Trade negotiations are not necessary

From today’s Open Europe news summary:

WTO chief warns of “complex and drawn-out” trade negotiations after Brexit

Roberto Azevêdo, Director-General of the WTO, has warned that it could take Britain decades to disentangle its trading relations with the EU and negotiate new ties with the rest of the world after Brexit. He told The Times, “It seems that there is a great deal of confusion about the trade implications of a British exit from the EU. I think it’s important to provide the facts. The likelihood is that a British exit would lead to a sequence of complex negotiations – with the EU itself, with the 58 countries that have trade agreements with the EU, and also with all the other members of the WTO. These negotiations would be complex and drawn-out.”
Meanwhile, Prime Minister David Cameron said yesterday that leaving the EU would cause an immediate shock, then uncertainty, and negatively impact trade. Boris Johnson said the risks of remaining in the EU are “massive”, due to the Eurozone and migrant crises.

Source: The Times The Sun Institute for Fiscal Studies The Daily Telegraph: Hague

No so-called trade negotiations are needed. The idea that a nation must seek the approval and reciprocity in order to lower or completely eliminate barriers to trade is one of the most persistent myths in all of economics. It is akin to believing that one cannot start a diet until everyone else starts a diet. Lowering barriers to trade does not require the cooperation of any other nation. All a nation has to do is unilaterally eliminate all barriers to foreign products. Such an action will lower the cost of living for the citizens of the importing country. Of course, these imports will be paid with currency of the importing country. And what is the exporting country to do with this currency? It has a choice. It can spend the currency on imports from the country that issued the currency . It can invest in the country that issued the currency. Or it can hold the currency as foreign reserves, to be spent later. Now, how is any of this a problem for the country that eliminated barriers to trade?

Scrap all the trade agreements currently in force. Send the trade negotiators home. Declare unilateral free trade. This is the path to peace and prosperity.

Patrick Barron

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