Lost in the fog of war over Brexit yesterday was the publication of the Government’s proposed abolition of nine out of ten tariffs on imports, in the event of Britain leaving the EU without a deal. This was the first sighting of the post-Brexit landscape. Perhaps surprisingly for some, the prospect of a less protectionist trade policy was rather enticing.
The proposed scrapping of most tariffs drew instant condemnation from the Confederation of British Industry, which described this liberalisation as taking a “sledgehammer” to the British economy. That alone should give hope. For the CBI has been on the wrong side of history so often that doing the opposite of whatever it recommends is a reliable guide to economic policy.
Free trade is always better for consumers, provided that they are properly informed about their choices. Producers often prefer protection, especially if tariff and non-tariff barriers enable them to create and preserve quasi-monopolies. The Government has rightly decided to ignore producers and allow the global market to determine prices, rather than taxes and subsidies.
The toughest area of trade negotiations is usually agriculture, both because of the political sensitivity of food prices and because farming lobbyists are usually highly effective. One need only recall the habitual tendency of French farmers to park their tractors on the presidential lawn. British farmers are less aggressive in public but behind the scenes they usually get what they want.
This time, too, they have succeeded. The Defra Secretary Michael Gove has been pressured into persuading the Government to impose WTO tariffs on beef, lamb, pork, poultry and some dairy products. Prices of these items would consequently rise in the shops, hitting the poorest hardest. That is regressive and, given that most farmers are Tories, the optics would not be good.
Far better to compensate farmers directly for the loss of the subsidies and protection they enjoy under Common Agricultural Policy. Indeed, rural communities should be better off under an independent national policy for the countryside, because the British set greater store than the EU by environmental protection and especially animal welfare. Farmers should be rewarded by the taxpayer for improving their welfare standards and working to restore our green and pleasant land, not for competing with the cheapest food producers on the planet.
Ricardo’s theory of comparative advantage applies to agriculture too. Under free trade, British farmers would focus on what they do best: high quality, organic and free range food, serving the growing proportion of consumers who care more about how their food is produced than how much it costs. The same applies, incidentally, to fisheries.
Meanwhile, the rest of the economy would have no choice but to compete in global markets. This raises the exciting prospect of Britain leading a movement to reverse the trend towards protectionism, symbolised by trade wars between the US, China and the EU. Such blocs may be large enough for their leaders to delude consumers into accepting the economic costs of high tariffs and prohibitive regulation.
Sooner or later, though, it becomes obvious even to these consumers that the smaller, free-trading economies are much more successful. Then trade liberalisation will come back into fashion. The UK is a big enough economy to make a real impact, particularly on its European neighbours. The long term effect of Brexit should be to lower trade barriers in the EU too. As an example: how does it benefit British-Irish trade to have tariffs on meat and dairy goods? Both nations would benefit from a zero-tariff regime, which could be negotiated as part of a better Brexit deal than the one now on the table.
Of course, if the UK remains in the Customs Union, none of this can happen. The EU would control our tariffs under any of the options that keep us in the Customs Union, such as the Labour Party’s proposed deal. This brings us back to the momentous votes taking place this week in Parliament. Today the motion for debate concerns an extension of Brexit. It would be good if MPs were to consider the long term implications of their decisions rather than voting according to tribal loyalties.
A United Kingdom proud to be both Atlanticist and European, leading a free trade movement as our Victorian ancestors once did, would not be a bad vision for the future. This is not backward-looking, but a belated recognition of our unique vocation. Britain plays its own instrument in the concert, not merely of Europe, but the world.