redundant workers seeking retraining, the growing numbers of selfemployed, etc – are being cut?

Why expand apprenticeships when traineeships – at around 20,000 a year – are lagging so far behind? Why not reform post-14 qualifications to create a genuine baccalaureate system, with academic, technical and work-based pathways replacing existing horizontal qualifications? Why not create common educational institutions post-16, or even post-14?

There is plenty of evidence to suggest that tertiary systems – where every student progresses to a single institution after 16 – are both fairer and more efficient than mixed or all-through ones. Such systems also facilitate progression to further education or training because there is only one kind of educational institution with which employers and training providers have to deal, and (as they are comprehensive) there is less likelihood of vocational studies being looked down upon in favour of academic courses.

Finally, one important difference between the UK and many other major EU countries is the relative weakness of most employer bodies. In Scandinavia, France and Germany, chambers of commerce and similar organisations link local employers with educational institutions and students.

This is partly about culture but it is also about incentives. Why not strengthen the capacity of smaller and medium-sized firms, in particular, to work with colleges and other training providers by legislating to give chambers of commerce or other local business bodies the ability to make a compulsory charge on local firms to meet their running costs and those of local training and other productivity initiatives?

That really would be a U-turn worth making.

Roger Brown is emeritus professor of higher education policy at Liverpool Hope University and chair of Barton Peveril Sixth Form College in Eastleigh, Hampshire

‘Employers aren’t angels, but it’s not all about greed’

Iain Mackinnon

18th March 2016 at 12:00

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Apprenticeships 

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FE

Not all businesses are motivated solely by money on apprenticeships, despite what the sector might think 

Some 20 years ago, the Financial Times published a cartoon that showed a man with a sign round his neck saying “Will work for food” and a rotund businessman asking him “How much food?”

It’s a viewpoint that is sadly all too common in FE: that business people care only about their own narrowly defined self-interest and that they will work hard to find ways around rules designed to push them into more acceptable behaviour, such as the new apprenticeship levy.

But that’s not the reality I see. And with businesses in the driving seat on apprenticeship reforms in England, it’s important to show the other side of the coin.

I have recently been advising a large maritime business on the apprenticeship paper that it was preparing for its board. Unquestionably, the board commissioned the paper because of the levy, but that’s good news, isn’t it?

If the government had set out to get every company board to put apprenticeships on its agenda, there would have been plenty of critics telling them that it couldn’t be done, so what a prize if the levy pushes many more to do so.

Compelling arithmetic

The arithmetic for this particular company is compelling: it will have to pay a levy of more than £500,000 a year. Any board would take notice of that. Chancellor George Osborne is fond of saying that the levy is an unusual tax in that you can get it back, so any board will obviously ask how that can be done.

But not at any price. If the only motivation was to “get its money back”, this company would not hesitate to turn its in-house high-level apprenticeship into a statutory, government-funded apprenticeship.

The company did hesitate, though: money isn’t everything. I’ve worked with at least as many companies over the years that fear entanglement with government as those that want to get their noses in the trough. This one knows well that government money comes with strings and wants to think through what it would have to give up in exchange.

It is worried about losing its intellectual property if it joins the government system: would all of its competitors get to see that fat file of training materials it has compiled, developed at the firm’s own expense? As each apprentice costs more than £100,000 to train, the company’s concerns are far from trivial.

I’ve reassured the firm that the Trailblazer process focuses on outcomes – the standard to be achieved – so businesses needn’t worry about giving away their intellectual property. It has decided to take the plunge by committing to converting its in-house programme into a statutory apprenticeship.

That’s a good win for UK plc. The levy has prompted this innovative business to work with its competitors to make a new apprenticeship openly available, and a higher-level one at that. If I worked at the Department for Business, Innovation and Skills, I’d chalk that one up as a success for its policy.

The board paper also took stock of the range of apprenticeship activity across the business, with numbers, and explained the rationale for current activity. What HR director wouldn’t relish the opportunity to have their board asking why there are so many apprentices in one part of the business and none in another?

'Unanswered questions'

There are plenty of unanswered questions on apprenticeship policy, but while politicians and commentators debate, companies must plan. A key gap for this company is what happens outside England. It has operations across Britain, so it needs to know how the devolved administrations will manage the levy. Will they, for example, restrict the fund to apprenticeships (as in England) or open it up to other training?

The Treasury has said that the devolved administrations will get their “fair share” of the levy pot, but has not yet translated that into something countable, so the political wrangling goes on with no end in sight. That’s unhelpful when employers are trying to plan.

The maritime sector takes training seriously because of the risks involved in so much of the work, but I doubt if the example I’ve quoted is out of line with how other employers are responding to the levy. Employers aren’t all angels, but it’s not all about greed either.

