Thursday 02 February 2017 4:15 am

Britain can lead the world in free trade – by keeping trade deals simple

In some ways, the Brexit referendum settled a long-running question. However, it has also raised more profound issues that this government now needs to address.

These include the question of whether we should adopt a policy of openness, free trade and liberalisation of regulation at home. And then, should we take the lead in promoting such a policy internationally, especially given the current circumstances in the US?

Britain is well placed to take that lead, but it will require intellectual courage, desire and imagination to do so. If we grasp the nettle, we could make an enormous difference, not just to the lives of British citizens, but to the lives of many of the poorest people in the world. In the last few decades, huge numbers of people have been pulled out of poverty because their governments have liberalised trade and adopted institutional reforms domestically. But, perhaps, the trade agreement model that is often adopted needs rebooting.

A document published this week by Cafod, an aid charity, raises some of these issues. In the past, I have had a number of disagreements with Cafod. Indeed, debating with them has been important in shaping many of my intellectual interests.

At just the right time – and when organisations such as Oxfam seem bent on presenting a rather destructive narrative – Cafod has released a paper which is an important contribution to the debate on trade. On some issues I still disagree with them. However, on many others I find myself agreeing with Cafod, though perhaps for different reasons. But change often comes when people come to the same conclusions about policy from different perspectives.

By way of example, let’s take two issues.

Cafod argues that we should remove our trade barriers without expecting anything in return from other countries. There is much to be said for this. Our trade barriers hurt British consumers and poor-country exporters and, ultimately, harm UK industries with an export focus. For example, we still have very high tariff barriers of up to 30 per cent on processed foods such as coffee and chocolate. We should just remove them.

Cafod might believe that allowing poor countries to keep their trade barriers is good for those countries. It isn’t. But we should not wait for others to do the right thing by their citizens before we do the right thing by ours.

Cafod also objects to the way in which trade negotiations take place in secret. The charity perhaps over-eggs this, but there is an important underlying issue.

Trade deals have become extraordinarily complex because most trade barriers relate to regulation. When it comes to agriculture, for example, regulation of GM foods is used to keep imports out. In financial services, we make enormous efforts to make already complex national regulatory systems internationally compatible. This all requires a great deal of commercial expertise. The result can be a marathon process and trade deals that create regulatory regimes that benefit incumbents and large firms.

Outside the EU, the UK government can be more relaxed about not using trade deals to harmonise regulation except, perhaps, in extreme cases of health and safety. Products and services that abide by UK regulations can be clearly labelled as such and consumers can then make their own choices.

We cannot go on negotiating trade deals that resemble the Encyclopaedia Britannica. Such deals should go the same way as the hard copy of that great set of books. We should give an intellectual and political lead so that countries such as India and most African nations might follow. Such a policy would enrich consumers and disempower elites.