Imperial Preference Archives - Richard M. Langworth

Churchill and Free Trade: That was Then, This is Now

Richard M. Langworth — Sat, 27 Apr 2019 21:59:26 +0000

On Free Trade and tariffs

The Hudson Institute economist Irwin Stelzer penned an interesting article on trade: “Trump girds for War with EU.” I sent it around to colleagues, praising it for properly attributing an alleged Churchill quote:

No one doubts that Trump is gearing up to launch a tariff battle with the European Union. For one thing, he is set to sign a deal ending the trade battle with China, and would not be fighting a two-front war should he take on Europe which, he tweeted last week, “has taken advantage of the U.S. on trade for many years. It will soon stop”…. If the EU negotiators think they can use jaw jaw to prevent or delay war war (to borrow Harold Macmillan’s take-off on Churchill’s “Meeting jaw to jaw is better than war”), they are misreading the President…. Trump demonstrates his ignorance of the economics of trade by focusing on bilateral trade deficits. But he demonstrates his New York street smarts by selecting opponents who are relatively weak, as China was when he launched a battle to end its predatory trade practices. Now it’s Europe’s turn.

It’s not too often that Churchill is so carefully referenced. Dr. Stelzer also highlighted my book of quotations, Churchill by Himself, as his recommended reading in that column. So I sent his column to colleagues, saying, “It sweetens his kind gesture by the fact that I agree with him.”

Challenge and riposte

This cost a remonstrance over my Churchillian credentials. A friend wrote:

Tariffs are a tax on domestic consumers, not foreign exporters. It’s crony capitalism for those domestic industries being “protected.” Churchill’s early mentor, Bourke Cockran, understood that; so did his protégé. So sad that someone otherwise so knowledgeable about WSC as you still doesn’t get it! Perhaps a re-read of For Free Trade might help you regain our hero’s wisdom? “Wise words, Sir, stand the test of time.” I saw that in a movie somewhere. [He refers to Young Winston.]

Uh-oh. My day in the barrel? But “never give in, except to convictions of honour and good sense”:

When I said I agreed with Dr. Stelzer, it was mostly with his pinpoint accuracy on the dichotomy of Donald Trump: often meaning well, whose policies often pay off, accompanied by the foulest, rudest and crudest behavior, juxtaposed with fun chummy stuff with supporters (and apparently, when among friends, a prince of good fellows). But how should I know? And after all, on the matter of President Trump, have any Americans by now not made up their minds?

On trade, Irwin Stelzer’s column recounted Trump’s moves and options, and displayed Trump’s knack of picking the softest targets (in this case the EU). Trump’s first impulses are often the right ones. You may recall him suggesting to a meeting the G7 nations: “Why don’t we drop all tariffs against each other?” The dear gentlepersons around the table all looked like they had bad cases of indigestion, and changed the subject.

Churchill wrote For Free Trade…

…in an age long before globalized industry making the same products, and government regulation of economies. The Egyptians sent Britain cotton and Britain sent them shirts, and Free Trade benefited all. There were few retaliatory tariffs because they made no sense. There were no running jokes on Britain, like EU cars taxed at 5% here, vs. our cars at 25% over there. Japan might say, “Ah, but our tariffs are more comparable.” Which is true, except that the same Toyota costing $35k in Japan sells for $30k here because of the government’s Export Subsidy Program, which has the same effect.

But Churchill also learned from experience. In 1932 he endorsed the Imperial Preference he had argued so passionately against in For Free Trade. Why? Because there was an unprecedented Depression (itself largely brought on by tariffs). Empire goods were being subject to increasing tariffs by other countries trying to preserve their industries. Thus Churchill declared:

As Conservatives we are convinced that an effective measure of protection for British industry and British agriculture must hold a leading place in any scheme of national self-regeneration.… Only by walking in company together can the races and states of the British Empire preserve their glory and their livelihood.

