Free trade and Brexit: The right combination

Witnessing Michael Gove’s journey from zero to hero and back to zero again has been sensational.

It’s happened at breakneck speed. After he stabbed Boris Johnson in the back to bid for the Conservative leadership – I thought there was no way back. Out of government and out of favour, he worked his way back into the spotlight with an impressive record as Environment Secretary and a barnstorming speech last month. At one point, he was the second favourite to succeed Theresa May as Prime Minister.

Then, for me, it all came crashing down when Gove announced that in the event of a No Deal Brexit, he wouldn’t hesitate to slap tariffs on imports in order to protect our farming industry. I’d like to think that – in the same way that Sajid Javid has committed to revoking Shamima Begum’s citizenship – that Gove knows this is not really the best course of action. Perhaps I’m cynical, but I think both moves (tariffs and Begum) are driven by personal ambition, and a desire to be seen as strong by the Conservative Party’s grassroots. Certainly, neither can be based on sound, comprehensive economic or legal advice – and neither decision can have been made in line with the liberal instincts of either Cabinet Minister.

Personally, I’m a natural Remainer. But, unlike the Conservative defectors to the Independent Group, I believe that we can have a successful Brexit that leads to a more prosperous Britain – if the correct, liberal steps were taken. Protectionism – let’s call this what it is – is not one of those policies. In fact, slapping tariffs on our farming industry undermines one of the most compelling arguments for leaving the European Union – leaving the protectionist Common Agricultural Policy which stifles competition, harms consumers and is a nightmare for developing countries trying to trade their way out of poverty.

The Consumer Choice Center’s Maria Chaplia outlined the senseless thinking behind protectionism for 1828 recently:

“Imagine you’ve been on a team with the same people for decades. You are well aware of the capabilities of your colleagues, and you are on good terms with your boss. More importantly, you have developed a working schedule for yourself, and have been sticking to it deliberately – repeating the same tasks day by day without attempting to improve the quality of their performance. You have been doing fine, just like everyone else on your team.

One morning, your boss announces that there is a new employee or group of employees from abroad joining the team. Naturally, every well-established tribe is suspicious or even hostile towards newcomers, especially if it’s not accustomed to dealing with changes. You and your colleagues will, therefore, try to find a way to persuade your boss to change their mind. After all, why hire someone new, or why alter anything at all, if you and your consumers are doing fine?

On their first day, the newcomers carefully examine your workplace and conclude that your team’s productivity and attitudes are completely outdated and have been far behind world progress for years. Added to that, they find out that the prices you charge are much higher than those in countries where they come from, and that your consumers are of course unaware of that. Their impression is that your boss has been consistently covering for you in order to “protect” you from competition. They are determined to change it: they suggest more innovation, lower prices to the benefit of consumers, and the elimination of the fine mentality.”

It's perhaps interesting that, so soon after the UK universally condemned Donald Trump’s ‘trade war’ tariffs to protect the US steel industry, our supposedly more liberal politicians are taking a leaf out of his book. The recent steel tariffs had immediate negative effects on the

U.S. economy. The day the steel tariffs were put in place, the S&P 500 dropped from around 2,750 points to around 2,590 points. Countless economists have predicted that steel tariffs, whilst they may protect some jobs, are bound to raise the cost of products which Americans need in their everyday lives – The Dartmouth Business Journal reported predictions that the tariffs could raise the price of cars by $300 dollars – on average. It doesn’t take a genius to work out that by making it more expensive for foreign competition to export to your country – you might product domestic jobs but you allow that industry to set prices to the detriment of consumers, undermine the concept of disruption and effectively restrict the aspects of a free market which drive economic progress and improve standards of living. Without the competitive aspect brought in by free trading policies, domestic industry has no incentive to innovate, to cut prices, or improve their product in order to retain business.

We’ve been having the argument about preferential tariffs since the days of Joseph Chamberlain and David Lloyd George – long before the European Union was even a remote possibility. Thankfully, Lloyd George and other free traders won the argument then – but we must continue to make it now. Embracing free trade may mean that industry moves on, and that can, of course, cause short term disruption. But an economy the size of the UK isolating itself from global trade does nothing but harm developing countries, hinder innovation and entrepreneurship, and drive prices up for domestic consumers.

There’s no reason that Brexit can’t be a success, if we do it the right way. Cutting ourselves off from the global marketplace – in any industry – is the wrong way.

By Matt Gillow

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