In an essay on “The Great Brexit Breakdown” (Wall Street Journal, December 7, 2018), Gerard Baker quotes the director of a London-based think-tank:
“You can have national sovereignty—and that’s fine. Or you can have economic integration—and that’s fine. But you can’t have both,” says Mr. Grant.
This is true if “national sovereignty” means that the national government has the right to control its subjects’ decisions to become integrated to the world economy, that is, to import to from or exporting to other countries. In other words, the dilemma is true if “you” refers to a very controlling national ruler. Otherwise, it is not.
To see this, imagine that “national sovereignty” means something completely different from its accepted definition, something closer to Anthony’s de Jasay’s “capitalist state” than to the authoritarian state. De Jasay’s capitalist state is a state whose only function is to prevent other states from taking over the country and oppressing its customers (citizens or residents). Perhaps such a state could even assume the quasi-contractual production of other public goods and services, as in James Buchanan’s contractarian theory, but it would need to be strictly limited. For our purpose, it suffices to imagine that Britain’s post-Brexit state does not claim to determine how its citizens will “integrate” or not, and with whom. (My formulation assumes that Scotland and Northern Ireland would secede following Brexit; if you don’t agree, just substitute “Britain” with “the United Kingdom.”) Then “you,” British citizen, could have both national sovereignty and economic integration—if you individually want that.
What I have described is as simple as it is ignored in the generally collectivist perspective of public debates. It is called unilateral free trade. (I have blogged a number of times on this topic here.) Under this regime, any British resident would have the right, as recognized by his own government, to establish (nearly) any relation he wants with a resident of the European Union (or other countries), whether it is import, export, marriage, investment, etc., provided that his counterparty is willing and allowed to conclude the agreement.
The term “allowed” must be emphasized. A British resident might want, for example, to export something to a E.U. resident who is prohibited by the E.U. government from importing it—or from importing it without paying a tax (a tariff) that ruins the deal. This would be most unfortunate, but it is more a problem for the E.U. resident, whose liberty is infringed, than for the British resident, who could try to export elsewhere. Moreover, since the European Union’s imports must be equal to its exports—or else E.U. residents will be flooded by pounds sterling that they will want to invest in Britain—British residents will be able to export much more than stiff-lip continental mercantilists would like.
It is true that this argument does not solve the problem of the free movement of people, which many Brits and Europeans value in the current European Union. But perhaps the British government could also give the example in this area, by allowing reasonable movement of foreigners on British soil. “Reasonable” means that the declaration of freedom to import goods, services, and capital–which is the definition of unilateral free trade–could include some liberal restrictions on immigration. As in the case of unilateral free trade, liberty would arguably be more contagious than tyranny. At least we have some reasons to hope so.
So the Brits could have Brexit and eat it too, in the sense that a non-authoritarian “national sovereignty” would be maintained and they would be free to individually integrate with Europeans. There is no such thing as a free lunch, so what would be the price? The price of this sort of Brexit cake would be a decrease in state power: the European Union’s government would lose power and the British government would not fill the vacuum. This price would be paid those who like to rule and those who count on the rulers to exploit others on their behalf.
Although British libertarians would like this solution, many others, probably most others, would not. There is some evidence that individuals with authoritarian values were much more likely to vote Leave than Remain. An interesting report by Kirby Swales of NatCen, Understanding the Leave Vote, concludes:
People identified as ‘authoritarian’ were significantly more likely to vote Leave than those identified as ‘libertarian’, 66% compared with 18% respectively (see Figure 9).
I am grateful to Mark Brady for reminding me that one may disagree with the way “authoritarian” and “libertarian” are defined (see p. 28). Yet, it seems to me that many if not most of the questions (from the standard British Social Attitudes survey) that served to define the two terms “authoritarian” and “libertarian” are indicative of what we usually mean by them. It also seems to me that much anecdotical evidence suggests that, if many libertarians favor Brexit, authoritarian bigots outnumber them by far. Many Brexiters hope that European regulations and controls, currently integrated into U.K. law, will be maintained, with a nativist vengeance. Stephen Filder of the Wall Street Journal (“Brexit Upends British Political System,” December 10, 2018) observes:
[Brexit] also attracts people on the left of the main opposition Labour Party, who see the EU as shoring up corporate capitalism and constraining nationalization.
