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Who needs trade agreements? I enjoyed this thoughtful article in the Telegraph by Ronald Stewart-Brown on the ramifications of Britain’s leaving the EU. He seems to think it wouldn’t be too bad because an acceptable trade agreement would be fairly easy to come by. As he says:
We could negotiate at least as good access to other EU services markets as we have at present. We would no longer need to contribute towards the excessive levels of trade-distorting agricultural subsidy other EU member states dish out under the Common Agricultural Policy.
Personally, I wouldn’t be too sure about that – I think we could be in for a fair amount of vindictiveness. But that’s by the by. My real question is whether we need or, indeed, should want trade agreements at all. After all, if we can’t sell to them, how will they be able to sell to us?
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Quite right. What would the board of BMW or Audi think of the Golden Isle, where they can sell their cars for considerably more than at home, suddenly saying ‘nein’.
They need us a lot more than we need them. We should look to the Anglosphere for the bulk of our future trade growth.
Surely you jest!
Consider A and B, where B has things to sell to A.
A sells to D; D sells to F; F sells to C; C sells to B (good old B gets to buy something it wants or needs) it uses what came from A through D to F to C.
You know, that sounds a lot like impersonal transactions that occur quite frequently.
I think the point is that B has to buy from someone and A has to be able to sell to someone.
Given the mixture of incompetence and progressive fifth columnism that characterises the Foreign Office – and almost every other part of the British state – we in the UK would be much better not negotiating trade agreements with the EU or anybody else.
International agreements are all too often Trojan horses via which daft ideas are smuggled into our law with out much debate.
A classic example, although obviously not a trade agreement, was the UN Convention on the Rights of the Child, which made the welfare of the child paramount. A great deal of wickedness has been perpetrated by social work departments and “family courts” based on that principle.
@ PC
Since I also follow your blogging elsewhere, I use respectfully with meaning:
Respectfully, I suggest the Bastiat condition “Service for service.” In non-primitive commerce, both must “sell” to someone in order to “buy” from someone, not necessarily from one another.
That said, it is not always necessary to “Buy” in order to ‘Sell;” see, Balance of Trade Surplus.
I think we could be in for a fair amount of vindictiveness.
From the French and possibly the Germans, yes. But I’m not sure the Spanish and Italians are in much of a position to be vindictive right now, and the Dutch, Danes, and Eastern Euros probably couldn’t care less (and would likely be looking on with interest). The Belgians might kick up a fuss, but who cares about them? Basically, the French would insist that the whole club punishes the Brits, but I’m not sure it has the clout to pull that off. The days of the French dictating EU policy are gone, and in any case they have far more pressing issues. I’m not sure even the French population would be impressed by political posturing against Britain.
The only problem with your scenario, RRS, is that you’ve added a whole slew of unnecessary intermediaries to the transaction, which inevitably drives up the cost. Better for B to be able to trade directly with A. (This is not intended to denigrate intermediaries, who often provide a very useful function, but merely unnecessary ones which only exist because of foolish governmental policies.)
@ Laird
Perhaps I see international trade (and services) from a different perspective. But, from experience, that is the way the world works. It is true that several large “Trading Companies” following a Japanese format thrived on capturing a portion of those transaction costs.
My point to the Cobden acolyte (who is a keen observor) was to distinguish the necessary conditions, not to identify the best (or optimum) conditions for each of the parties to satisfy wants and desires.
One should never underestimate the irational nature of politics – but……
It would be odd indeed for the German governement and the French government (let us be blunt – the other powers in the E.U. do not matter) to undermine the exports of French and German enterprises to the United Kingdom by playing games.
To use the normal (although silly) language “they sell us more than we sell them”.