Jeremy Corbyn and Donald Trump are two sides of the same protectionist coin | City A.M.
Protectionism is like a boomerang: just as soon as you think it’s out of sight, it flies back threatening to hit you square in the face.
“Tariffs are the greatest!” tweets Donald Trump, while Jeremy Corbyn unveils a plan to stop non-UK firms from bidding for public contracts.
Economists do not often agree, but one thing they are sure of is that. in the long run, free trade benefits everyone.
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But then, say the critics, many of those economists have well-paid, tenured jobs in state universities, where the lifestyle is pleasant and you can look forward to an index-linked pension – and where the chance of your job being outsourced to China is slim.
Things look very different to a fitter in an engineering firm in the Midlands or a redundant steel worker in America’s rust belt. To them, foreign competition is a life-threatening reality. So promises from Trump or Corbyn to protect their jobs against foreign interlopers have a strong and immediate appeal.
This is what makes protectionism so politically powerful, why there is so much around, and why it endures, despite economists’ protestations.
Away from the slim seaboards of the US, with their financial and political elites in the east and tech and media elites in the west, you discover a vast America that loves Trump.
It’s the same in post-industrial areas of the UK that yearn for an uncompromising and interventionist programme from the likes of Corbyn.
Of course, in reality protectionism ends up hitting hardest the very people most attracted to its champions.
Trump, who prides himself on the art of the deal, clearly wants something specific with his protectionist agenda. In this case, it’s a total rewrite of America’s trade deals. America is, he tweeted, “the ‘piggy bank’ that’s being robbed”.
He has a point on some imbalances: US car exporters face EU tariffs of up to 10 per cent, but add on non-tariff barriers and it is the equivalent of an import-killing 25 per cent or so. By slapping on his own tariffs, Trump says he can bring other countries back to the negotiating table and get something fairer. He reckons it’s working: “everybody’s talking!” he gushes.
The problem is that the victim in any trade war is the consumer. In this case, the American consumer ends up paying higher prices and having fewer options.
Corbyn, obviously, denies any similarity with Trump’s protectionism. “Nobody’s ever said I have something in common with Donald Trump before,” he mused after a speech this week, in his usual disarming way. “It’s news to both of us, I suspect.”
Hardly. Their core slogan is the same: bring jobs back home. If it looks, walks, and quacks like a demagogue, it’s probably a demagogue.
Trump’s tariffs are brutally honest and obvious. In contrast, non-tariff barriers are sneakily dishonest and unseen. And that is what Corbyn proposes. Under his proposals, some £200bn a year of government purchasing – on trains, medicines, passport printing, you name it – will go to UK firms, not foreign ones.
The problem isn’t that Labour’s heavyweights have never heard of David Ricardo’s theory of comparative advantage and free trade. It is that they do not want to hear it, because they want to promote jobs in highly unionised industries – namely manufacturing and production.
But this protectionism has its unseen costs too. If the public sector cannot buy from the world’s best-value suppliers, taxpayers will have to pay more for essential services – “picking the pockets of the many to subsidise the few,” as my colleague Sam Dumitriu puts it.
When suppliers from the EU, the US, China or others are denied access to an important UK market, they are hardly likely to be open to our exporters. Start throwing around trade protections and you’ll find them heading straight back at you. Jeremy Corbyn should just ask his unlikely ally Donald Trump.
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