Regulation

Britain can lead the world in free trade – by keeping trade deals simple


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In some ways, the Brexit referendum settled a long-running question. However, it has also raised more profound issues that this government now needs to address.

These include the question of whether we should adopt a policy of openness, free trade and liberalisation of regulation at home. And then, should we take the lead in promoting such a policy internationally, especially given the current circumstances in the US?

Britain is well placed to take that lead, but it will require intellectual courage, desire and imagination to do so. If we grasp the nettle, we could make an enormous difference, not just to the lives of British citizens, but to the lives of many of the poorest people in the world. In the last few decades, huge numbers of people have been pulled out of poverty because their governments have liberalised trade and adopted institutional reforms domestically. But, perhaps, the trade agreement model that is often adopted needs rebooting.

A document published this week by Cafod, an aid charity, raises some of these issues. In the past, I have had a number of disagreements with Cafod. Indeed, debating with them has been important in shaping many of my intellectual interests.

At just the right time – and when organisations such as Oxfam seem bent on presenting a rather destructive narrative – Cafod has released a paper which is an important contribution to the debate on trade. On some issues I still disagree with them. However, on many others I find myself agreeing with Cafod, though perhaps for different reasons. But change often comes when people come to the same conclusions about policy from different perspectives.

Cafod argues that we should remove our trade barriers without expecting anything in return from other countries. There is much to be said for this. Our trade barriers hurt British consumers and poor-country exporters and, ultimately, harm UK industries with an export focus. For example, we still have very high tariff barriers of up to 30 per cent on processed foods such as coffee and chocolate. We should just remove them.

Cafod might believe that allowing poor countries to keep their trade barriers is good for those countries. It isn’t. But we should not wait for others to do the right thing by their citizens before we do the right thing by ours.

Cafod also objects to the way in which trade negotiations take place in secret. The charity perhaps over-eggs this, but there is an important underlying issue.

Trade deals have become extraordinarily complex because most trade barriers relate to regulation. When it comes to agriculture, for example, regulation of GM foods is used to keep imports out. In financial services, we make enormous efforts to make already complex national regulatory systems internationally compatible. This all requires a great deal of commercial expertise. The result can be a marathon process and trade deals that create regulatory regimes that benefit incumbents and large firms.

Outside the EU, the UK government can be more relaxed about not using trade deals to harmonise regulation except, perhaps, in extreme cases of health and safety. Products and services that abide by UK regulations can be clearly labelled as such and consumers can then make their own choices.

We cannot go on negotiating trade deals that resemble the Encyclopaedia Britannica. Such deals should go the same way as the hard copy of that great set of books. We should give an intellectual and political lead so that countries such as India and most African nations might follow. Such a policy would enrich consumers and disempower elites.

 

This article was first published in City AM.

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.


1 thought on “Britain can lead the world in free trade – by keeping trade deals simple”

  1. Posted 12/02/2017 at 12:27 | Permalink

    “Products and services that abide by UK regulations can be clearly labelled as such and consumers can then make their own choices.”

    If all products being sold in the UK don’t need to abide by UK regulations, then they aren’t really regulations then, are they? If you are suggesting UK-made products need to abide by these regulations, and imported ones do not, that sounds a lot like an import subsidy rather than an even playing field, especially as I understand that British regulations are some of the most demanding in the world. I am not in the slightest protectionist, but the UK, and the EU, can still make some things better than the rest of the world, and there’s no need to destroy those industries for the sake of simplicity.

    You maybe don’t, on the whole, want regulations at all. Frankly, this just sounds like a disingenuous way to achieve that result.

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