lördag 2 december 2017

The Irish Border after hard Brexit

If the UK allows Irish produce in without tariffs, it will probably have to do the same for every import from the US, China, Australia, etc. Thus it not quite true to say, as is commonly claimed, that the WTO requires control of inwards movements in all circumstances. I say "probably" because Minford, who advocates free trade, unilaterally if necessary, has had one of his minions at work on the subject and has pointed out that the situation is not precisely as is usually asserted ie that the UK is required to impose border controls if it does not immediately offer unrestricted imports from everywhere.

Minford's advocacy of unilateral free trade is in accord with the conclusions of all the classical economists in the line of evolution from the Physiocrats, through Smith and Ricardo, to J S Mill and Henry George. That conclusion, which was in opposition to the earlier mercantilist theory, has never been refuted. It has just been ignored, together with most of the body of classical economics. But Minford, too, is in error in so far as he appears not to have applied Ricardian theory in his forecasts, which consequently are more pessimistic than would have been the case if he had.

The re-emergence of seventeenth century mercantilist economics has been driven by powerful, sectional producer interests, which cross the conventional political divide. This is a dangerous road; as Bastiat famously did not say, "When goods don't cross borders, armies will." Mercantilism eventually led to the ruin of Spain. In its protectionist guise, it retarded the industrial development of the USA. The abandonment of tariffs was an important factor in the spread of prosperity in Britain in the second half of the nineteenth century, following the abolition of the hated Corn Laws in 1846, (reinstated 1973).

One of the fallacies behind mercantilism is that economic activity is supply-driven, and so everything is looked at from the producers' point of view. Even the term "access to markets" has become perverted. In normal parlance, it means that customers have access to enable them to purchase the things they want or need, not that sellers can purvey their wares.

We all know from personal experience that the economy is demand driven, yet to judge from the post-referendum comments, one would come to the conclusion that people inside the EU were purchasing goods from UK suppliers as an act of charity, not because they want or need them.

It goes both ways. After Brexit, people in the UK will still want their Kerrygold butter. People in Sweden, where I live, will still want to buy their favourite British brands. All that a "trade agreement" does is get governments to agree to remove obstacles to trade that most of their own people do not want and did not ask for, but were forced on them by the sectional producer interests. The bluff needs to be called.

In the meantime, unilateral free trade gives one's own people access to markets (in the normal meaning of the term), and prevents resources from being wasted on producing goods which could be imported at the best price. If foreign governments continue to put obstacles in the way, their own people will suffer and complain, and that will lead to political pressure to put an end to the protectionism. There will also be blow-back, as countries need to import if they want to export.

The confusion over Brexit on both sides, and the EU's reaction is a demonstration of the zombie-like resurgence of economic theories which had been comprehensively refuted by 1800. It is willful ignorance on the part of the best educated. One of the worst offenders has been the Financial Times, a very different thing from what it was forty years ago when people such as the renowned Samuel Brittan presented the free trade case with consistency.

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