The following is an excerpt of an article by Comment section co-editor Taylor A. Francis. This features in our fifth print issue, available from the 15th September.
Find out how to get your own copy of the issue here.
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Widely agreed to be one of the main benefits of leaving the European Union, having an independent trade policy is important both for the economic health of the UK, and for the hopes and dreams of this government if it wishes to stay in power far beyond the 31st of October. However, on what terms will we trade beyond the immediate WTO future? Are we to sign free trade agreements, guaranteeing mutual open access to our trade partners’ economies or are we to protect our vulnerable industries from predator multinationals using tariffs? One question we already know the answer to is that the top trade priority of this government will be a trade agreement with the US. A question few of us have asked though, is how should we approach it?
Before this, however, we must discuss the nature of trade and the benefits of its various forms. Popular as ever, free trade is the go-to for many on the Brexit side, who often reference in condemnation at the same time the protectionism of the European Union. Simply put, a comprehensive free trade agreement guarantees open tariff-free access between the economies of its signatory parties. Not a bad deal, you might say, and you’d mostly be right.
On the other hand, there is protectionism. Firstly, it must be stressed that protectionism does not exclude the possibility of free trade in many areas of the economy, it is generally selective and targets certain sectors. The logic behind protectionism is to protect those industries most vulnerable to international competition, through either tariffs or subsidies. A main component of protectionism is the theory of ‘infant industry protection’, coined by one Alexander Hamilton, a familiar name for many. In this, a state protects its newer industries, i.e. those most vulnerable to large predatory foreign competitors, with tariffs and subsidies until such a time as they can stand on their own in the international market.
Protectionism is often touted as the policy of tin-pot dictatorships and backwards economies. On the contrary, the most successful economy today, that of the United States, was built on protectionism. Without it, it would not be the world leader it is today. South Korea, Japan and we too in the early period of the British Empire have benefited greatly from this policy. Donald Trump has now put this practice back into fashion.
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Read the rest of this article in the print issue, information on which can be found HERE.