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In defence of free trade

Not so long ago, free trade was seen as the route to greater prosperity and multilateral trade deals were pursued with this aim in mind. That view has changed somewhat, most noticeably in the United States. On the left we do not appear to know whether trade is good or bad, which is a problem when we are debating Brexit. We need to remind ourselves that there is a strong left of centre case for trade.

In his inauguration speech, Donald Trump referred to ‘rusted-out factories scattered like tombstones across the landscape of our nation’ ignored, in his opinion, by mainstream politics. He promises to restore jobs to these areas, bringing American company operations back onshore. Under Trump, US trade policy can be expected to be driven not by the aim of reducing trade barriers overall, but by specific advantages that can be won for the US. This is why he is so attracted to a bilateral deal with a weakened United Kingdom.

Trump’s views have resonance here, linked to the Brexit debate. The far-left apparently sees the European Union as a neoliberal project in the interests of big business. More widely, one of the explanations for the vote to leave the EU has been that many people felt left behind by globalisation and unable to exert any control over global forces that affected their way of life.

There is a bitter irony therefore that those few economists campaigning for Brexit before the referendum advocate the removal of all trade barriers in the UK, rapidly exposing our industries and services to the full blast of open trade. They would do this even if we could not negotiate reciprocal arrangements with other countries. Manufacturing companies would be devastated in most cases but, it is argued, the economy would rebalance and overall GDP will be higher. However, many highly skilled people would be out of work and hit yet more communities, even if other sectors benefited. This is the hard Brexit vision.

An alternative is to put up barriers, as Trump advocates, which would incentivise companies to operate inefficiently, and cost the country. But who wants to pay more for goods and services? The left must never be tempted in this direction.

Trade is good. If people specialise in the tradeable goods and services they are best at providing, everyone is better off overall. Most of us do not farm all the food we need to sustain us. Instead, we trade, because most of us are much better at making other goods or providing services that people want. If each of us was required to grow our own food, or build our own homes for example, together we would be a lot poorer. So much is obvious. The same applies to countries.

It is all very well saying trade makes nations better off, but there can be huge costs for communities. As competition opens up, some people find their skills are no longer required. It is not enough to say that people should be satisfied that GDP is a bit higher, through higher profits and lower prices, and that the market should drive all the adjustment. Trade policy should always be linked with strong policies designed to help distribute the gains and opportunities fairly. It should stand against exploitation. This is a progressive approach to trade.

Those advocating a hard Brexit have little credible concern for the communities hardest hit by aspects of globalisation. We know this because we did not hear them call for radical policies to help those communities before the referendum and we do not hear such calls now. The EU did not stop David Cameron’s government from adopting bold industrial strategies and social policies, including distributing gains from immigration. It did not stop any political party from building more homes. Political choice was exercised. Governments chose not to give these communities the priority they needed and rather than take responsibility, our leaders blamed the EU. There is no sign from anyone in politics at present that this situation will change.

Labour is hung up on how it should vote on article 50 because it has yet to unite around a comprehensive vision of what kind of economy and society we want to have in future. Get that right, combined with some political courage, and a coherent approach to Brexit can follow. Instead, many members of parliament have been voting for something they believe to be fundamentally against the national interest, whether in terms of principle, negotiating terms, or timing. The third reading of the European Union (notification of withdrawal) bill will provide another opportunity to hold the hard Brexit ideologues to account. If Labour, accepting the referendum result, still believes the government is not acting in the national interest, it should be able to explain why and vote accordingly.

This article was first published by Progress on 7 February 2017.

Progress, 7 February 2017, 17/04/2017

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