Iain Mackinnon is secretary to the Maritime Skills Alliance, but writes in a personal capacity. He tweets @IainAMackinnon

In a dramatic twist on free trade...

Who saw this coming?

Defiant China slaps steel tariffs on Britain as trade war looms 

Port Talbot steel works is spewing political fire CREDIT: ALAMY Ambrose Evans-Pritchard 

1 APRIL 2016 • 8:37PM

China has thrown down the gauntlet in an escalating trade war over the global steel glut, imposing punitive tariffs of 46pc on hi-tech steel produced in Britain and the rest of the European Union.

The astonishing move came as the Prime Minister, David Cameron, confronted the Chinese leader Xi Jinping at a meeting in Washington, pleading for action to slow the flood of Chinese steel exports reaching Europe.

The imminent demise of the Port Talbot steelworks and Tata’s wider steel operations in Britain has mushroomed within days into a full-blown national drama, calling into question the Government’s whole approach to China.

Some 800 steel workers gathered for talks today in Port Talbot 

The Chinese ministry of commerce said in a terse statement that it was slapping anti-dumping tariffs of 14.4pc to 46.3pc on companies from the EU, South Korea, and Japan, claiming that China had suffered “substantial damage” from trade abuses.

In a macabre twist, the measures target the Tata plant in Port Talbot, which produces the specialist flat-rolled electrical steel used in transformers. A tiny amount is exported to China. 

Javid on Tata: 'working hard to save the plant'Play!01:14

“If this is not a trade war, I don’t know what is,” said Gareth Stace, director of UK Steel. “We’re literally drowning in a flood of Chinese imports globally. We’re certainly not seeing a flood of European steel into China.”

China’s share of global steel output has risen from 10pc to 50pc over the last twelve years, with the single province of Hebei now producing twenty times as much as Britain. China’s excess capacity 400m tonnes, double the size of the entire EU steel industry.

China now accounts for half the world's steel output CREDIT: WORLD STEEL

The country can no longer absorb its own supply as the construction boom fades and the catch-up phase of breakneck industrial growth hits the limit. A record 112m tonnes was exported last year but Chinese  producers are also suffering huge losses.

Anshan Iron and Steel Group announced today that it had lost $7bn over the last year and warned that the steel industry faces an "Ice Age that will force a brutal consolidation".

The US Trade Representative accused China of systematic trade abuse and illicit subsidies for its steel industry in a blistering report released today.

David Cameron: Tata steel crisis is of 'deep concern'Play!02:57

“China’s trade policies and practices in several specific areas cause particular concern for the United States. Chinese government actions and financial support in manufacturing industries like steel and aluminium have contributed to massive excess capacity in China,” it said.

The US trade report said China’s steel capacity has continued to grow “exponentially” to 1.4bn tonnes – even higher than previously feared – despite weakening global demand.  This now dwarfs the rest of the world’s combined output and is profoundly distorting the global steel market.

It said China has no natural advantages in raw materials or energy costs to justify this, and claimed that it is the result of export subsidies, cheap credit, and an opaque regime of state support.  

China's steel growth has been prodigious but it has no natural advantages to explain this

“These practices have caused tremendous disruption, uncertainty, and unfairness in the global markets. To date, however, China has not made any movement toward the adoption of international best practices,” it said.

It cited a long list of alleged violations, especially in “strategic emerging industries”, technology, intellectual property, and services, accusing Beijing of obstructing access its own markets.

The report is certain to be seized on by Republican presidential candidate Donald Trump, who has accused China of manipulating its currency and operating behind a “Great Wall of Protectionism”. His Trump Plan calls for punitive tariffs.

China has vowed to slash its steel capacity by 100-150 million tonnes over the next five years, mostly by shutting obsolescent and dirty micro-mills, but it is also still building fresh plants at a brisk pace.

UK Steel said Chinese exports are pouring into Europe as the market of last resort while the US shields its own market. Washington has imposed tariffs of 267pc on cold-rolled steel, compared to 13pc in the EU.

“We are dragging our feet. We must remove the sign above Europe, saying ‘please dump here, you’re welcome’,” said Mr Stace.

The UK government now finds itself in a delicate position. The European steel lobby Eurofer – backed by French and Italian ministers – has accused Britain of the being the “ringleader” of a blocking minority in the EU council that has in effect stopped Brussels taking a tougher line with China.

They allege that Downing Street has been currying favour in Beijing in order to save the nuclear power project at Hinkley Point and to win a share of China’s offshore trading for the City of London.

Mr Cameron said he was doing everything he can to save the British steel industry. “It’s a very difficult situation, and people who pretend there’s some simple easy answer in a world of massive overproduction and collapsing prices are not playing straight with you,” he said.