Trump’s protectionist trade policy and May’s post-brexit trade dilemma have fuelled trade reciprotarians on both sides of politics. They argue that free trade is only a sensible policy proposal if it is mutual. But is this really the case, or are we merely appeasing the whims of proud politicians at the cost to the consumer?
Those with a beady eye on trade-related academic literature will realise that the title of this piece is a twist on Bhagwati and Irwin’s seminal work ‘Return of the Reciprotarians’. However, they never did leave in the first place, for it was all a ruse. We didn’t stop appeasing politicians’ whims either and Britain has had and still has her fair share of politicians on their high-horses.
The early 19th century bore witness some of the biggest battles — including in a literal sense with duels fought over the matter — concerning reciprocal trade. The arguments echo the rhetoric prevalent today.
They say we need a level playing field on principle and that asymmetric tariffs would damage the British economy. “We are to lose the great industries for which this country has been celebrated. Sugar is gone. Let us not weep for it, jam and pickles remain!”
Replace “sugar” with steel, coal or farming and you have the editorial line of your girl-next-door protectionist journo and it sounds all too familiar. Jokes on you though, it is only Joseph Chamberlain; 19th century grassroots organizer of democratic instincts. Nonetheless, one only need to look to their nearest supermarket or kitchen cupboard to realise that we still have sugar, coal and farming produce — in abundance because they’re cheaper too — what a surprise.
More interestingly, Lord Randolph Churchill was a leading advocate of using tariff policy as an instrument to pry open foreign markets. Foreign markets, like oysters, he said, needed to be opened with a ‘strong clasp knife, instead of being tickled with a feather’. This approach to open markets is tedious and requires the wishful skill of politicians. Though the apparent ‘strong clasp knives’ may appear to acquire votes in the short term, to quote Gladstone, “this quack remedy is under the special protection of quack doctors”. For the avoidance of doubt, the quack doctors here are politicians. This tit-for-tat strategy has been advocated by many sympathetic to ‘right wing protectionism’ but it is fallacious; politicians and economies are uncertain by nature.
Standing in stark contrast to protectionist tendencies of Randolph Churchill, Robert Peel, at the expense of votes and his cabinet loyalty, became a catalyst in the history of unilateral free trade measures by repealing the Corn laws in 1846. Richard Cobden, even more so than Smith given his ideas’ influence on the government of the day, was a driving force on this issue. When the French proposed mutual tariff reductions, Cobden objected that the “treaty was opposed to the principles on which the great English tariff reform of 1846 had been based”. The principle was not just free trade, but unilateral free trade.
Unilateral free trade measures may even result in reciprocal liberalisation. Waves of unilateral reciprocity followed the repeal of the Corn Laws and again after the US sponsored the General Agreement on Trade and Tariffs (GATT) which did not require “substantive reciprocity from its major trading partners” after World War II. In this way unilateralism may be reciprocated without a formal agreement to do so. Why kill two birds with one stone when you can kill a flock?
At present however, May’s pitiful attempt to negotiate a constructive trade agreement with the EU reveals that the argument for unilateral trade is yet to be won. A nation’s willingness to unilaterally cease trade barriers is the best measure of its commitment to free trade. Britain doesn’t just need better politicians, she needs a fundamental change in economic doctrine.
Earlier in 2018, during a meeting with industry representatives Trump announced, “you will have protection for the first time in a long while, and you’re going to regrow your industries”. Trump is often caricatured as a charlatan and inconsistently ‘conservative’ on trade based on his protectionist pursuits or attempts to pry open foreign markets in the Randolph Churchill tradition depending on your view of his intentions. Although his critics may be correct, even some of the more ostensibly liberal traders such as Reagan have succumbed to this fallacy; “we are always willing to be trade partners, but never trade patsies,” he claimed at the State of the Union Message in 1987, revealing his ideological fickleness.
This not just a national issue; even the WTO has reinforced the fallacy. Its aims and principles use the milk-and-water lexicon of the reciprotarian, espousing words like: ‘non-discriminating’, ‘stable’, or ‘fair’ to describe trade relations. The word ‘free’ is sadly either non-existent or has been replaced by the more euphemistic adjective: ‘open’.
The Joseph Chamberlains and Randolph Churchills did not win in the 19th century; almost 70% of overall trade liberalization since the 1980s has been unilateral. Let us stop their spiritual heirs from winning today.