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Fox tests tariff-free trade and nets Brexit backlash

For years now, people have been suggesting that Britain might leave behind the European Union, forget all tariffs and create a new way of trading with the world.

The idea is that cheap imports would drive down prices for domestic and business consumers. That the threat of being beaten by low-prices Chinese rivals would make British businesses become more efficient, or perhaps provoke them into moving into other areas.

It is, in some respects, the very acme of a capitalist model – that we put ourselves at the mercy of the economic tides of the world. If a British industry can’t compete with global competitors then it withers.

If that sounds brutal, that’s because it is.

Patrick Minford, the economist whose work influenced both Mrs Thatcher and the Leave campaign, was clear when giving evidence to a parliamentary committee: “If you have an industry that is not economic, it is in your interests to run it down.”

CBI deputy director general Josh Hardie
Business groups enter Brexit tariffs debate

It could be cars now, he said, just as we had once run down the coal and steel industries.

The flip side of all this is a tariff structure that whacks great big taxes on imports from other countries, to protect domestic products.

But take such protectionism too far, and you reward inefficiency and bad practice. Prices go up, and consumers notice that they’re paying more for the same things than their counterparts in other countries.

That’s why the question of tariffs is important for post-Brexit Britain. And why it’s significant that Liam Fox has raised the spectre of zero-tariffs.

International Trade Secretary Liam Fox
Image: International Trade Secretary Liam Fox

He may well have done so just to see what would happen. After six months of tentative, behind-the-scenes chats, this was the day when the topic burst into the open.

And the result? Condemnation from business groups. “I would urge Liam Fox to think again and think about the damage this plan would do to our industry,” said Laura Cohen, chief executive of the Ceramics Confederation.

The British Chambers of Commerce, an organisation becoming ever more publicly exasperated at the pace of Brexit negotiations, came up with this: “A snap decision to move to zero tariffs speedily and unilaterally would harm both domestic producers and exporters, and create a huge new source of extra uncertainty for business communities at an already-difficult time.”

It went on: “Some UK manufacturing and agriculture businesses would lose market share quickly, and find their businesses facing existential threats.”

Dr Fox, I expect, is soaking this all up.

He was non-committal about tariffs today, with talk of possibilities and various different models being examined. With a nod to his own constituents, he accepted that zero tariffs would hurt the livelihoods of many farmers.

It feels like he has stepped back from the idea of zero tariffs on everything.

But he is, I suspect, a politician who believes in minimising the number of products that require tariffs.

And that decision, of which things are protected and which are not, could have profound consequences for the UK in the years to come. This is a space worth watching.

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