In 2016 I joined the Free Market Road Show. We travelled around Europe giving speeches about things like the EU and the sharing economy. The troupe mostly visited eastern European countries, where the battle of ideologies is still distinct.
In Moldova, I found myself on a panel discussing the coming EU free trade agreement. Reading the news today about Brexit reminded me what I told the audience back then. The same underlying confusion is what’s causing all the debate.
If you pick up a UK paper, you’ll read about the Customs Union, European Economic Area, EU and free trade agreements. Which should we choose? Or perhaps a hard Brexit with none of the above? Even the politicians can’t make up their mind, let alone the economists.
But if you frame the issue of Brexit properly, it isn’t an issue any more. And the Moldovan debate about the free trade agreement was completely missing the point too. That’s what I tried to tell the audience in Moldova.
Sitting to my left and to my right were rather bulky economists. One was from Russia. They gave speeches about the benefits of freeing up trade with the EU. The economic benefits, the products which would become available, and plenty more.
After asking the host if I was allowed to swear, I told the audience all this was complete bull***t. On so many levels it’s hard to dig through it all. The economists either side of me bristled.
At the time, the politicians on both sides of the border were advocating for freeing up trade between Moldova and the EU.
Well who restricted trade in the first place, I asked the audience. The government did. The very same politicians.
If free trade is a good thing, why did they restrict it in the first place?
And if free trade is a good thing, what on earth is taking so long to allow it?
Most of all, why on earth does there need to be an agreement for trade to be free? Isn’t freedom the absence of government interference? Why not just get rid of trade barriers?
The answer to all these questions is that politicians do not see trade as a good thing. If you bother to actually read a so-called free trade agreement, you’ll discover it’s actually a long list of restrictions on trade…
But that example of hypocrisy isn’t the main one. Things got really awkward on stage when I said this:
“If someone steals money from you, but then offers you a contract where you get half of your belongings back, are you happily going to sign it?
“Of course not!
“It’s the same with trade agreements. Politicians are giving you back half of your basic human right to trade across borders, and expect you to be happy about it.
“Of course, it’s better to have the free trade agreement. You’ll be better off. But you’re missing the point. Someone is selling you back your own rights, which they took from you in the first place.”
How does all this relate to Brexit? It illustrates that Orwellian doublespeak is at the heart of the Brexit issue, not trade itself. The entire conflict is an artificially created one which need not exist.
Right now, more or less free trade exists between the EU and UK. People mostly acknowledge that’s a good thing. So if the EU and UK believe such free trade is good, then why on earth are they threatening to take it away from us if we don’t have a trade agreement worked out?
“If you do not agree to our free trade agreement, which is full of restrictions on trade, we will not trade freely with you,” the EU negotiators tell Britain. That makes absolutely no sense. Again, on so many levels it’s hard to sift through.
Any restrictions on trade must be put in place by governments. Trade restrictions are not the natural state of things.
Threatening trade restrictions as the punishment for not agreeing to less trade restrictions is a contradiction. Either trade restrictions are good or bad. Either trade is good or bad. You can’t say free trade is good, but if you won’t agree to a few trade restrictions, then we’ll put on loads of restrictions.
The absurd politics of trade we see discussed in the news do make some sense if you accept the world which the World Trade Organisation (WTO) rules have created. Under their laws, in the absence of a trade agreement, the default trade restrictions of a nation must apply.
That’s an utterly absurd way to organise things. It creates the need for a WTO and all the drama about free trade agreements.
In other words, the artificially created need to push for trade agreements to enable freer trade is the problem, not the solution.
When it comes to Brexit, if the EU and UK had no agreement in place about trade, and goods and services were allowed to flow freely, there would be absolutely no problem.
All the issues and concerns are artificially created by any divergence from this natural state of affairs. They are created by the affairs of state.
That fact is exposed beautifully by Brexit. And in a new way, which illustrates the point I’m trying to make.
Just because Britain leaves the EU, German sausages don’t suddenly become poisonous for Brits and British financial markets don’t suddenly become unsuitable for European investors.
The restrictions which the EU puts on trade are a bad thing. Having them fall into place because of Brexit would expose this by robbing people of their right to trade for no good reason.
I don’t think that Europeans would accept the absurd position of politicians that, with Britain outside the EU, it is no longer a good idea to trade freely with us. People would realise the whole debate is ridiculous.
That’s why, when it comes to Brexit, absolutely no deal is the best deal. Politicians would be forced to explain why they suddenly need to implement trade restrictions.
The absurdity of the trade institutions they’ve created would be put on display. People would routinely flout the rules given how stupid they obviously are. And the whole idea of restricting trade would look stupid.
Trump’s trade war
It’s not just Brexit that is highlighting the absurdity of trade rules. President Donald Trump is too.
His trade war is working a treat so far. The US deficit plunged for March and April. The Wall Street Journal reported that “For the first time since such record-keeping began in 2000, the number of available positions exceeded the number of job seekers”.
More and more Trump haters are giving their president credit for the state of the economy.
The US’ trading partners, however, are not so happy. The EU, Canada, Mexico and China are up for a fight.
But the backlash to Trump’s trade war is not about the trade itself. Again, the underlying issue is the stupid world of trade rules. The way that politics handles the simple matter of trade is creating the conflict.
The US has begun to exploit the rules of the game as other nations have a long tradition of doing. Trump’s “fair trade” is fair in the sense that both sides are now playing dirty. This comes as a shock to those who have got away with subsidies and tariffs for so long.
The fact that all trade restrictions impose self-harm to some extent is difficult to hide these days. Trump is forcing the issue by claiming to be willing to self-harm most of all. Will other nations threaten trade suicide in return?
Unlikely, which is how Trump’s strategy to secure more free trade works. If you want someone to move in a certain direction, you give them a push in the opposite direction. They’ll naturally resist and move the way you intended. Trump’s threats are about forcing nations to cut their trade restrictions, not about starting a trade war.
But Trump’s skilful politicking isn’t the point. The point is that, just perhaps, the narrative of a global trade war is simply wrong.
Perhaps the world’s institutions of trade are slowly being exposed as the underlying problem. The WTO, EU and free trade agreements prevent trade, not enable it. In a world without these institutions, Brexit is no big deal.
Until next time,
Nick Hubble
Capital & Conflict
Category: Brexit