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Free-market Brexiteers dabble in mercantilism

by Sam Ashworth-Hayes | 10.03.2016

Some eurosceptics who preach the free market are trotting out “mercantilist” arguments for leaving the EU. Mercantilism is the idea, popular in the 18th Century, that a country should get rich by restraining imports, boosting exports and accumulating bullion. It was famously slammed by Adam Smith, the patron saint of free marketeers, in The Wealth of Nations — a book which celebrated its 240th anniversary this week.

One Brexiteer guilty of advocating the free market and espousing mercantilist language is Douglas Carswell. UKIP’s only MP says on his blog that he “favours free markets, small government and individual freedom.” And yet on the BBC last Sunday (7 minute mark) he spoke about how Britain runs a trade deficit with the EU of £60 billion. He said: “The idea that they would somehow impose tariffs from cross-Channel trade from which they’re the principal beneficiaries seems to me absurd.”  Real free-marketeers would find the notion that exporters are the “principal beneficiaries” of trade absurd.

Meanwhile, Paul Nuttall, deputy leader of UKIP and an MEP, says on his blog: “UKIP is in favour of free trade”. Elsewhere on the same blog, he says our deficit with the EU shows our membership is a “dead weight around our economic neck more mercantilist lingo.

Daniel Hannan, Tory MEP, has also fallen into the same trap. The man who says “the spread of free trade has arguably been the single happiest fact of the past 60 years ” once listed our trade deficit as the number one reason to leave the EU.

Imports are also useful

For a country, the only point of exporting in the first place is so it can buy something else from abroad, either now or in the future. There is no point in running a permanent surplus unless you believe Britons, like Smaug, sleep best on piles of exotic coins.

Saying that the EU is getting the better of the deal simply because it’s running a surplus is like saying that the bakery round the corner is the principal beneficiary when you buy lunch.

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    Importing gives us as consumers a great range of choices. We can, for example, buy BMWs as well as Mini Coopers. It increases competition, driving down prices. It also lets countries specialise in what they do best, increasing the efficiency of the global economy and so meaning there are more goods to go round.

    Meanwhile, our companies make use of imports too. Raw materials and part-manufactured goods come into the UK, and finished goods and services flow out. If our companies were constrained to buy British, they would produce less at higher prices – and would be less competitive in the export market.

    These are classic free trade arguments. Funny that, in their desperation to quit the EU, supposed free marketeers are ignoring them.

    Edited by Hugo Dixon

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