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Liam Fox is right: we need to talk about Britain’s trade problem

10 September 2016

1:44 PM

10 September 2016

1:44 PM

When Theresa May appointed three of the most outspoken and free-minded Brexiteers to her Cabinet, her fellow Remainers were delighted. Surely the only question is what they’d do first: implode or disembowel each other? Ever since, the speeches they’ve made have been seen through this narrative. First, David Davis was seen to have gaffed for pointing out that it’s “improbable” that the UK stays in the European single market. And today, we have Liam Fox’s remarks to Conservative Way Forward about Britain’s trade problem.

A friend of mine was at the event, and took a video. Here’s the transcript: CoffeeHousers can judge for themselves if his remarks are really so outrageous.

“This country is not the free trading nation that it once was. We have become too lazy, and too fat on our successes in previous generations. And when I look at a country built on free trade, as an outward-looking, forward-looking nation, and I look today at the proportion of British businesses that export beyond our border – what is it? 80 per cent? 60 per cent? 11 per cent.

What is the point of us reshaping global trade, what is the point of us going out and looking for new markets for the United Kingdom, if we don’t have the exporters to fill those markets? We’ve got to change the culture in our country. People have got to stop thinking about exporting as an opportunity and start thinking about it as a duty. Companies who could be contributing to our national prosperity but choose not to because it might be too difficult or too time-consuming or because they can’t play golf on a Friday afternoon. We’ve got to be saying to them: if you want to share in the prosperity of our country, you have a duty to contribute to the prosperity of our country.”

 “We’ve made a fundamental shift in British policy. Up until the change of government, the policy was to get as much foreign direct investment into the United Kingdom as possible, but to largely ignore overseas direct investment elsewhere. And that’s a problem because it’s great the year we get the foreign investment and we get jobs created, but every year after that all their income flows that go to their parent companies or their parent countries are outward flows in our current account. Unless we have counterbalancing overseas development, overseas investment, we are unable to get those income flows to counterbalance that.

It was noteless speech, intended for a small audience of MPs. He had known it would be broadcast in front of the nation, he’d have probably dropped the golf course gag. But this was a speech aimed at specific audience: Eurosceptic Tory MPs, perhaps feeling a little too complacent about Brexit. Perhaps imagining that leaving the EU will, in and of itself, propel us to greater trade deals and more prosperity. It’s a lazy assumption. The history of free trade deals tells a very different story: you need reform at home, then you negotiate. And what Fox was saying was simple: we need reform at home. Britain is not the tethered tiger of Eurosceptic fantasy; in fact, when it comes to exports, we’re rather lame.

Fox concern is the UK’s eyewateringly-large gap between what we import and what we manage to export. UK exports are a pitiful 27pc of GDP, the lowest figure in Europe. The EU average is 43 per cent. Surely these figures raise some serious questions about just how outward-looking and pro-free trade Britain really is? George Osborne set a target of £1 trillon exports by 2020: they were barely half this figure last year. The BCC’s John Longworth reckons Britain is 15 years behind where it needs to be to reach this target because “the UK has too few exporting companies.” Just as Fox was saying.

Fox could have added: how many UK corporates have been content to grow their profits on cheap, imported labour while leaving the tough trade talks to Brussels? The EU has been a constraint for some, but a hammock for others. Both constraint and hammock will soon be gone.

As I argue in my latest Daily Telegraph column, it’s nonsense to think that Britain’s post-Brexit success will be resolved out by trade deals, that we can somehow negotiate our way to better globalism. Tories love to think: yes seafaring Britain would do a lot more business if it wasn’t for the pesky, parochial EU. It’s a lazy assumption, and is contrary to the many protectionist instincts in parliament and the Tory party itself. In the last PMQs we heard one Tory MP (Neil Parish) saying that…

…we need to make sure that both farming and the food processing industry are protected in any trade deals we make. I seek that reassurance from my right hon. Friend.

In other words: can the Prime Minister assure the House that she will conspire with producers against the consumers, to keep prices up and living standards down? If Fox was using strongly-worded language to his own party, this is why. The voices of old Tory protectionism are piping up once again.

Free trade or protectionist? This is the battle about to begin in the Tory party – a battle that has tore it apart once before, after the repeal of the Corn Laws.

Brexit is not a magic wand. It cannot create more exports – only companies can. And right now, UK companies don’t export very much. Is it really so outrageous to start a debate as to why this might be? As the great Wilhelm Röpke put it: “internationalism, like charity, begins at home.” And this is, pretty much, what Fox was saying.

This is new. It’s a conversation that Britain hasn’t had for almost half a century, because trade deals have been the preserve of the EU. Now that conversation has finally started, it will be unfamiliar – and a little rough, in places. But we’ll have to get used to this debate if Britain really is to make a success of Brexit.


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