Most Brexiters certainly have no clue about unilateral free trade, which they would probably instinctively abhor. They don’t want to have their cake and eat it too, or have no idea how to do that.
READER COMMENTS
Salem
Dec 11 2018 at 10:03am
You appear to be missing the more expansive meaning of economic integration that is meant by the EU, and other modern international economic arrangements. To the extent that regulatory harmonisation is necessary for economic integration, it’s hard to see this as anything other than an abridgement of national sovereignty.
Pierre Lemieux
Dec 11 2018 at 12:16pm
Salem: I don’t think there is a good reason for believing that regulatory harmonization is necessary for integration. (That is indeed the major problem with the EU.) See my previous blog post on this. If there were, an important harmonization step would be to impose the English language and a standardized education system to anybody who wants to trade.
Salem
Dec 11 2018 at 2:34pm
And I happen to agree with you, at least to some extent, but that is the critical argument being made here.
I also don’t think you are dealing with the strongest version of the argument. It’s not that countries “unfairly benefit” from a lax regulatory climate, and so some supervening authority needs to even the playing field. It’s that separate regulatory regimes can often lead to a bifurcated market, with companies operating in one environment having to pay very large costs to demonstrate compliance with the foreign environment in order to export into it. Limiting the extent of the market like that is going to result in inefficiency for all the traditional Smithian reasons.
OW
Dec 11 2018 at 10:50am
I’m always pleased to see such commentary from across the pond, because reporting on Brexit in the US is, in my experience, often a poor representation of true events and sentiment.
As a Brexit supporter here in the UK (and, unsurprisingly for an Econlog reader, one of very much the same libertarian persuasion Pierre describes), perhaps I can give some more observations from the field:
Firstly, if you are outside the UK, be aware that most of what you’ve heard has probably come from people hostile to Brexit…
Suppose we class Brexit voters as 80% protectionist (certainly not the case – see below) and everyone else is in favour of free trade – even if Brexit is a widely protectionist position, there’s still a majority for free trade.
The Vote Leave campaign and the bulk of politicians and intellectuals behind Brexit are free-trading internationalists. The Vote Leave campaign was fought very clearly on this platform, arguing for the opportunity to strike free trade deals globally and not protectionism. This seems massively under reported outside the UK and the opponents of Brexit like to cast the situation otherwise.
The anti-immigration strain of Euroscepticism is widely unpopular. It’s been said that as support for it increased, support for leaving the EU fell and vice-versa. Ensuring that this did not become the face of Euroscepticism was behind the defection of Douglas Carswell – only UKIP MP and, I believe, a reader of this site – from the Conservatives to UKIP.
The broad concept of free trade, though subject to all the unusual misunderstandings, is still very popular in the UK – much more so than the US. Here’s a poll from earlier this year: Link Note support is actually higher amongst Leave voters than Remain…
Much of the divide is not so dissimilar to the usual left/right Tory/Labour split. Leave voters are more likely to be against high taxes, more likely to be against the NHS (national religion…), less likely to view socialism favourably and all that sort of stuff. The way I see it, economic literacy, low as it is anywhere, is higher on the Leave side than Remain, which is precisely the inverse of what the media say. On that basis, I don’t think it would be any more wise for an economic liberal (in the European sense) to cast themselves in with the Remain camp. The political alignments aren’t so abnormal as is sometimes made out.
Though control of immigration is one major factor in the Brexit vote, control of laws and the ability to do free trade deals are consistently found to rank highly along side. There’s a Lord Ashcroft poll out this morning on Conservative Home finding that ending free movement of people ranks only the 5th most important outcome for both Conservative Leave and Labour Leave voters – behind laws, trade and money.
