When the politicians talk about international trade, they always talk about what the businesses in their country can sell. But British businesses, faced with the possibility of an interruption with their trade relations with the European Union, are at the moment worried about what they can buy.
The United Kingdom has decided to leave the EU, and the specter of a “no-deal Brexit” — an end to the U.K.–EU relationship without an accord to replace it — has British businesses “hoarding at rates rarely seen outside of wartime,” as the Wall Street Journal puts it. BMW AG, which manufactures Mini automobiles in the United Kingdom, is stocking up on parts and hunting for storage. Other companies are stockpiling automobile components, aerospace parts, machinery, food ingredients, and the raw materials for pharmaceuticals, among other things.
The great benefit of trade is the imports, not the exports — the politicians always get that wrong. You would think that the United Kingdom, with its proud history of world-bestriding trade, would appreciate that first of all countries. For eons, kings, consuls, emperors, and khans undertook enormous pains to keep the trade routes open and to establish new ones, building everything from roads to navies to educational institutions (propagating the once-arcane sciences of accounting and basic finance) to enable the exchange of goods. It is a myth that the Romans salted the fields of conquered Carthage: They ate the grain Carthage grew, and only would have been starving themselves. They needed those imports.
In our time, we have stood that on its head, and as the merchants of the world bring the best of everything to our shores for our use and delight, our biggest worry is that they are not charging us enough money for their goods. These are dumb times.
There is going to be a U.K.–EU trade deal. The ladies and gentlemen in Brussels may have their feelings hurt after John Bull dumped them, but the powers that be in Stuttgart and Munich know how many of their cars are sold in the United Kingdom. Germans like money, too.
As it stands, EU duties on non-EU goods are not especially high: U.S. firms pay an average of 4.2 percent on industrial goods sent to the EU, while EU firms pay about 3.1 percent on goods sent to the United States. The United Kingdom is a big, rich, important market for European exports, and the Brits are going to get themselves a good deal one way or the other. They need those European goods, and the Europeans are of course keen to sell them.
As I have argued before, this presents the British with the opportunity to make themselves a very good deal that requires no input from Brussels at all, a very British solution to their manufacturers’ worries about importing the materials and components they need: unilateral free trade. Hang up a sign reading “Yes, Please,” and send a thank-you note to John Major for refusing to exchange the British pound for the euro. Treat British subjects like free and intelligent adults, which many of them are, and let them choose for themselves what kind of shoes they want.
There’s a lesson in this for Americans, too: As President Trump talks about sealing off the Mexican border and, hence, cutting off trade, American firms involved in everything from manufacturing automobiles and electronics to making ice cream are being threatened with losing access to their most important components and raw materials. That is the stuff out of which American prosperity is made, and cutting ourselves off from the sources of our prosperity out of pique is the worst kind of politics.
It’s an interdependent world out there, and a complicated one. The United States has become an energy powerhouse that currently is exporting a lot of oil — and importing a lot of oil, too: We export the sweet stuff and import the heavier Saudi stuff for our refineries, many of which are optimized for that kind of oil. Iran has some of the world’s richest oil reserves, and it imports a great deal of gasoline. If you think your pickup truck is “Made in the USA,” don’t ask too many questions about that.
The alternative to trade is autarky, the backwards philosophy of “produce what you consume and consume what you produce” that has done such wonders for North Korea and Venezuela. The last time Great Britain had that kind of economy, it was . . . not so great.
If the United States had a different kind of leadership, it might be taking this opportunity to see what could be done to deepen and expand trade relations with the United Kingdom and the European Union both. Those already are healthy and fruitful relationships, but they could be better. The United States and the European Union together account for about half of the world’s economic output. Small gains in efficiency mean a great deal in a market that big.
Trade is not going away — deal or no deal. Making the most of it is as easy as saying “Yes.”