Cutting tariffs unilaterally

By Tim Worstall | 1 March 2005

There's one part of the discussion on globalization that is terribly difficult to understand. This is the reluctance of people to note that the argument in favour of free trade is not that it benefits others (whoever they may be), or our just our exporters, but that it benefits us via lower prices for imports. There is ever a reliance upon trying to show that opening up other people's markets to our goods is what it is all about. In fact it is the imports that are good for us, the exports simply being the price we pay for them. Even if everyone else in the world were not a free trading nation it would still benefit us to be one.

To those of a mercantilist mindset this is a troubling idea. It is one that does not actually seem to make sense. So it's good to see that Professor Patrick Minford has actually crunched the numbers for us in a forthcoming book, Should Britain leave the EU? An economic analysis of a troubled relationship. He looks at the entire relationship but one interesting number is that if Britain left the EU's tariff regime (currently a weighted average of about 1.4%) and were free traders, the UK economy would benefit by 2-3% of GDP, or twenty to thirty billion quid a year. Yes, the figures assume that our exports to the EU 24 would face EU tariffs.

This simple fact leads to a question, what exactly do our trade negotiators actually do for us? "If you open up your market to our goods, we'll open up ours to yours," seems to be what they say. But given the known benefits of no tariffs, what they are in fact stating is "If you persist in keeping your people poor by denying them our cheap products, we'll keep ours poor by denying them yours."

Not, on the face of it, a particularly logical piece of reasoning. In the absence of this perfect solution we shall have to keep staggering on, doing the best we can, with multilateral and bilateral deals (they are so much easier to sell politically), using the WTO for its powers as a court, enforcing those deals already signed up to. For, after all, some trade is better than no trade, low tariffs better than high.