On the same basis, Theresa May’s Brexit deal is currently attracting widespread hostility from Brexiteers (fearing we’ll be stuck in the Customs Union, accepting large swathes of regulation and under the ongoing jurisdiction of the ECJ), despite the fact that it ends free movement of people. Unfortunately, I fear Theresa May believed, like many, that Brexit was all about immigration – current events show otherwise.
A large proportion of politicians and other public figures who are individualist, free-market or libertarian back Brexit. There’s a sizeable contingent of such people to be found in the Brexit camp in a way that you won’t find elsewhere. On the other hand, free-market and individualist outlooks are comparatively scarce in the Remain camp.
Among Brexiteers, the policy of unilateral free trade has quite a few proponents. Two such examples being MP Jacob Rees-Mogg and CEO of Wetherspoons Tim Martin who have been making a good case, and moreover, they are often met with substantial support from Brexiteer factions of the public who, in their opposition to the EU have adopted a new found loathing of protectionism! Far from the lead balloon that UFT is often seen to be, Brexit looks to have opened some new eyes to the proposal. It must bee said, however, that the exact opposite has also applied to many Remain voters who’ve discovered a strange new love of the Customs Union. A lesson to all – opinions can be extremely fickle.
The reality of a leftist case for Brexit is that, while it undoubtedly exists, and is a risk (especially with Jeremy Corbyn around), it’s going against the tide.
On the anecdotal evidence Pierre mentions, I’d say most Brexiteers are neither libertarians nor bigots, nor terribly favourable to EU regulation. The median Brexiteer is probably in favour of a “managed” migration policy, but is certainly not racially prejudiced, likes free trade on a reciprocal basis but not unilateral and is fed up with red tape but isn’t a big de-regulator. In other words, most Brexiteers are just typical people.
Lastly, on immigration, a point I’d make is that if you want a sustainable liberal migration policy, having it decreed by a distant, unpopular, supranational body is not the way to go about it! It’s a counterintuitive argument but I believe if you have to end free movement to maintain a liberal migration policy. So far, the facts seem to back this up too, because since the referendum, attitudes to immigration have become much more positive in the UK – in contrast with continental Europe.
I hope this may be of interest to readers and provide some insight into how things look to a libertarian Brexiteer in the UK.
PS: When it comes to the Authoritarian-Libertarian axis, I’d say it’s somewhat flawed. Respect for traditional values and school discipline are not necessarily about government force, and tougher sentences is relative, and many in this country believe sentences are generally too weak. These three things really point to a mainstream conservative position, and I think even an anarcho-capitalist could agree with them.
Dylan
Dec 11 2018 at 3:54pm
As an American who has mostly read American and/or UK sources that are aimed more at an international audience, I do appreciate hearing from a Leave supporter that favors free markets. However, I’m really curious what the expected outcome of negotiating free trade deals with countries outside of the EU is expected to be? My understanding is that, when determining how much two countries trade with each other, their distance from one another is by far the largest determinant of the volume of trade, followed by the size of the economy. Unless the UK is planning on moving that island so that it is off the coast of NY instead of France, where are you expecting to find another economy that can make up for the loss in trade from the EU? Even with unilateral free trade, it seems like it would be difficult to even match the current level of trade if one were to suffer a significant decline in the value of trade with the EU, due to the lack of regulation harmonization. What am I missing?
OW
Dec 12 2018 at 6:24am
Firstly, I would say that while geographical location is a big determinant in trade, it’s only a rough proxy for the transactions costs. Distance is becoming less and less of an issue in the modern world.
Despite being in the EU, we have a trade deficit with them and a trade surplus with the rest of the world. We’re the only country in the EU who sells more outside than in and the proportion of our trade with the EU is shrinking.
A large determinant of trade will be commonality of language and business practices, culture etc. and the UK has strong historical links with other countries in the Angloshpere – not least the US. A trade deal with the US would be a substantial benefit.
Plus, we every intention of continuing to trade freely with the EU as much as possible. We start from the basis of complete free trade and complete regulatory alignment.
