Free Trade is Not Always the Right Answer

by ukcivilservant

Parts of the current Brexit debate remind me of a similar Michael Heseltine inspired debate back in 1994, when I and others were advising him on industrial policy. One of my contributions to the debate can be found by clicking here.

In short, I was concerned that the most ardent free traders did not recognise that it had often made sense for the UK and other countries to protect ands subsidise our industries:

  • in the face of imperfect markets, foreign protection, and overseas product standardisation, and
  • so as to help industry get to market first, and to overcome barriers such as high research costs.

I concluded that “Our consideration of trade issues needs to be more thoughtful.  We need to analyse our success and our failures, and the success and failures of our competitors … Above all we need to think in dynamic and strategic terms, deploying negotiating and tactical skills, rather than starting from static and unreal assumptions and assertions.”

For the avoidance of doubt, the paper was for internal use only, and contains the unspoken assumptions that the Single Market – driven forward so strongly by Mrs Thatcher – was an unalloyed blessing as it removed so many non-tariff barriers which had previously locked us out of many European markets. It also assumes that the EU’s State Aids regime was generally very sensible. If it has any modern relevance, it may help explain why post-Brexit trace negotiations will be complex and difficult, and will need to involve industrialists and officials who have deep knowledge of their sectors both at home and abroad.

(A previous blog explains how non-tariff barriers such as product standards can be such effective weapons in the hands of governments that want to exclude competitors from their markets.)

Martin Stanley

Editor – Understand Regulation website