To Embrace Free Trade we must Leave the EU

For most Brexiteers, like myself, the debate has moved on from the benefits of leaving the EU, to simply a defence of the validity of the referendum and the odd counter to remainer retaliation.

Thus, when I was questioned the other day of a good reason to leave the EU this almost caught me off guard, as it’s not a question I had answered since the summer of 2016. Of course, I remembered all the rhetoric of the lack of democracy in the EU, the net contribution and protectionism. However, I think for many Brexiteers we have forgotten what we were fighting when we campaigned to leave. So, I wanted to write this, as much to remind myself, as to remind others why leaving the EU is the best course of action.

For me, the best way of understanding the fundamental problems of the EU is to look at who runs it, what they’re doing and what they plan to do next. The person who epitomises the reasons we voted to leave is the former German defence minister and now the President of the European Commission Ursula Von Der Leyen, so she seems to be the perfect candidate for showing those problems. What I remember quite well about the campaign are all the alleged myths that the Vote Leave campaign propagated. Of course, they were guilty of this in places, however, claims of growing federalism, and an opposition to free trade are only confirmed by this pseudo-democratic appointment.

Von Der Leyen has only been in her new role since July and already she has presented herself as the human embodiment of all the problems of the EU. This has been shown worst of all by the publishing of a 173-page memo advocating policies including greater public funding, more loopholes in competition rules and worst of all: stricter protectionist measures. This protectionism is done under the illusion of creating a “level-playing field”; arguing that the way to combat the growing Chinese markets, is to tax the consumers who would benefit, from the growth of cheaper imports.

Back in 1776, Adam Smith was able to make the case successfully why a policy of this nature is clearly problematic. The way to advance domestic industry within the bloc is not to tax the consumers buying the goods, that the eurocrats want us to buy. In the Wealth of Nations, he taught us that “in every country it always is and must be the interest of the great body of people to buy whatever they want of those who sell it cheapest”.

In effect, all tariffs do is raise the price of economic goods, hurting ordinary people by increasing their cost of living. As the average non-agricultural tariff in the EU is 2.8%, this is already is hurting the 508 Million citizens of the EU. For comparison, the famously protectionist Donald Trump currently seeks an average non-agricultural tariff of just 2%. Thus, we have someone who’s globally critiqued for his opposition to free trade, clearly providing preferable trade terms than our supposedly liberal allies in the European Union. This is particularly problematic when we consider that tariffs on agriculture tend to be more. Whilst this may seem quite low, imagine you spend £10,000 on imported goods each year; that would mean you’re having to spend an extra £280 a year and this isn’t taking into account any of the tariffs taken by the British government already. For many people, this is unnecessarily making their standard of living substantially worse. Despite all this, the new President wants to increase these regressive, protectionist measures, only further hurting the citizens of the EU.

The reason these harmful tariffs are introduced, is that it is believed that it will help out European firms who are struggling to compete with emerging markets. However, this takes an overly static short-term view of economics, that fails to understand economics as an everchanging equilibrium, therefore cannot correctly explain global changes. As nations develop, those traditionally specialised in producing certain goods lose their comparative advantage as other countries become able to produce the goods cheaply. Schumpeter described this in the 1930s as the “perennial gale of creative destruction” and some countries have embraced creative destruction to help improve their economies. Creative destruction is what allows us to advance, it is the reason we no longer have typewriters or weavers. Where industries decline, new ambitious industries replace them; this is especially exciting today with the emergence of artificial intelligence which creates the prospects of any number of new industries, providing further opportunities, wealth and employment. Thus, by protecting these outdated industries, all we’re doing is preventing the modernisation of our economy.

This has seen a large shift from goods to service reliant economies in much of Europe. Countries such as Finland have done this rather well, with services making up 72.7% of the economy. This is very similar to the UK, where we have, also, been quite successful in adapting to a largely services-based economy. However, the countries with the most influence within the EU such as Germany and France, seem not to have made this shift and have thus both welcomed this report. The emergence of advanced goods production in China is hurting Germany, whose export-led growth is largely reliant on their manufacturing. This is why it is the Finnish trade minister who has argued correctly that “erecting barriers is not the best way to enhance competitiveness”.

However, as those arguing for these tariffs like Germany and France yield a considerable amount more influence within the EU, it is an almost certainty we will see more. It is clear that these tariffs will not be in the best interests of Finland, nor most of the citizens of the EU. However, as German and French industrial groups have pushed for them, it seems likely we will see them put through in the near future anyway.

Whilst, we’re in the EU we have very little power to stop this transition to further protectionism. These measures don’t just present economic problems, but also greater diplomatic problems. Mises tells us that trade “leads men to regard each other as comrades in a joint struggle for welfare” and “makes friends out of enemies, peace out of war, society out of individuals”. This has been seen in the trade war between America and China, which not only has worsened the economic outcomes of both nations, but also their relations as countries. If we are to embrace ‘Global Britain’ we cannot be a part of a bloc getting enveloped in a senseless trade war with the two largest economic forces on Earth, even if they’re both led by unsavoury people. This only seems to be confirmed by Guy Verhofstadt’s recent speech at the Liberal Democrats Party Conference in which he advocates the creation of a European Empire to rival the forces of China and America.

The tide of the European Union isn’t going towards free trade, but towards protectionism. For me, back in 2016, this was one of my largest motivating features for siding with the Leave campaign. Thankfully, the recent appointment of Von Der Leyen and the related protectionist memo has confirmed to me that I didn’t make a mistake with which side I picked. The EU is still the same only partially democratic, protectionist bloc that will only become more contrary to the interests of the British people over time. So, all I can finish by saying is, thank god by leaving we’re avoiding the worsening global relations between the US, China and the EU that is made under the disguise of “level-playing fields”.

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© The New Briton 2020