Trade policy: retrospect and prospect

Abstract

In 1763, Louis XV's Minister, the Duc de Choiseul, wrote to the Earl of Halifax, one of my illustrious predecessors as President of the Board of Trade: 'mais pour l'amour de Dieu, ne laissons pas les querrelles de p&cheurs degenerer en querrelles de nations'. 1 During the intervening centuries progress in human civilization has been so slow that quarrels of fishermen continue to degenerate into quarrels between nations, even within a union as close as that which constitutes the European Community. Nor is this the only commercial quarrel that has disturbed the even progress of Europe's ways. When the wider world is brought under observation, the flesh creeps at the battlefield cries of governments rallying to the support of their fishermen and wealth creators of all kinds. Thirteen years after Choiseul wrote, Adam Smith published The wealth of nations. For more than two hundred years since then, liberal economists have been striving to persuade governments of the unwisdom of their interventions.2 They have singularly failed. We are forced to conclude that tendencies so deep-rooted in the conduct of nations demand more thorough enquiry than has yet been achieved by economists of the liberal school. This article, then, will discuss three themes with the aid, at certain points, of some illumination from my own experience of international economic relations. The first question is why nations and governments, after two centuries of liberal economic thought, are still basically mercantilist in their approach, still carry their mercantilism into trade negotiations and can still be found supporting their own' companies in competition for orders at home and overseas. The answer will be that the interests of nations are in conflict and that uncertainty as to the working of economic forces leads governments into policies of risk reduction. This is followed by an attempt to illustrate the effect conflict and uncertainty have on economic policy. I will show that, particularly at times of economic difficulty, economic policy becomes defensive and international economic cooperation difficult. Thirdly, I will argue that pragmatism, even mercantilist pragmatism, is better than liberal dogma as a way of reconciling conflicts and increasing cooperation. I will take comfort from the fact that-perhaps paradoxically, in the present tense international situation-there are such dangers in further divisions within the West that practical men of government will make great efforts to patch up economic conflicts. It cannot be certain that they will succeed, but they will do what they can. They have not done too badly so far in circumstances that have been far from easy. I begin with a plea. International economic relationships are, in part, relationships between nation states. Nation states are political institutions. Few these days seriously question the proposition that the functioning of the economic system internationally can in principle be improved by agreements of different kinds negotiated between nation states. There are certainly those who see, especially in