On to the End

Churchill stuck to Imperial Preference through 1944, when at Dunbarton Oaks and Bretton Woods his dear friends the Americans demanded it end, lest American exports suffer (with the hardest currency in the world, after the Swiss franc). A nice thank-you for the ally that had stood alone until “those who had hitherto been half blind were half ready.”

John Charmley’s second Churchill book, Churchill’s Grand Alliance, explains how the British were treated. Andrew Roberts’ Walking with Destiny (Chapter 15, “The Clattering Train”) explains the reasoning behind our hero’s volte-face in 1932. It’s always important to know the whole story.

Irwin Stelzer comments

In asking permission to quote him, I showed Dr. Stelzer my words above and asked what he thought. He replied:

You’ve got it right. After all, Trump did not initiate trade wars; they were in place for years. It’s just that America was a non-combatant victim, eschewing Adam Smith’s advice.* If Trump is telling the truth—that his tariffs are a means of getting those in violation of world trading rules to the table so that trade will end up freer and fairer—they are unobjectionable. His insistence that other countries are paying the tariffs is either stupidity or a lie. I prefer to believe it is the latter.

There is an additional problem you might consider. Free traders concentrate on efficiency and maximizing growth. They ignore the distributional consequences: there are winners and losers. The little old lady sewing sneakers in a southern factory is the loser—collateral damage. The American consumer is the winner, at least until forced to pay taxes to support the losers. Since the average unskilled worker subject to competition from cheap labor is probably poorer than the average consumer, free trade involves an income transfer from poorer to richer. Tariffs are a crude way of preventing that regressive transfer. Better to allow it to occur and spend tax money retraining and/or supporting the innocent losers.

*Adam Smith’s advice

…It may sometimes be a matter of deliberation how far it is proper to continue the free importation of certain foreign goods … when some foreign nation restrains by high duties or prohibitions the importation of some of our manufactures into their country. Revenge in this case naturally dictates retaliation … when there is a probability that they will procure the repeal of the high duties or prohibitions complained of. —The Wealth of Nations IV, ii.

Brexit: Leadership Failures Over Four Generations

Richard M. Langworth — Mon, 01 Apr 2019 14:00:14 +0000

Quotation of the Season

So they go on in strange paradox, decided only to be undecided, resolved to be irresolute, adamant for drift, solid for fluidity, all-powerful to be impotent. So we go on preparing more months and years—precious, perhaps vital, to the greatness of Britain—for the locusts to eat. —Churchill, House of Commons, 12 November 1936

Brexit Bedlam

For me the most adroit analysis of Britain’s Brexit Bedlam we can read to date was by Andrew Roberts in the Sunday Telegraph. You can register for free to read the article.

Will this be the year May ends before April? If Prime Minister Theresa May lasts through 5/31, Roberts says she will beat Gordon Brown (two years, 319 days) and the Duke of Wellington (two years, 320 days). Big whoopee.

Dr. Roberts goes on to opine what the right course would have been from the outset:

The cautious, bishop-like approach when she became prime minister would have been to have prepared business, the civil service and the country for a managed, World Trade Organisation-based, no-deal Brexit, without giving Brussels any guarantees on security, future domicile status for EU citizens, a divorce pay-out or indeed anything else until a negotiating timetable was agreed that was fair to both sides. Any fifth columnists in the Civil Service who were actively undermining the strategy should have been demoted; it would not have taken long for the rest to have got the message. The squealing of the Remainers would have been loud and long—especially of course on the BBC—but nothing like as bad as it has been.

Many colleagues reply to this by saying, “Sure, but hindsight is cheap.” Au contraire. Mrs. May, who is an admirable PM in many respects, had those options from the get-go. She knew she had them. She rejected them. Brexit still offers them. It is not likely that she will opt for them.

