Dr Liam Fox hits headlines with a speech about the future of free trade for Britain. Here is the full speech.
It was 240 years ago, on 9 March 1776 that Adam Smith published the Wealth of Nations.
It set out the principles for the emerging world of global commerce but its lessons are just as relevant today.
Smith had a vision of what trade could produce in terms of prosperity and opportunity, a vision that was revolutionary in its time.
He reminds us still that the essential element of a successful trading system is mutual benefit.
“It is not”, he wrote “from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest”.
Although the principles of free trade are the same today as set out by Smith in the 18th century, the trading environment has changed beyond recognition.
Today, we stand on the verge of an unprecedented ability to liberate global trade for the benefit of our whole planet with technological advances dissolving away the barriers of time and distance.
It is potentially the beginning of what I might call “post geography trading world” where we are much less restricted in having to find partners who are physically close to us.
It is an exhilarating, empowering and liberating time yet this bright future is being darkened by the shadows of protectionism and retrenchment. History teaches us that such trends do not bode well for the future.
Those of us who passionately believe in the case for open and free trade therefore have a clear mission.
To succeed in this great task we need to get back to first principles.
I want to remake the intellectual and philosophical case for free trade for I believe the arguments are overwhelming.
On these shores we know this better than most because our nation was built upon it, helping us spread our influence around the world exporting not only goods but ideas of commerce, law and liberty.
In recent times it has underpinned the multilateral institutions, rules and alliances that helped rebuild post-war Europe and the world beyond.
It helped usher in the fall of communism and the tearing down of the Iron Curtain; and it has facilitated 70 years of global prosperity, raising the living standards of hundreds of millions of people across the world.
Its modern-day critics would do well to evaluate the devastating failures of alternative economic models throughout history and to compare them with the recent success gained by countries such as China, India, or Vietnam.
My message today is a simple one – free trade has, and will continue to, transform the world for the better, and the UK has a golden opportunity to forge a new role for ourselves in the world, one which puts the British people first.
The case for free trade
Free and fair trade is fundamental to the prosperity of the United Kingdom and the world economy.
Our trade with the world is equivalent to over half our national income. Free trade is a significant job creator, increases our pay packets and has allowed us to enjoy the highest living standards in history.
More trade means greater tax revenues to the Exchequer, which we can then invest into our infrastructure, security and public services, creating stronger and safer societies.
Adam Smith argued that it is a moral right for people to buy whatever they want from those who sell it to them the cheapest.
The idea that governments should restrict the right of individuals to exchange their hard work for goods and services at an agreed price in an open market is one of the gravest infringements of personal liberty I can think of.
Just a stone’s throw away from here is Manchester Free Trade Hall: built to commemorate the repeal of the Corn Laws in 1846.
It symbolises a watershed in our country’s relationship with free trade.
It is particularly poignant for a Conservative politician, for the bold and principled decision of Conservatives such as Sir Robert Peel to take on the power of the wealthy producers initially tore my party asunder but the benefits it produced eventually allowed the British Conservative party to become the most successful political party in the free world.
The Corn Laws kept the prices of basic items such as bread artificially high to protect wealthy landowners from foreign competition.
These tariffs hit ordinary workers the hardest and they rightly saw it as an unfair attempt to preserve the wealth of a privileged minority at the expense of an increasingly hungry majority.
The echoes of this epic struggle reverberate down the halls of history and changed the course of our nation.
Today, as then, by putting the consumer first, free trade has been one of the great levellers in our society ensuring that more people can access more goods at greater value, making their incomes go further.
Over the course of the 20th century, new and exciting technologies have become increasingly available to a wider and wider consumer base.
Not only have car prices halved and household electrical items, once luxuries, become ever cheaper, but who would have imagined that the brick with an aerial that we used to call mobile phones back in the 1980s, with an initial retail price of almost $4000, would develop into the almost universal technological marvels that we carry around with us today.
Free trade forces businesses to innovate to compete and instils a healthy dose of competitive uncertainty into the marketplace which means that we, the consumers, benefit from better quality and ever evolving products.
It is interesting, for example, to ponder whether Apple would be minded to innovate at its current rate if Samsung and Microsoft were not breathing down its neck.
Free trade also allows markets to specialise in the production of goods where they have the greatest efficiency.
A visit to a local supermarket will not reveal much Scottish wine or French whiskey, testament to Adam Smith’s foresight.
This process of specialisation means that global output increases and ultimately, we pay less at the checkouts for the products we actually want.
But the benefit can apply just as much to businesses as customers.
Free trade opens up new markets, which means millions of potential new customers.
The EU/Korea free trade agreement, which came into effect in July 2011, is just one example.
In the year before the FTA was agreed, the UK sold just over 2000 cars to South Korea.
In 2014 that number reached over 13,000.
Free trade also allows businesses to benefit from the transmission of ideas, know-how, talent and technology across borders.
I am certain that Tata’s investment in the UK automotive sector benefits the local Indian car industry, just as UK investment in the Indian chemical sector allows our pharmaceutical firms to draw on new techniques.
That is the glorious joy of free trade – it is not a zero-sum game, it really can be win-win.
And here in the North West, I am reminded that free trade benefits regions as well as nations.
Exports of goods in this region were £25 billion last year; that was a greater figure than from Scotland or Wales.
This morning I had the privilege of visiting EDM Ltd – a leading North West business of 200 employees supplying training simulators to the civil aviation and defence markets, with an annual turnover of £22m.
Today the company announced they are in the process of finalising a number of new orders including a new £2m contract with Delta airlines.
A great example of how free trade supports local people and places whilst building national wealth.
The benefits to Britain of this approach to global trade can be felt well beyond the prosperity and diversity we find in our own backyard.