We’re a highly service based economy, and the EU “single market” doesn’t exist in the same way as for goods yet.
The ability to import at world prices would be a significant boost. Food prices are about 17% higher in the Customs Union. Average EU tariffs are higher than the US and many other countries, so expecting the trend to be downward is not a far fetched idea.
Most growth is occurring outside the EU so there are plenty of opportunities. The EU has no trade deal with the US or China, and the Japanese one is only just coming through. The EU is a sluggish negotiator because you’ve got 28 countries all pulling in different directions and a FTA can be scuppered for everyone just because one protectionist region of Belgium doesn’t like it…
There is hope that we can set a new precedent for trade deals based on mutual recognition, harmonisation.
Also, freer trade is better trade – even if volumes don’t increase, it’s beneficial to have specialisation and comparative advantage operating to their fullest degree to get the maximum gains from exchange. The EU is all about managed trade, not free trade.
Increased competition would, I believe, give us a much needed productivity boost too.
But the other thing is that trade isn’t everything. There are plenty of other reasons to leave:
Poor/damaging/excessive/protectionist regulation (e.g. recent Dyson case – testing vacuum cleaners without dust to the advantage of German manufacturers). There’s no area of life they don’t want to extend their regulatory tentacles into.
EU regulations apply to our whole economy, not just our exports to the EU and bear in mind that regulatory harmonisation harms trade with other countries with different regulations. We have no capacity in the EU to change our regulations to enable trade.
Harmonisation also means less competition in regulatory practices.
Hostility to innovation (e.g. GM crops, vaping). The “precautionary principle”. We’re unlikely to have a thriving future in the likes of biotech and AI in such an environment.
Hostility to tax competition (e.g. Apple case) – indeed, to competition in general. The EU would love it’s own fiscal policy, and has its eyes set on “harmonising” corporation tax etc.
Eurozone – enough said…
Rising populism – the Brexit vote has put paid to the reactions we are seeing on the continent.
Financial Transactions Tax – could be devastating for the City of London. On a similar strain, the City is at risk from hostile regulation pushed through by the other states.
Overzealous anti-trust enforcement.
EU army – this was widely shouted down as unfounded during the referendum, but it has recently been backed by Macron and Merkel.
The European Court of Justice is embedded in the Civil Law system that is the norm on the continent, rather than our Common Law system.
An unelected executive – this means a ratchet mechanism towards “ever closer union”. The people who initiate the legislation can’t be changed, so there’s essentially no capacity to undo or change what has been passed if the Commission doesn’t want to. Imagine how it’d be the POTUS was unelected…
The EU gives a big, central location for lobbyists to target and it is only too willing to oblige. Being more distant from the electorate it has more space to hide. On Public Choice grounds it’s a terrible way to do things.
Common Agricultural Policy and Common Fisheries Policy – both dreadful for farming, fishermen and environment alike.
It’s by no means the case that Brexit is a magic wand – it would be silly to make out that it’s a bed of roses – but the core thing is that the EU is not a place that’s friendly to free-marketeers and though I don’t believe the considerable benefits of Brexit are likely to be realised in full, I believe that on balance we will make at least small steps in the right direction.
It’s about thinking on the margin.
Dylan
Dec 13 2018 at 8:08am
Thank you for the detailed reply.
michael pettengill
Dec 14 2018 at 6:01pm
So, California should be setting its immigration policy, not Trump and Congress?
Or Northern Ireland should set its trade and migration policy, not a distant unpopular government in London.
California’s economy is larger than the UK aand faces a more hostile Federal governmnt than the UK has faced in the EU and EC, paying an order of magnitude more in taxes to the hostile distant government, which supports energy policies that harm Californians with polluted air, drought, ….
I would note that almost a century ago, California objected to US migration policy, objected to the climate refugees flooding into California, and also objecting to US born, California born people not being forced to migrate to other places.
Speaking as someone old enough to remember the EU is USA 2.0 done to allow EU members to throw off the crushing soverignty of the US economic power to force each nation to do what US governments and US corporations demanded. Even today, California, and California corporations threaten EU sovereignty and its the EU struggles to restore EU control.
