David Fuller's view -
The debate about our trading relationships after we have left the EU is now hotting up.
Most economists would agree about the optimum end result, namely free trade between the UK and both the EU and the rest of the world. But there are disagreements about the best route from here to there.
The case for free trade is essentially the same as the case for free markets in general, that is to say, left to its own devices the market allocates available resources to their best possible use, given consumer preferences and the production possibilities afforded by existing technology.
There is no point in trying to be self-sufficient for its own sake in any, let alone all, forms of economic production. If we so chose, the UK could be self-sufficient in bananas. But the cost of doing this would be prohibitively high. It makes much more sense for us to produce the things in which we have a comparative advantage relative to other countries and to exchange whatever we produce for bananas (and any and everything else) that we wish to buy from other countries.
Of course, just as there are arguments to restrain, correct or encourage market forces in a purely domestic setting, so there are some arguments for sometimes restricting trade across borders. But they are limited. The word “protection” is misleading. It suggests the warm embrace of cuddly caring. Who would not want that? It might be better if it were replaced by “trade interference”. Unfortunately, the apparent attractions of trade interference mean that it is resorted to far too frequently.
Naturally, each producer group would like its output to be protected against foreign competition. Those who suffer from such measures are everybody else in the economy who would buy its output, or the output of its foreign competitors. They will now have to pay higher prices. This group overwhelmingly consists of consumers. So there is a tension in debates about trade between producers and consumers.
Producers are much more concentrated than consumers. This gives them a substantial advantage in the battle for hearts and minds. Indeed, in such discussions the consumer interest hardly gets a look in. At international trade negotiations, the discussion is about the competing interests of producers in different countries.
A country cannot suddenly become a successful unilateral free trade entity at the flip of a switch. It needs to constantly hone its competitiveness from quality control to management and skilled personnel. It needs research triangles from universities with strengths in the sciences and engineering, to corporations and government incentives including competitive taxation, to develop and also attract skilled entrepreneurs.
The UK is already doing this but it can always do more. In today’s competitive and increasingly high-tech world, the opportunities are greater than ever before but a country needs to keep moving forward to remain competitive.
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