On Wednesday, the British and American governments took an important step toward eventual economic recovery. They began negotiating a free trade agreement.
“Our friendship is not some alliance of convenience,” said Liz Truss, the British trade secretary, at the initial meeting, which was held online. “It rests, rather, on shared values and principles. Together, we are an awesome force, and we are just getting started.”
You might think that a tie-up between the world’s largest and fifth-largest economies, each already the other’s largest investor, would be uncontroversial. We are plunging into the deepest depression in history. Anything that helps get us back to growth is surely worthwhile.
Yet the talks have their critics. In Britain, they are an odd coalition of anti-Americans, anti-capitalists, anti-Trumpers, anti-Brexiteers, and anti-omnivores (the deal is portrayed by leftist media as being wholly about the importation of “hormone-treated American beef” and “chlorinated American chicken,” though in fact food represents less than 2% of our trade).
Since the pandemic, this coalition has been joined by two more constituencies. First, the people who feel that, even if a trade deal is desirable in principle, it is a distraction from containing the infections. Second, those who argue that the virus proves the need for greater self-sufficiency.
The first objection is easily dealt with. What do people imagine professional trade negotiators would otherwise be doing with their time? Researching vaccines? The world is facing a slump worse than 1929 or the two world wars. A trade agreement might help a little or a lot, but there is no question that it will help.
The second objection is more widespread. The case for free trade is hard to make at the best of times because it runs up against so many statements of apparent common sense. “Exports matter more than imports,” “We can’t compete with low-wage economies,” “We need to be self-sufficient in strategic commodities” — all these ideas sound completely reasonable. In practice, they impoverish every country that applies them. But human beings tend to trust their gut feelings more than they trust economic data.
This is especially true when we feel stressed or frightened. An epidemic triggers our most basic algorithms. We turn inward. We shun strangers. We hoard. Translated into public policy, these Stone Age promptings demand border closures, lockdowns, and self-sufficiency.
I have lost count of how many previously reliable free marketeers have started saying things like, “The coronavirus shows that we can’t depend on imports.” Actually, it shows the opposite. No country will happen to be sitting on vast stocks of medical gowns, face masks, ventilators, drugs, potential vaccine ingredients, and the rest. Some countries will have surpluses of some of these things, and all will have some deficits. Imagine the past two months had we not been able to import what we needed. Both the British and American governments dropped rules that had previously inhibited the importation of medical supplies. They recognized, even if their voters do not, that imports tend to matter at least as much as exports.
“We need to grow more of our own food,” I keep being told. As a matter of fact, the virus hit during what is known as Britain’s “hungry gap” — the lean April weeks when winter crops such as potatoes and cabbages have run out but the first harvests have not yet begun. Happily, we were able to import everything we needed or we’d have been living on rhubarb, asparagus, and nettles.
“We can’t rely on China. We need to diversify.” Well, OK. But diversifying does not mean replacing dependence on China with dependence on domestic producers. Making everything at home, quite apart from leaving you poorer, makes you vulnerable to local disruption. Security depends on having a wide range of suppliers.
We were able to bounce back from the financial crisis a decade ago largely because we shunned Smoot-Hawley protectionism and continued to benefit from global gains in productivity. Will we do so again? The early signs are not good.
The coronavirus has, however irrationally, boosted protectionists on every continent. A comprehensive U.S.-U.K. free trade agreement can be a counterweight to the restrictive tendencies of Brussels, Beijing, and the rest.
“A free trade agreement between the U.S. and the U.K. would allow us to set a new standard for world trade, seldom equaled since the fall of Rome,” said Sen. Pat Toomey. “Our goal should be to agree to let the British system apply to all Americans doing business in Britain and the U.S. system apply to all Britons doing business in the U.S.”
Quite. At a time like this, we need to pull every lever we can. The sooner such a deal is agreed, the better for everyone.
