Saturday, June 25, 2016

The Neoliberal Consensus on Trade

Here is Paul Krugman, the Democratic Party's favorite economist, writing about Brexit:
Yes, Brexit will make Britain poorer. It’s hard to put a number on the trade effects of leaving the EU, but it will be substantial. True, normal WTO tariffs (the tariffs members of the World Trade Organization, like Britain, the US, and the EU levy on each others’ exports) are low and other traditional restraints on trade relatively mild. But everything we’ve seen in both Europe and North America suggests that the assurance of market access has a big effect in encouraging long-term investments aimed at selling across borders; revoking that assurance will, over time, erode trade even if there isn’t any kind of trade war. And Britain will become less productive as a result.
Even though Krugman is a liberal, he (like almost all economists) thinks that on the whole trade is good, barriers to trade bad.


pithom said...

One of the many points of the Leave campaign was that it would enable Britain to be freed from the E.U.'s protective walls and make more trade deals with other, non-E.U. nations.

John said...

Possibly, but Britain trades far more with Europe than anywhere else, so any loss would be hard to make up. Krugman's argument is not so much about trade as investment; the idea is that Chinese or Brazilian companies might set up in Britain because it gave free access the whole EU. From that perspective even a small amount of disruption in relations between Europe and Britain might lead to a significant investment shortfall.

G. Verloren said...

China actually wanted Britain to remain - they even openly urged them to, which is hugely uncharacteristic of them (normally they like to keep quiet about other countries' decisions in the hopes that others will keep quiet about theirs).

Britain not only hurt their own economy and their trade relationship with the EU, but also their capacity to trade with the rest of the world. Places like China and Brazil are pissed off at the British, because the choice to leave hurts them too. China in particular viewed Britain as a friend that could help them negotatiate with the EU to help facilitate trade between Europe and China. Now that isn't possible, and the Chinese are very unhappy about the lost opportunity.

Here in the US, there are plenty of annoyed investors as well - the aftemath of the leave vote wiped out all of our stock market gains made this year so far. If Britain or anyone else thinks that's a good way to encourage trade with us, they've got another thing coming.

Basically, the only people celebrating this are misguided nationalists of various stripes; the Russian government, which is ecstatic to see Europe weakening itself for no logical reason; and groups like ISIL who I can only imagine are saying to themselves, "Look how scared they are! Look at the lengths to which they're willing to go in their terror! They've done more damage to themselves and created more fear and uncertainty than we ever could with a dozen major bombings!"

pithom said...

G. Verloren, if you're such a fan of Brussels imperialism in Europe, did you oppose the independence of the Belgian Congo from Brussels even more strongly? Man, that lowered its GDP per capita! Led to actual war with 6+ million deaths, in a country with (now) more people than Britain! Why should White people get any less support for their national independence from the Left than Blacks?!ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_pcap_kd&scale_y=lin&ind_y=false&rdim=region&idim=country:ZAR&ifdim=region&hl=en_US&dl=en&ind=false

John said...

Anyone who thinks the situation of Britain now is anything like what the Congo endured under the rule of Leopold II ought to read a bit more. Have agents from Brussels come to London to enslave people on rubber plantations and shoot the slackers? I think not. Every nation in the EU joined freely, by the decision of its own government; this includes Britain. I am no great fan of the EU but to call it "imperialism" is just plain wrong.

There are arguments to be made about the good done by European colonizers, just as there are arguments to be made about the good of freeing Britain from the EU. But the situations are in no way analogous, so comparisons are of little use. Except as trolling.