My first political writing was a letter I wrote as a boy to Margaret Thatcher in 1980 or 1981, a time of great economic and industrial stress.
I had just been with my family to France for the first time and was cross that the French roads were full of Peugeots and Renaults and Citroens, while ours were full of allsorts. My letter advocated an obvious solution: economic protectionism, or tariffs.
The observation might have had some truth, but my proposed prescription was all wrong. It is beguiling to think you can protect your domestic industries to create employment and growth, and rake in lucrative tariff revenue at the same time.
Trade does need to be fair. Farmers and producers should not be undercut by others with lower standards. And self-reliance is important in strategic sectors, like food and energy. But, as a general rule, the freer trade is, the better.
International trade is important to Hampshire, with Southampton handling exports of £40bn a year. And Britain is an outward-looking maritime nation. Mostly (not quite always) for good, our country has been a leader in global trade.
It was in the same year that the then thirteen American colonies declared their independence - 1776 - that the great Scottish economist Adam Smith published the Wealth of Nations. Smith’s seminal work is the grounding of our understanding of how the division of labour, specialisation and trade bring economic growth.
In 1799, another British economist, David Ricardo (inspired by reading Smith), developed the theory of Comparative Advantage: the notion that everyone benefits when countries specialise in and export what they’re best at, and buy in other things from others.
It is complained in some countries that “the problem is, we don’t have a comparative advantage in anything any more.” In fact, that is impossible. Even if country A can produce everything better and cheaper than country B, there are still gains to be made from trade by country A specialising in the things it is even more better at (bad grammar, I know).
Moreover, if you do hike tariffs, as we have seen again, other countries retaliate – and then competitively you are back where you were, but with consumers now paying higher prices. No one wins from a trade war.
To say “globalisation is over” is wrong. But it certainly is much challenged and already much changed.
Exactly how and where the US tariff actions will lead is an open question.
But one thing’s for sure: we need to renew, not reduce, our commitment to trade. We must work harder at our trading relationships with powerhouse growth economies like India, and G7 partners in Japan, Canada and Europe
