Free Trade

Can Britain follow a free trade policy? If so should this be unilateral?

We have free trade within Europe - but round Europe is the Common External Tariff.

How can this be the best option?

What about offering subsidies to our exporters?

The fact remains that regardless of whether a foreign producer is offering a better and cheaper product because of competitive efficiency or because of governmental support, that producer's product is offered to the British consumer at a lower price than the domestic seller is willing to offer it.

This cannot be good - can it?

For every job saved in the protected industry, other job opportunities are lost or fail to come into existence. Limiting imports means that the foreign producer earns fewer dollars than otherwise would have been the case. And with fewer earnings, the foreigners will buy fewer European exports, with a resulting loss of jobs in the exporting sectors of the economy.

At the same time, because European consumers must pay the higher prices charged by European producers, the standard of living of Europeans in general is lower than it could have been. This also means that the Euros that could have been saved if the less expensive foreign product had been bought are not available to European consumers to buy more of other products; as a consequence, jobs that would have come into existence to meet the demand for these other products never have a chance to materialize.

So we shouldn't have a Common External Tariff - and yet we do - why?

1 comment:

  1. This is all true in most cases. However, there are industries which I believe should be protected from a geopolitical perspective. Farming is heavily protected by the EU. This might be bad as African farmers loose their comperative advantage. However, thanks to the tariffs on agriculural goods, Europe is able to feed itself. Importing food when one might imagine a conflict in which transport of goods between continents is disturbed might prove to be fatal. Furthuremore, tarrifs on foreign goods allow the European firms to safely pursue more environmental friendly ways of production, which could be too expensive in a perfectly free market