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Trade does not require trade agreements

Douglas Carswell makes some excellent points about the perils of any post-Brexit trade agreements with the EU:

So let’s spell it out. Access to the single market means being able to trade with single-market countries. Membership means being bound by single-market rules.

Why is this difference so important?

Because access is consistent with the vote to leave the EU. Membership isn’t.

Access clearly doesn’t require membership. Countries around the world trade with the single market. Many do so freely, with no tariff barriers, via bilateral free-trade agreements. Britain can do the same. We don’t need to be part of the single market to trade freely with it.

In fact, we will have freer trade once we leave the single market. Because the single market doesn’t enable commerce, but rather restricts it.

The single market is a permission-based system. It stops suppliers from selling things people want to buy unless they conform to standards set by bureaucrats in Brussels. Rather than remove trade barriers, the single market creates them. Not between countries, but between producers and consumers.

The effect is to limit competition. Big corporations with expensive lobbyists rig the rules to shut out disruptive innovation from upstart rivals. Economic progress is impeded.

Indeed, and as Peter Lilly wrote not all that long ago:

How important are trade deals? As a former trade minister it pains me to admit – their importance is grossly exaggerated. Countries succeed, with or without trade deals, if they produce goods and services other countries want. Thanks to the Uruguay Round, tariffs between developed countries now average low single figures – small beer compared with recent movements in exchange rates. So the most worthwhile trade agreements are with fast growing developing countries which still have high tariffs.

Quite so. The sooner we are out of the EU the better.

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14 comments to Trade does not require trade agreements

  • RRS

    Much is said about competition of (or amongst) participants in markets.

    Equally important are the opportunities “markets” can provide for cooperation of those participants.

    The intrusions and interventions by non-participants in the circumstances understood as markets and in the relationships conducted in them by the actual participants are as likely to be more detrimental to cooperation than to competition.

  • Chip

    Exactly. The default philosophy of the EU and statists everywhere is that the individual is born with chains that are loosened or tightened when a politician or bureaucrat issues a directive.

  • JohnK

    Chip:

    Your point is a good one. The EU is a system of government of the bureaucrat, by the bureaucrat, for the bureaucrat.

  • Thailover

    As Tom Sowell so aptly pointed out, you can have trade between two parties, or you can have trade with government involved, which is at minimum count, three parties.

    Voluntary trade ONLY occurs when the conditions suit the parties involved. There will be far more trade with two parties than with three, or even worse, four, or five….

    As trade creates direct benefits and side benefits, lack of trade does the opposite. Gov involvement is a trade barrier. It helps no one by pretending that we’re children unable to fend for ourselves.

    And it’s even worse than that. Voluntary trade occurs only when both parties GAIN i.e. profit, from the exchange. But when gov makes itself a necessary and arbitrary arbiter (is there any other kind?), trade often occurs when it’s not to the benefit to all parties, because gov interjects politics, and politics poisons everything.

  • Thailover

    RRS wrote,

    Much is said about competition of (or amongst) participants in markets. Equally important are the opportunities “markets” can provide for cooperation of those participants.

    Free market trade is where people compete to cooperate with potential customers, by helping people, offering them what they want and need for an agreeable and affordable price.

    Only insane Marxists would suggest that this is evil.

  • Brad

    I get so tired of the people not comforted when the giant squid uses its copious tentacles to channel the food to its beak. If you’re not bright or savvy enough to symbiotically flit around its edges for the loose bits, don’t cry about your lack of foresight. If this keeps up, we’ll have to snap out of this languid torpor and actually produce something. One gets exhausted just thinking about it.

  • Stephen K

    ‘The default philosophy of the EU and statists everywhere is that the individual is born with chains that are loosened or tightened when a politician or bureaucrat issues a directive.’

    I blame the Romans.

  • PeterT

    This misses the point exactly. If country A has a set of rules for goods and country B has another, this is a so-called technical barrier to trade. In practice, producers will choose to comply with the most demanding set of rules that they can bear. The purpose of the rules of the single market is not to overrule private market participants but to overrule governments.

    In practice, I expect that if the UK doesn’t remain part of the single market there will be a reasonably sharp adjustment. However, it may well take a number of years for the economy to re-specialise and nobody should think it will be entirely painless.

  • The purpose of the rules of the single market is not to overrule private market participants but to overrule governments.

    Yes… but no 😉 In reality the rules of the single market are to favour a different power centre rather than many national governments (well in theory, in reality national government still get their oar in), and moreover in many cases rules get harmonised up (i.e. becomes more costly) rather than harmonised down.

  • Laird

    “The purpose theory of the rules of the single market is not to overrule private market participants but to overrule governments.”

    There. Fixed it for you.

    Of course, the practice is something else again entirely.

  • PeterT

    Whether rules get harmonised up or down will depend on your starting point. I expect that it would have been more beneficial for economies with less developed trade networks, and more overbearing local regulations, than for relatively free trading economies like the UK, the Dutch and so on. Certainly at some point it must be right to step out of the single regulatory framework. However, I do not know that that is now.

    What riles me about opposition to the single market is that those that oppose it seem to believe that it is almost like remaining in the EU. It is not; the EEA only have to bear a fraction of the regulations that originate from the EU.

  • staghounds

    Post Brexit, ha ha ha.

  • Either staghounds or the rest of us are going to look very daft indeed in a bit more than couple years or so. I know where my money is on that score.

  • Paul Marks

    Good post.

    What is the E.U. going to do – stop companies selling stuff to British customers? Britain has a massive trade deficit with the E.U.

    There is no need for talks – just declare free trade and have done with it.

    Basically the Civil Service (and the establishment politicians) want an EXCUSE to keep E.U. regulations (the so called “single market”) and “trade” is that excuse.

    As Charlton Heston’s character says at the end of “Planet of the Apes”.

    “Damn them – damn them to Hell!”

    Passed the censor on bad language – as the character meant it literally (about the people who had destroyed the world).