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A sugar beet field: While unilateral free trade would benefit the UK as a whole, many in agriculture, particularly sugarbeet farmers, would suffer (Gilles San Martin CC BY-SA 2.0)


Brexit meant Brexit, but no one was entirely sure what Brexit meant. It now seems that no deal may mean no deal, but a similar uncertainty besets the meaning of no deal. Of course, no deal means that we do not pay £40 billion for “two-thirds of diddly squat”, as Boris Johnson has put the matter. It also means that Parliament recovers sovereignty and has a genuine chance of recovering its ability to pass new legislation in every area of national life, regardless of the European Commission. But what about trade policy, the subject which was central to the debate when we joined the then “Common Market” in 1973?

The default position is that, under World Trade Organisation rules, a country leaving an international trading arrangement replicates the existing tariffs and quotas applying within that arrangement. Inside the European Union the UK has free trade in all products with other members; outside the EU it adopts the EU’s common external tariff — as it is at present — and the CET applies to our trade with the remaining 27 EU nations. The CET includes some very high tariffs,  notably of up to 36 per cent on dairy products. So suppose the government is passive and the default position becomes reality. Then no deal implies that there would be a tariff rate of perhaps 36 per cent on both dairy exports from the UK to the EU 27 and dairy imports to the UK from the EU 27. Any fool can see that — in these circumstances — no deal would be a backward-looking and suboptimal for the UK.

It follows that, if a trade deal with our European neighbours cannot be reached, the government has to form a view on the right tariff levels and quota restrictions for our country after Brexit. In an article in the June 2017 issue of Standpoint I argued that the correct response to this challenge was to abolish tariffs and quotas in their entirety, and to pursue unilateral free trade. The clear lessons of textbook theory and real-world experience are two-fold. Theory says that unilateral moves to trade liberalisation ought to benefit countries that go down that path. Practice shows that the theory works and that free trade is good for the nation that adopts it. (Compare Singapore and Hong Kong — both free traders for many decades — with Cuba and North Korea, which have been semi-autarkic, again for decades. Think of the explosive growth of trade and output which followed China’s self-chosen elimination of quotas and slashing of tariffs under Deng Xiaoping.)
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