Will the UK alone be able to match Google, FB, Amazon, etc, or even British commonwealth citizen, and illegal immigrant US citizen Elon Musk?
Benjamin Cole
Dec 11 2018 at 11:09am
Suppose the comparative advantage of nation A is that it uses state apparatus to expropriate intellectual property from nation B.
Should the residents of nation B have the right to purchase product from nation A?
More broadly, does a nation have a right to prevent the purchase and sale of stolen goods? Do consumers have a right to buy stolen goods for property?
Pierre Lemieux
Dec 11 2018 at 12:26pm
Benjamin: The question you raise is a serious one–in extreme cases like goods produced by slaves. (But wouldn’t the slaves themselves prefer their stolen products to be sold rather than starve?) In less extreme cases–like “intellectual property”–the underlying theory under the question is a recipe for the state to forbid any trade the rulers don’ like. For example, would it have been justifiable to forbid trade with Americans until very recently. Here is a quote from a Regulation article of mine:
Benjamin Cole
Dec 12 2018 at 12:28am
Pierre L–
I think you have dodged the question.
I posed a hypothetical. As a hypothetical, it was clean and unencumbered by real-world messiness.
You answered by presenting real-world messinesses and compromises.
So I bluntly ask, “How do you answer the hypothetical?”
But what is good for the goose is good for gander.
You posit that—in theory, or hypothetically —global “free trade” is best.
Okay. But if we ponder real-world messiness and compromises, is free trade still best?
Here is the original hypothetical, which of course describes China and the US.
“Suppose the comparative advantage of nation A is that it uses state apparatus to expropriate intellectual property from nation B.
Should the residents of nation B have the right to purchase product from nation A?
More broadly, does a nation have a right to prevent the purchase and sale of stolen goods? Do consumers have a right to buy stolen goods or property?”
—30—
So, does the above hypothetical more or less accurately approximate the real world than “free trade” theory?
Unfortunately, these are such large topics that your answer (or mine) boils down to biases.
I think the above hypothetical is roughly accurate, and that “free trade” theory is hopelessly outdated and inaccurate for the real world.
You harbor the reverse sentiments.
Hazel Meade
Dec 13 2018 at 4:17pm
If a US company thinks that a Chinese company is infringing on it’s patents, they are completely free to file suit under US law, and often do. US patent law prevents people from selling things in the US that violate patents. I don’t think anyone is complaining about Americans buying things that violate US patents in the US. They are complaining about the competition in foreign markets faced by US companies because Chinese companies clone their products and sell them in China and India and Africa.
Weir
Dec 11 2018 at 7:09pm
I don’t see a lot of difference between class sovereignty and national sovereignty. Maybe you do?
It’s true that within our class we don’t refer to our class as any mere class, one among others. We define ourselves in universal terms. We identify ourselves as above all petty identities. We identify ourselves with truth itself, which is our way of saying that we are above identity.
But isn’t that just our conceit and our mystification? We define the outsiders in terms like nation or people, and we explode the myth of their existence. Insiders like us don’t have to justify ourselves. It’s enough to say, over and over again, that the outsiders have no legitimacy. Our rule is unquestionably legitimate: “The powers that be are ordained of God.”
But aren’t we deluding ourselves when we insist that “they” want sovereignty, whereas we don’t? Obviously we want sovereignty. We insist on our sovereignty, even if we will not say out loud that our sovereignty is sovereignty.
The sovereignty of our class cannot be abridged or rejected. When voters in Ireland rejected our rule, we over-ruled them. When voters in France rejected our rule, we cancelled the result of their vote. When voters in the Netherlands rejected our rule, we nullified that process. And now that voters in Britain have rejected our rule, we have again re-asserted our sovereignty.
Our class will impose a border wall through Ireland. Our class will impose a tariff wall around the Brits in perpetuity. We won’t allow them to trade freely with the rest of the world. We will not let them leave.
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