One of the great puzzlements to economists is why people have to be persuaded into the benefits of free trade. OK, sure, all are aware that politicians suffer from incentives different from those of normal people, perhaps even of human beings. But even then the puzzlement remains, the benefits of such free trade are so great that it really is, in those economic terms, a complete no brainer. Even if you really were that stationary bandit of Mancur Olson’s structure, you’re able to farm more out of a richer population, trade makes people richer, so the dictator should also be a free trader. The only economist who disagrees with this is Peter Navarro.
That means it’s always a bit difficult to understand why people have to be persuaded into it, as The Queen’s being asked to do:
Queen drafted to charm ex-colonies into post-Brexit free trade
Sure, there’s a great deal of good feeling towards Brenda but still, why this persuading? After all, the only thing that we’re asking anyone to do is not to tax themselves when they buy foreign made products. Really, that’s it! If everyone had unilateral free trade – no taxes on imports that is, something of benefit to their own population – then we’d have global free trade, wouldn’t we? Why would anyone need persuading?
As the Commonwealth heads of government met in London this week, two trade experts debated whether this group of nations could provide Britain’s trading future after Brexit. Policy adviser Allie Renison argued that the 52 Commonwealth nations could be the foundation for a global approach to trade. Former cabinet minister Peter Mandelson stressed the challenges of increasing trade with these distant allies if Britain loses its traditional selling point of access to the EU single market.
Mandelson is of course wrong. The benefits of trade are what we buy from foreigners. How they handicap themselves is of no import to us. We don’t have to have barriers to what we buy therefore we shouldn’t. That we buy from the EU or the Commonwealth thus has nothing at all to do with the trade policies that they follow, only with our own.
After decades of sidelining the Commonwealth as a relic of their imperial past, many in Britain are now promoting the group of ex-colonies as a ready-made market for what they hope to be the country’s buccaneering global business spirit after the exit from the European Union.
Going out and selling to the colonies does have unfortunate historical overtones. But that’s not even what we nee to happen, all that we do need is that we don’t put barriers in the way of our own buying from them. This alone will make us richer.
As I’ve pointed out before the correct trade treaty – policy even – for the UK post-Brexit is very simple indeed:
1) There will be no tariff or non-tariff barriers on imports into the UK.
2) Imports will be regulated in exactly the same manner as domestic production.
3) You can do what you like.
4) Err, that’s it.
Get that onto the statute books and we’re both richer and done. But then the difficulty of getting politicians, with their own incentives, to understand this is why we’ve got to the draft the Queen in to persuade those colonial ones isn’t it? If only someone of equal stature could go to work on Theresa May and the Cabinet. D’ye think Phil the Greek might like to come out of retirement?
Yes and no. Certainly tarrif free imports plus an absence of non tarrif barriers to import would benefit all consumers, and consumers in aggregate are more important than producers.
But producers are important too, and mostly have more lobbying power than consumers.
Since politicians always want to be seen to be organising things, and are always the ones being lobbied, it is reasonable that they make an effort to get better terms for producers.
My worry is that they will prioritise the lobbyists rather than the consumers.
Good point. Omelettes are all good and well unless you’re an egg. The standard free trade argument is much too collectivist for my liking. Being ordered to sacrifice yourself for the greater good is not what should happen in a free economy.
Once tariff barriers are gone there’ll be pressure to build up the non tariff ones from the native businesses. But the non native ones will lobby the other way. The politico then says alright, highest bidder wins. Not ideal. So probably better at the outset to accept EU,NAFTA,ASEAN domestic market regulations as equivalent. The public is then worried that foreign standards are worse and its always possible to dredge through lots and lots of rules and find one that yeah hey that’s not really what we’d like (like bleached chicken). So you’d have to reserve the right to ban that… Read more »
Pat’s worry is not a worry but a certainty. To the politician, the question is not: (1) Shall the citizenry be free? but (2) Are we going to leave all that money on the table, untaxed? To the car assembler wearing a MAGA hat, free trade means that people have the option to buy abroad what he makes at home. He is not for free trade (nor for a regime of free love in which his wife might find it easier to be unfaithful). Workers, no less than mega-corporations, profit from barriers placed on their business counterparts against using alternatives.… Read more »
People who lose x normally hate you more than people who gain x love you.
For example people who bought cheap houses after the housing crash in 1991+ were not more likely to vote Tory, those who lost money were less likely to vote Tory.