Everyone knows trade makes everyone richer. We need some clarity however on the trade options we should be pursuing in the present situation, and on an even more fundamental question: how much of our trade has to be overseas if we are to maximise its benefits, considering we also have an enormous home market? After all, trade occurs at home as well as abroad.
Everyone in UKIP also knows we cannot stay in the EU’s single market, and why. What we want is at least as good an access to that market as any other non-EU country enjoys, with reciprocal arrangements in return. We do not yet know what form that access will take in terms of being tariff-free or not. We will be of one voice however in our determination that there should be no ‘price’ for such access, though regrettably we can have no confidence this pusillanimous Government will not buckle in to unwarranted and unreasonable pressure for us to end up paying one.
We also know that the 27’s trade surplus with us is running at about £70 billion, that the effective current price for the privilege of tariff-free exports to them, taking our membership costs into account, is about 7%, and that this is double the average tariff of the WTO. Additionally, whilst the fall in sterling remains in place (which might not always be the case, if we can only get our act together) and the resulting inflation makes imports dearer, finished goods like cars, on which the EU puts a 10% tariff, will be at a considerable price advantage to us.
Any tariffs with the EU would be regrettable, but if there did happen to be a consequent reduction in trade the EU has more to lose in overall terms (though less per capita). If Brussels were so silly as to impose them, then in theory we cannot retaliate with reciprocal tariffs without breaking WTO rules, since any tariffs we impose have to be identical to the relevant WTO global tariff – unless those tariffs are part of a trade deal. In other words we come back full circle to the desirability of a sensible agreement with the EU. The alternative is WTO tariffs, which is how most of the world trades when other trade deals do not apply. Since this includes countries like the USA and Australia this should not be a concern. Indeed on the current figures it would pay us greatly if we traded with the EU under WTO rules and had done with it, although the ideal remains a deal with our European friends too since they will always be our close neighbours – just without the strings.
The WTO has strong sanctions in place against ‘actionable subsidies’, but so does the EU. This is a hindrance considering the colossal challenge we face trying to regenerate our manufacturing base, which poor management, complacency and the ineptitude of successive governments, through sins of both omission and commission, have reduced to a parlous residual state. Steel, heavy engineering, ship-building, chemicals, clothing &textiles, so much has almost disappeared, with many promising tech companies too snapped up by overseas predators,that the concept of strategic national assets is becoming barely meaningful. Other European countries have made very sure to have found ways of supporting their key industries, and so should we. Better transport infrastructure and cheaper energy would be a good start. We must keep sufficient industrial mass, not least to keep our much-reduced defence industries viable.
Whatever the outcome of Brexit negotiations, we can also be sure that in practice there will be little fall-off in trade. Trade will always continue, because of its mutual benefits, and plenty takes place satisfactorily without trade deals. Nevertheless, good trade deals are always to be pursued where possible, because they do increase the exchange of goods and services to both or all parties. The only problem is that they can start to favour one party over time, and reciprocity takes a back seat.
Which brings us to that fundamental question which no-one ever asks. At what point in a country’s economic decline does market dominance by foreign imports become so great, and cause so many myriad problems, that it would pay to start protecting what is left of its industrial or agricultural base by imposing or increasing import tariffs, and risking retaliation in the process? Has Britain already passed that theoretical point where we would gain more than we lose? The answer, very likely, is ‘yes’, in which case we should not be ruling out the possibility of some protective measures. The best situation though would be a period of competent government to manage and grow the economy effectively and thereby start to recover our industrial fortunes, and only if that failed then resort to such action. We may already be on the verge of an outbreak of global protectionism, possibly prolonged. No-one wants trade wars or an international slump, but a government’s duty is to its own people first.
For all countries have a right to pursue their own interests, and in the end only they can decide what those are. Britain became free trade’s great champion with the abolition of the Corn Laws in 1846 because it was more important to exploit its position as workshop of the world than protect its farmers, and with its naval power had the means to impose it; a century later import tariffs on manufactured goods into Britain were 23%. No situation in this context is immutable. If we want to see cows in our fields we have to protect the dairy industry – and rather better than the EU does (German dairy farmers get twice the quota). If we want our steel-making capacity, or any other, to survive, then we have to support it as described above, and be prepared therefore to take unilateral lateral action on tariffs. We cannot let our country become an industrial wasteland.
First however we have to find a competent government.