Monday, 21 August 2006

British Revolution

Last month, Andrew Mitchell, Britain’s shadow secretary for international development, proposed a Pan-African Trading Area (PATA) that would see a reduction and, hopefully, elimination of import tariffs between African states. PATA is a good idea, but it would require a full-hearted support of African governments. Such support, unfortunately, may not be in the interest of African elites, which thrive on corruption that import duties facilitate. The Tories could, however, do a great deal of good for the British consumers, poor people around the world, and for themselves, by opting for unilateral trade liberalization.

As a result of its 1973 entry into the European Economic Community, Britain gave up sovereignty over matters of trade to Brussels. Today, trade issues are subjected to qualified majority voting in the European Union’s Council of Ministers, which means that powerful defenders of protectionism, such as France, are usually able to derail moves toward greater trade openness. EU Trade Commissioner Peter Mandelson’s pathetic inability to commit to further liberalization of agriculture was partly responsible for the derailment of the Doha round of trade negotiations. His pandering to special interest groups ranging from French farmers to Italian shoemakers harms European consumers and shows the shortcomings of the common EU approach to trade negotiations.

Tony Blair’s insistence on coordinating Britain’s policies toward the developing world with the rest of the EU, because that is what “good Europeans” do, stands in stark contrast with his oft-declared passion for reducing world poverty. And so, the EU remains committed to protecting its producers from foreign competition, preferring, instead, to purchase acquiescence of poor countries with dollops of foreign aid, much of which ends up in the pockets of third world dictators.

That disconnect between Blair’s words and deeds provides a golden opportunity for the Conservatives. Instead of hoping to convince African governments to agree to PATA, they should declare their intention unilaterally to open Britain’s markets to foreign goods and services once they are returned to power. Aside from benefiting British consumers, trade liberalization would enable the poor in Africa and beyond to help themselves. Moreover, the Tories would show that they are more serious about reducing world poverty than their Labour opponents.

How would that work? Before taking effect, all European legislation must first be agreed to by the British Parliament. The Parliament can repeal outdated or unwanted legislation. It can also change the terms of British participation in the EU or force their renegotiation. As such, the Parliament could adopt legislation that would allow foreign products to enter British ports free of a common European import tariff. In such a case, Brussels would have only two options. It could accept the British decision. That would, in effect, eliminate import tariffs on exports from poor countries throughout the European common market.

Alternatively, Brussels could subject British exports to Europe to tariffs consistent with the European commitments under the WTO. But, Britain is one of the EU’s most important and most powerful members. It is also Europe’s second largest economy, and a net importer of goods and services from the rest of the EU. A tit-for-tat tariff war would harm Europe more than it would harm Britain. Also, Britain’s historical affinity for free trade is supported other EU members, such as the Netherlands and Estonia. An attempt to punish Britain, therefore, would unleash a mighty row within the EU and expose the hypocrisy of those EU governments that claim to want to help the poor countries, but are willing to do little about it.

Importantly, unilateral trade liberalization would bring to the fore the “European question,” which has been torturing the Conservative Party since the early 1990s. A solid majority of the Conservative Party believes that Britain’s membership of the EU is not really working out. Alas, fearing popular backlash, the Tories are too afraid to advocate full withdrawal. Trade liberalization could galvanize the public opinion in favor of the Tories’ wish to renegotiate Britain’s position in the EU. After all, it is the British consumers who pay higher prices for food, because of the monumentally wasteful (and very French) Common Agricultural Policy. It is they, who pay more money for shoes, because import tariffs benefit the Italian shoemakers by keeping cheap shoes from China out of the European market.

The repeal of the Corn Laws in 1846 showed that unilateral trade liberalization, in addition to making economic sense, was also a moral thing to do. The primary beneficiaries of trade liberalization were the British poor, who suffered under protective tariffs designed to benefit the wealthy land-owners. Back in the 19th century, it was the Tories who were on the side of the wealthy land-owners. Now, the Conservative Party has an opportunity to correct that mistake, and become a party of free trade and a champion of the poor.

By Marian Tupy.

Marian L. Tupy is assistant director of the Project on Global Economic Liberty at the Cato Institute.

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