British Tribune of Trade<br>Could Steal the March <br>On Trump’s Protectionism
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
Britain after Brexit is wasting no time announcing to the trading world it is open for business. Minister of International Trade Liam Fox speaks of free trade with an optimism that must inspire envy in America’s market conservatives. Who can imagine government praising the virtues of free trade?
Economic growth, Mr. Fox asserts, is supported by three pillars of market freedom. One is liberty of trade, unshackled from state interference, since “the idea that governments should restrict the right of individuals to exchange their hard work for goods and services at an agreed price in an open market is one of the gravest infringements of personal liberty.”
Two is entrepreneurship, where “competition leads to innovation” that in turn “powers progress.” Three is competitive advantage, whereby markets “specialise in the production of goods where they have the greatest efficiency.”
Mr. Fox’s paean to free trade is based on Adam Smith’s economic principles and his “vision of what trade could produce in terms of prosperity and opportunity.” Unfortunately, Mr. Fox fails the Smith test of trade imbalances, lamenting Britain’s “current account deficit.”
The Scotchman earned his economic laurels dispelling the mercantilist fallacy that money alone defined wealth. More money equated with more wealth and national greatness; less money, less wealth, national impoverishment. In any transaction, Smith countered, both participants win — whether as individuals or nations — each exchanging something subjectively of less value for something valued more: “That trade which, without force or constraint, is naturally and regularly carried on between any two places, is always advantageous, though not always equally so, to both.”
Britain’s trade minister is not alone in sending mixed signals about valuing international exchange. Stanching imports through tariffs is a major Donald Trump campaign promise. “The terrible truth about protectionism is that while it may be a short-term vote winner or temporarily prop up failing industries,” Mr. Fox explains, seemingly with The Donald in mind, “it is always the consumer and often the poorest in society that ultimately lose out.” Adding that “the proliferation of protectionist measures has often been by the very countries who should be the most ardent supporters of free trade.”
Mr. Trump has since attenuated his tariff threats, focusing instead on combatting currency manipulation by foreign countries and addressing Federal Reserve monetary policy that leads to a “false economy.” (It should not go unnoticed that, like many apologists for Mr. Trump’s economic nationalism, Mr. Fox also speaks of “trade at any time with any market that is functionally similar;” rule of law and sound currency presumably being among the necessary criteria.)
But before setting in motion Adam Smith’s prosperity prescription, both America and Britain can best prepare the ground by removing barriers to growth. Punitive corporate taxes that stifle capital accumulation; regulations such as frustrate small business start-ups, and schemes of redistribution — whether in the form of minimum wage requirements or income taxes to “soak the rich” — are all disincentives to entrepreneurship.
Entrepreneurs are the catalyst of free trade, taking the proverbial pie and baking it ever, ever larger in the kitchen of economic improvement. Growth in excess of 4% relies on supply-side dynamics and, in turn, confounds the Keynesian axiom of that depressed growth is due to insufficient demand.
Demand is dampened only when producers err, either by satiating consumer wants through over-supply or through malinvestment brought on by expansion of money and credit. Thought of another way, only the dead cease to have demands. For the rest of us, it is the task of entrepreneurs to attempt to meet our boundless wants through creativity and innovation.
The British minister extolls entrepreneurial incentive. “Free trade forces businesses to innovate to compete and instils a healthy dose of competitive uncertainty into the marketplace which means that we, the consumers, benefit from better quality and ever evolving products.” One hopes the full import was not lost on an audience where laissez-faire doctrines became synonymous with “Manchesterism.”
The economic future of Britain is promising. The island kingdom is not “looking inwards” but “increasing its global engagement.” Post-Brexit, she “is in a prime position to become a world leader in free trade because of the brave and historic decision of the British people to leave the European Union.” The contrast with rising American protectionism cannot be mistaken.
Matching Donald Trump’s patriotic rhetoric to “make America great again,” Liam Fox anticipates “a golden opportunity to forge a new role” in the world, “one which puts the British people first.” And so, a trans-Atlantic challenge is issued: Will Trump’s economic revival for America be outfoxed by post-Brexit Britain?
Mr. MacLean maintains the weblog The Organic Tory.