The Free Trade Hypocrisy

One of the most repeated ideas that many prominent Leavers repeatedly praise is Free Trade. For some, it was their whole rationale for Brexit, saying that wanted to escape the protectionist shackles of Europe and become – once more – the beacon of free trade and global trading that we apparently once were. Our Brexit minister himself once even said that this was the whole point.

In many ways, such people do have a point. Free trade is good, it benefits all the economies concerned and protectionism harms them – in the long run. Short term protectionism to allow an industry to develop to a critical mass is a significant exception. Such a policy worked in Germany and Japan in the late 19th century and the absence of such a policy arguably keeps too many developing nations dependent on importing more developed products. But that’s a debate for another time as it clearly does not apply to either Britain or Brexit.

Advantages

The general advantages of free trade and open markets are the first thing you learn when studying in economics. Literally. Certainly when I studied A-level economics, both ideas were introduced in the first lesson. Admittedly, they are given the less interesting titles of Comparative Advantage & Economies of Scale; but the concepts are the same.

Comparative advantage is simply the idea that it benefits everyone if we all do what we do best and trade rather than trying to do everything ourselves. Combined with the second idea of economies of scale – the more things you make, the less each individually costs – and you can immediately see why people and countries being allowed to specialise in what they do best and sell it to many helps everyone. After all, the alternative is we’d all be stuck in individual villages trying – and usually failing – to do everything. Trading and specialising is beneficial.

Free Trade in Action

So on Free Trade, I broadly agree with these Brexit activists; which is not something I would expect to say. But what makes me mad with them is their naked hypocrisy. Because whatever they say about Free Trade, they don’t really believe it. If they did, they would be support the most perfect example of free trade between nations ever created – the Single Market.

The whole goal of the Single Market – together with the Customs Union – was to create an area where people and companies could just get on and trade.  Proper free trade. No tariffs, no messy regulations, no queues of lorries at the border, just trade. You make one item to one set of regulations in your factory and then you can ship it straight to the rest of the market. No bureaucracy or protectionism, just trade. What made you a success was a good product that people wanted. Nothing else. Proper unabashed free trade which we all benefit from because we get a wider choice at a cheaper price

And it worked. This goal, pushed so hard by Conservatives, who back then actually understood business, set up something amazing. Admittedly, on Services, it’s not complete and is still being developed; but it still has a massive impact and one that the City of London on the UK has hugely benefited from. International investors were able to set themselves up in the city and then sell their financial services throughout the Single Market.

The Leave Proposal

Hard Brexiteers now want to rip us from this market for old fashioned nationalist ideas; or because of immigration; or because they don’t understand what it means and it is just something “European”. However, my complaint here is with those Leavers who want to erect barriers to the other 445 million people we currently trade freely with; but say they don’t. By saying that, they reveal one of two things. They are either lying (I throw it out as a possibility, nothing more); or they just don’t understand it. After all, you currently build a product to one set of standards and can ship it – without hindrance or tariff – to the whole EU, once you leave the Single Market and Customs Union, you can’t. Different regulations, different testing, different origin rules etc etc. You’re in or you’re out.

Now whatever these Leave activists may be up to, whether it’s wilful deception or incompetence, they persuaded many many reasonable people to vote Leave on that basis. On the romantic idea that we are a trading nation and Brexit will secure our future by us engaging the world and trading on a global scale. You will have all heard the arguments: “that’s where the growth is”; “that’s the future, that’s where all the population is”; even that we can reinvigorate all the old imperial ties etc. It can be quite persuasive – especially when spoken with passion. The buccaneering global Britain. Only problem is that it’s bollocks.

I am not for a second saying we cannot trade and succeed on a global scale (I am certainly not talking Britain down!). We can definitely do that. More importantly, we already do! But let’s just take some of these myths apart to show why it is such a load of testicles.

The Reality

Firstly: leaving Single Market is throwing up massive barriers to trade with 445 million people. No one, I repeat no one, anywhere in the world is going to allow the absolute level of Free Trade we already have there. No one. Any “deal” we get will be a poor shadow.

“But it doesn’t matter,” the Leavers cry, “we don’t need 445 million people in the EU. There’s more than twice that in India and they’re growing!” Well, yes, there are more of them and, yes, they are growing; (At this point the Leavers I have spoken to feel triumphant) but there’s three vital points that these people have forgotten:

  1. They have less money and so will buy less (much reduced purchasing power per person and still much less overall, despite their numbers);
  2. They are less in need of our key services – so we would have to completely change our economy to benefit (assuming they had the same purchasing power as the markets we are losing, which they don’t);
  3. And they are much further away – so even if the first two points weren’t true (which they are), there is simply a bigger distance between those markets and our country and that always means less trade than with a closer county. That’s an unavoidable fact.

So we would have to work hard to replace what we had lost. And that’s assuming we could get any deals that would improve on our current ones via the EU. Which is incredibly doubtful. We’d lose all the ones we have now and have no right to any of the ones we have through the EU (another Leaver fantasy that has been repeatedly rebuffed) – we have to start afresh. Even if the terms of the deals that we might get were brilliant (we can sell everything unhindered, they can’t sell anything without paying fees – a total fantasy), they will take ages to be completed.

And all the time our competitors get ahead.

Conclusion

So the Free Trade that so many Leavers have in their head is an illusion. Of course we’ll trade after a Brexit. But it’ll be on worse terms – less free trade not more. So if you really believe in Free Trade, if you believe in an economic led policy as the drive of a trading nation, and if you really believe that business and Free Trade benefits everyone – and I personally believe all of that – then you would be fighting tooth and nail to keep the U.K. within the Single Market and the Customs Union. But if you instead go around professing a desire for Free Trade, talking of the importance of trade to our country; and yet push for a hard Brexit – I am thinking of people like David Davis, Liam Fox and Daniel Hannan –  then you are a total and complete hypocrite.

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *