I BELIEVE I can trace the collapse of the World Trade Organisationâs trade talks to a crucial intellectual error: I blame much of the troubles on a meeting between Richard Cobden and Henri Charpentiere, 150 years ago.
Both were good and wise men. Both created a vast error. Cobden was in the service of Gladstoneâs Liberal government, Charpentier was the agent of Napoleon III. Their mission was to create a free trade area between France and Britain.
Ever since these fateful deliberations, it has been assumed that trade liberalisation has to be mutual.
I think those who only believe in reciprocal free trade have no credentials as liberals. The economics are plain. Comparative advantage, the defining principle of international trade, applies regardless of the tariffs imposed by its trading partners. Trade terms simply do not need to be reciprocal. The hunt for such agreements is now a deterrent to opening up the worldâs markets.
All this horse-trading at the WTO is largely a waste of effort. Far better just to cut tariffs, regardless of how other nations operate. The boldest move in British economic history was the reduction of tariffs accomplished by Sir Robert Peel. We remember it from history lessons as the abolition of the Corn Laws, but it wasnât just the tariff on wheat that was scrapped.
Peel, to the horror of his Tory back benchers, cut all tariffs. The result was a vast surge in trade. It seems to me the creation of an integrated world economy - globalisation - can be traced back to Peelâs decision to act unilaterally. If he had waited for other nations to match his decision, nothing would have happened.
Naturally Peelâs move was unpopular. In the House of Lords, all the landowning peers were outraged and alarmed. They felt that cheaper foreign foods would destroy British agriculture - and their rents. Every industry complained. Free Trade was "unfair". They wanted "level playing fields". Every other stale clichÃ© was deployed.
What happened? No sooner were the general tariffs lowered than all sorts of hitherto undiscovered possibilities emerged. Very quickly it was found sheep could be transported from Australia and New Zealand. Argentina contributed beef. Canada and the US shipped their crops. Did British agriculture collapse? No. It adapted.
Other surprises jolted all but the most complacent. The Exchequer, fearful that revenues from Corn Duty and other levies might tumble, found the volume of trade harvested more inc