May 11, 2025 - 8:00am
For nearly 50 years, EU membership meant British governments had no independent control over trade. But after Brexit, this changed almost overnight. The real question, though, was whether Britain could do something bigger and better than it could have otherwise achieved within the EU? The answer seemed to come this week when the British government announced long-awaited trade deals with the United States and India. Cheered by the government as “landmark” and “historic”, these were “deals for growth”.
At the same time, the Governor of the Bank of England made headlines by saying Britain should “do everything we can” to maintain the UK-EU trading relationship. Keir Starmer is expected to announce various policy concessions — on fishing, food, and immigration — to lower trade barriers with the EU later this month.
Trade politics is back, but it’s not your grandfather’s trade politics. Reading the news, you’d think the only two sides of this debate are between the pro-EU and pro-US free traders.
Pity the protectionist — especially of the old Labour variety like myself. Where, in any of this discussion, is the Left-wing argument for tariffs, which once was at the heart of Labour trade policy. As Labour ministers Tony Benn and Michael Foot once warned, without tariffs, “British industries are running down their production and engaging in mass layoffs, while there has been a flood of manufactured goods”.
It was long understood on the British Left that the magic formula for the British economy was to seek open trade on food and protection against imported manufactures. This was the philosophy of Barbara Castle, who as a eurosceptic Labour MEP in the 1980s, fumed: “I have no doubt at all that the Treaty of Rome, if rigorously applied, would make it impossible for a Labour government to carry out its alternative economic strategy.”
The current Labour government seems to have forgotten this, allowing itself to be entranced by the neoliberal orthodoxy which holds that any barriers to trade are bad because they raise the price of doing business. Increasing the price of doing business increases prices at the till, and this is bad for consumers.
From a purely neoclassical economic perspective, this might be true, but it is not a very socialist perspective. Taken to its extreme, it could apply to all kinds of other ideas which the Labour Party supposedly cherishes. Trade union organisation distorts the market and raises consumer prices. So do minimum wages, sick leave, parental leave, and a variety of labour protections, but they are the price of living in a civilised society.
A similar logic can be applied to manufacturers. It might be more efficient from a business perspective — and cheaper from a consumer perspective — for a factory in Lancashire to close down, move its activities to Romania or India, and sell back the goods that had once been made in Lancashire. Rather than pay £20 for a British-made toaster, you might pay £10 for a Chinese-made one. In a narrow sense, this is a win for consumers, especially those who do not have a lot of money to spend in the first place.
But what are the social costs of all of this? If cheaper toasters means fewer jobs, especially for those who haven’t gone to university (a majority of British adults), maybe the trade off isn’t so sensible. And one might ask if the toaster is in fact cheaper, once we factor in the ongoing costs of deindustrialisation: social decay and high welfare bills due to worklessness, precarity, disability, and poor mental health.
Tariffs are an essential tool in boosting the domestic economy. We know this because over a very long span of history, both the United States and then the European Union used tariffs to develop and grow their own domestic economies and manufacturing bases. It was only once they reached a certain position of strength that they shifted their focus to free trade. The US is now realising that it needs to revisit some of its earlier protectionist practices to respond to the high social costs born from deindustrialisation. For all its posturing, the EU never abandoned protectionism in many areas, from television sets to leather shoes to cheese.
Free traders would respond that manufacturing can be boosted by increasing exports. This might be true in some industries, but it is not the case across the board. And while it is true that a majority of British exports go to the EU, only about 18% of British manufacturing goes to the EU because most of our goods are still for a domestic British market. One way to boost manufacturing is to increase domestic aggregate demand, rather than rely on shipping the surplus of production overseas.
Labour once understood all of this. In the 1975 European referendum, the Left-wing Labour MP Michael Meacher said: “It is deeply disturbing that British manufacturers should be so markedly increasing their concentration on the modernisation and expansion of industry in the Common Market rather than here. It can only mean that the ebb of British manufacturing jobs to the Continent will soon become a flood. Now we understand that pro-market advertisement “Jobs for the Boys”: they didn’t tell us it meant for German boys and French boys.”
Who will speak for Left-wing protectionism now? Trade is yet another example of how Labour has swallowed the neoliberal orthodoxy, at the expense of the workers who will decide its fate at the next election.
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