Tata Steel processing plant at Scunthorpe (Photo by Christopher Furlong/Getty Images)
Artillery Row

Free trade ain’t free

Who’s afraid of protectionism?

There are few unbreakable orthodoxies in our politics. The willingness of the Conservative Party to pivot from liberal centrism to social populism — or “Red Wall” politics, as it’s now lazily called — is a good example of the party’s capacity to be amorphous. 

Only a small number of countries practise unilateral free trade

But there is one, dominant orthodoxy which in modern Tory circles seems as unbreakable at the level of theory as it is phantasmic in the real world: unilateral free trade.

This particular Conservative shibboleth encounters almost no intellectual challenge in our political discourse. Laissez-faire platitudes are repeated uncritically in the corridors of Parliament. Opinion pieces spewed forth from the centre-right commentariat on the evils of protection when the Prime Minister authorised the extension of steel tariffs this year.

The free-trader drum is beaten so loudly and so incessantly that one does begin to wonder whether our MPs and opinion-formers are simply unable to move on from that undergraduate tutorial on Ricardo. There is little to no apprehension of the fact that debates over whether the burden imposed by tariffs falls more heavily on consumers or on overseas exporters, is still very much a live one.

The first myth in need of busting here is that there is anything new — or controversial, or un-Conservative — about tariffs. As part of the EU customs union, the UK was subject to a wide-ranging tariff schedule committing the country to import duties for some goods and no such duties for others. Indeed, by extending protective tariffs now, the Government is merely echoing protective decisions that have already been taken in Brussels.

Only a small number of countries practise unilateral free trade, and the UK has not done so since well before the Second World War. Indeed, a Free Trade Agreement (FTA) between two countries is notable by virtue of its being an exception, not a rule. By offering one specific country superior trading terms, FTAs are in fact a trade intervention made by sovereign states for reasons of policy — often to solidify political and diplomatic ties.

Secondly, it is profoundly historically illiterate to call pragmatic protectionism “un-Conservative”, let alone “un-Tory”. For decades, the Tories were the party of protection and imperial preference. In Victorian Britain (when it was not personal pronouns or conversion therapy dominating political debate, but trade), Tory electoral propaganda repeatedly painted the free-market Liberals as those who would heartlessly put British labourers out of work.

The Tories are not only the party of Disraeli, who led the charge against Corn Law repeal, but of Baldwin and Joe Chamberlain — the latter the arch-protectionist leader of the Tariff Reform League, which sought to use tariffs on goods from outside the Empire as a glue to reinforce colonial interdependence. For Chamberlain, tariff reform was part of a wider social reformist platform. In his communitarian vision for a fairer Britain, the revenue raised from tariffs would be used to fund old age pensions.

Whether extending steel tariffs is justified in this particular case is a matter of weighing the evidence and considering the relative impact of each option. Does the need to protect British steel production in working-class communities outweigh any extra costs to manufacturers and consumers? The answer to this must be pragmatic and political, rather than flowing from impulsive ideology.

In June, the Trade Remedies Authority (TRA) found that there are “indications of serious injury to UK producers for all three steel product category groups”. It went on to find that there is evidence to suggest that extending safeguard tariffs is “necessary to prevent or remedy serious injury or threat of serious injury to UK producers”.

Governments must have one eye on the common good

The most dogmatic free-marketeers would reject that such a finding is possible, since in their minds tariffs never have any positive effects. But the more honest libertarian position is, in truth, a principled devotion to prioritising lower prices for consumers, no matter the social cost.

The TRA found that there are signs of significant oversupply in global steel production, presenting a serious threat to the UK steel industry. It does not seem to be considered by free trade absolutists that current extraordinary conditions will pass, but that by then — if British steel is allowed to wither and die — it will be too late. Unilateralists must be aware of this, yet simply regard British steelworkers being put out of work as part of the necessary and inevitable operation of the market.

But there is no such necessity, and the destruction of British steel — and the communities employed by it — is not inevitable. Movement to protect our steel base is wholly consistent with international practice and national-interest politics. Domestic manufacturers could suffer higher costs for a time, and they have made their case well. It is down to the government to weigh that against the costs of abandoning steelworkers to their fate.

Every country in history has operated a trade policy that furthers its national interest. Indeed, the freedom to set one’s own tariff schedule is a key element of being a sovereign nation (this is one reason that UK membership of the EU customs union was so degrading). Markets operate within nation states, within legal regimes and political cultures. Governments must have one eye on the common good as well as the principle of the market.

Trade protection is often distortive and inefficient. It can prop up businesses and industries that are not viable, wasting economic resources that are poorly deployed. It can deter or delay innovation, and it can — if overused — drive inflation. But it is not always so. If targeted protection had no purpose, nations would not have recourse to it. The reality is that trade, and the national communities that engage in it, cannot be separated. Governments must serve the interests of those they govern.

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