It's Rare To See This Much Confusion About Trade

If the UK steel situation has taught us one thing this week, it's that most UK citizens, and apparently many politicians too, do not understand the benefits of trade. In wanting to protect British industry with barriers to foreign imports these people are showing economic ignorance of the worst kind. Take this article in The Guardian, for example - it is staggeringly rare to find so much economic illiteracy in one piece of writing. Rather than going through a point by point rebuttal of all the individual errors, I'll just explain the benefits of import/export trade and the way trade barriers harm both sides.

Suppose it costs a UK plant £120 to produce a tonne of steel, and a Chinese plant £100. And suppose the reverse is true for pharmaceutical products: while it costs a Chinese pharmaceutical company £120 to produce 1kg of a particular medicine, it costs a UK company £100. If there are no barriers to trade, the British will buy Chinese steel and the Chinese will buy British medicine.

But suppose the UK government wants to protect the British steel by imposing a tariff of £40 per tonne of imported steel, pushing the price up to £140 per tonne, this is good for British steel providers, but it's bad for British steel buyers who must pay more. But it's also bad for other British companies too, because some of that money would have been spent in their industry.

On the whole, it's fairly easy to see that Brits are worse off from the tariffs, because they hamper the process of best value based on market clearing rates. It's equally obvious how subsidising our own industrial exports has a further damaging effect. Suppose that the UK government subsidised British steel to the value of £40 per tonne - this would advantage British steel producers and the foreigners to whom they sell, but it would disadvantage everyone else.

This kind of economic ignorance is rife - so much so that I'll bet if you asked everyone in the UK if it's true that imports benefit the UK whereas exports take away some of that benefit and give it to other countries, a lot would say they agree.

But, alas, in agreeing they have their reasoning backwards, because what we consume (goods and services) is the true measure of the value created. If we export a product, people outside our country consume it; if we import a product, we consume it. If we export more than we import, our consumption is not in surplus in relation to what we produce. It's true that a trade surplus means there is more money coming into the country from foreign buyers, but money has value only in what is consumed from it - without consumption it is merely 1s and 0s in a bank account. It is only when consumption occurs that the real benefits of money are brought to bear, which means it ought to be more obvious that you do not need a surplus of imports over exports to be better off, and you certainly do not need import tariffs to make your country better off.

No, Britain Absolutely Should Not Pay Reparations For The Slave Trade

Jamaica's Prime Minister Portia Simpson Miller has called on David Cameron to personally apologise for Britain's role in the slave trade, and to even consider paying reparation money too. It was good that David Cameron uttered the words 'Jog on!', or words to that effect, because the idea of contemporary nations apologising or paying reparations for our ancestors' role in the historic slave trade is an ugly and egregious notion.

Now let's be absolutely clear: the slave trade was horrific, despicable and a truly abhorrent legacy for which some of our ancestors ought to have felt much shame, regret and contrition. But that sentiment must apply to - and only apply to - people who were personally involved, and people around at the time who didn't do enough to stop it - it is certainly not David Cameron's duty to apologise or offer financial restitution for these past crimes against humanity.

The very basis of contrition, regret and atonement is that we are moral agents who must take responsibility for our own actions, not the actions of people we've never met and to whom we have no personal connection.

But there is another point to this opprobrious news story: in asking us to live in the past, the valuable notion of 'moving on' and acknowledging the progress that has been made in the intervening time is being diminished, which to me smacks of treating the current people of Jamaica a little too trivially and disrespectfully. It sees to me rather patronising to talk of the citizens of Jamaica as being people so stuck in the past that they haven't moved on and are still preoccupied with righting the wrongs of history.

Perhaps they are, but I would like to think not: for if there is one valuable thing to be learned from being human it is that harbouring resentments from the past is rather like pouring hot coals on your own head and expecting it to burn the scalp of your enemy. Imagine how much that truism is magnified when the people who've done the wronging did so at a time when your grandparents weren't even born.