Churchill and Europe: Then

It almost seemed that every speaker at the recent Hillsdale College Churchill Conference was asked about Brexit in one way or another. We convened to study Churchill and the movies, one of them “Henry V.” Another kerfuffle with the French, but 600 years ago. The best insight into Churchill’s thinking is his own words. So when asked about Brexit I offered two Churchill quotations:

We are not seeking in the European movement … to usurp the functions of Government. I have tried to make this plain again and again to the heads of the Government. We ask for a European assembly without executive power.” —House of Commons, 10 December 1948

* * *

At Zürich in 1946 I appealed to France to take the lead in Europe by making friends with the Germans, “burying the thousand-year quarrel.” … As year by year the project advanced, the Federal Movement in many European countries who participated became prominent. It has in the last two years lost much of its original force. The American mind jumps much too lightly over its many difficulties. I am not opposed to a European Federation including (eventually) the countries behind the Iron Curtain, provided that this comes about naturally and gradually.

But I never thought that Britain or the British Commonwealths should, either individually or collectively, become an integral part of a European Federation, and have never given the slightest support to the idea. We should not, however, obstruct but rather favour the movement to closer European unity and try to get the United States’ support in this work. —Memorandum to the Cabinet, 29 November 1951

Churchill and Europe: Now?

That answer was incomplete, so a second question arose. “You gave us two Churchill quotes in which he opposed Britain joining a federal Europe. Does that mean you think he would be in favor of Brexit?”

Answer: No. To so conclude would violate his daughter’s First Commandment. Lady Soames always said, “Thou shalt not declare what Papa would say about any modern issue. After all, how do YOU know?”

I offered those quotes only to refute the opposite argument we hear all the time. Because Churchill wanted Franco-German rapprochement after World War II, he would now favor the creation of a European super-state.

Theresa May has much to answer for before the bar of history. But it is unfair to blame her alone for the current shambles of irresolution. The mistakes began long ago, under governments both Labour and Tory. They led to de Gaulle‘s rejection of British membership in the European Economic Community in the 1960s. After he’d left, Britain applied to join again. Even then, Britain joined a free trade association, not a federal union regulated by unelected bureaucrats in Brussels.

“If Churchill Had Not Won the 1945 Election”

In 1930, Churchill wrote a marvelous essay, “If Lee Had Not Won the Battle of Gettysburg.” It is presented as if written by someone in an alternate world where Lee DID win the battle of Gettysburg. This precipitated (implausibly from our viewpoint) a sequence of events leading to the abolition of slavery, a fraternal association of English-Speaking Peoples, the prevention of World War I, and with it German fascism and Russian Bolshevism. By 1930 there is the prospect of a Council of Europe led by Kaiser Wilhelm.

I have written, but not yet published, a parallel essay entitled “If Churchill Had Not Won the 1945 Election.” Using some of his phrases, it explains how Churchill DID win, resulting (also implausibly from our viewpoint), in a prosperous, reinvigorated British Commonwealth, a rollback of Soviet expansion, a free Poland, an Arab-Israeli settlement, a democratic China, the evolution of Iran to a constitutional monarchy. It ends with the prospect of a Latin American free trade association led by Che Guevara. Che, an educated, practical man, has pronounced communism a failure and deposed Castro.

Safely reelected in 1945, Churchill renounces the Dunbarton Oaks and Bretton Woods agreements, in which the United States demanded an end to Imperial Preference. Britain then organizes SAFTA, the Sterling Area Free Trade Association. The first of its kind, SAFTA spans the British Commonwealth, including India and Pakistan. They both get independence, but only after the border questions are settled and millions of lives saved by avoiding strife. SAFTA gets along fine with the U.S. and Europe. Free trade blossoms in an era of unprecedented peace and prosperity.

Back to Reality

The mistakes leading to the present Brexit debacle began with abandoning Imperial Preference. Churchill himself had supported that from 1932. Failing to render the Commonwealth a free-trade association of independent states hammered home the error.

So on Brexit, we must NOT proclaim what Churchill would say about a situation he never contemplated.

As for the present Brexit shambles, a Norwegian friend of mine offered an answer. “The best thing to do would be to go back to 1945 and start all over again.”