It helps ensure that we are economically fit enough to be able to tackle some of the biggest global challenges today – terrorism, poverty, climate change and an increasingly volatile and interdependent global financial system.
Any economist worth his or her salt can see that free trade has been one of the most potent liberators of the world’s poor.
In 1993, around 45% of India’s population sat below the poverty line; in 2011 it was 22% – and it is no coincidence that in the intervening period India embraced globalisation and started to liberalise its economy.
Ask yourself whether there has been a greater emancipator of the world’s poor than free trade.
It is also no coincidence that most of the world’s biggest market economies are also amongst the biggest and most powerful military nations in the world.
Not only do these countries appreciate the need for a safe and stable global trading environment but the benefits of an open trading system enable them to earn the money that is necessary to support the means of providing that security.
If you want to see the contrasting results of open and closed economies then look to the Korean peninsula.
In 1945, both North and South Korea began from a very similar base, but while South Korea embraced open trade and free markets, Pyongyang turned inwards with the tragic consequences for its citizens that we see to this day.
Seoul is now at the heart of a thriving economy and dynamic democracy where freedom and prosperity are shared among all its people.
It should come as no surprise that while over 80% of South Koreans have access to the Internet, less than 0.1% of North Koreans enjoy the same.
More tragically, there is a greater than 10 year discrepancy in the life expectancy of those north and south of the demilitarised zone.
For the prize of free trade can be measured not simply in terms of economics but in human terms too.
There is a reason why those who wish to diminish political freedoms try to have closed economies because they know that, especially in the era of the technical revolution that is the Internet and social media, open markets will sweep in empowering and liberalising ideas.
It used to be said that the hardline leaders of the Iranian revolution were much more concerned about the impact of McDonald’s than Mossad and there is probably more than a grain of truth in it.
The threat of growing protectionism
Despite all the benefits and historical precedents, the voices of protectionism continue to grow louder.
But why has this retrenchment occurred? Part of the reason is that, in some cases, the advances in global prosperity have not been equally shared.
The echoes of the Corn Laws debate can be heard in many of these arguments.
Certainly, developed economies need to ensure that the benefits of an open trading system are not felt merely by the privileged few but perhaps some of the resentment lies in the fact that it is always easier to identify the losers in a free trade environment than it is to find the winners.
Economic sectors who cannot cope with competition are much easier to pinpoint than the general increase in prosperity that tends to be shared amongst the population as a whole, who are able to access a greater range of goods and services at lower prices as a result of global competition.
The duty of political leaders should be to explain these processes rather than to pander to short-term protectionist instincts; for such behaviour, while it may lead to their own short-term political gain, is likely to be bought at the expense of the greater good.
At the same time, we must be sensitive to the fact that many people have concerns about the pace and scale of globalisation.
They feel insecure and are not convinced that further economic and international change will be to their benefit.
It is an insecurity that fuses together and is fed by a number of factors: new technologies that threaten long established industries; the social and economic impact of high levels of immigration and the fear that international trade means the export of jobs and an inability to compete.
Change is unsettling so we need to show we understand that government has a role to play in equipping the country for change.
For example, by upskilling the workforce and improving both our hard and digital infrastructure, whilst being committed to mitigating the effects for those most disadvantaged.
If we don’t then arguments against globalisation and free trade will give rise to protectionist retrenchment with damaging economic consequences that future generations will have to endure.
We can begin by dispelling some popular myths about how open trade affects workers.
A good example is the North American Free Trade Agreement (NAFTA) which was signed in 1992 under President Bush and came into effect under President Clinton.
The public discourse has tended to be negative and centred around the potential loss of manufacturing jobs.
Yet, a 2015 study for the National Bureau for Economic Research found that intra- bloc trade increased by 41% for the US after NAFTA was agreed.
The office of the US trade representative says US trade with Canada and Mexico supports over 140,000 small and medium-sized businesses and a 2014 report for the Peterson Institute for International Economics estimated that 17 million jobs were added to the US economy in the seven years following NAFTA’s enactment.
Based on the increase in US exports to Mexico between 2009 2013, the authors found that around 188,000 new US jobs per year were supported by increased sales to Mexico, which were on average better paid than the jobs lost to imports.
Where there are challenges for sections of our economy we must respond with bold ideas and policies.
We must ensure that the forces of globalisation do not leave people behind by ensuring that the fruits of our success are targeted into the right investments – in infrastructure, training and skills, so that the benefits of trade help build a fairer economy that works for all, not just the privileged few.
The battles that resulted in the building of the Manchester Free Trade Hall need to constantly be fought and refought.
We must be vigorous in explaining the benefits that a free and open trade system provides.
Competition leads to innovation and it is innovation that powers progress.
Those who promote the alternatives must be honest about their consequences.
Barriers to trade raise prices and diminish purchasing power.
The terrible truth about protectionism is that while it may be a short-term vote winner or temporarily prop up failing industries, it is always the consumer and often the poorest in society that ultimately lose out.
This is not however, to argue that temporary measures are never needed or that we should not take action against anti-market measures such as dumping where our own industry is threatened by uncompetitive behaviour.
And those who peddle the myth that free trade is synonymous with reducing standards are simply wrong.
For example, the Environmental Goods Agreement, which is a plurilateral trade agreement aiming to eliminate tariffs on environmentally friendly goods, such as solar panels, is currently being negotiated through the WTO.
And over 1.5 million farmers and workers are now part of Fairtrade certified producer organisations, which ensure that they receive a fair price for their products.
Far from being a race to the bottom, free trade is often a ladder to the top.
It is a sad fact, however, that the proliferation of protectionist measures has often been by the very countries who should be the most ardent supporters of free trade.
The most recent WTO reports show an acceleration of protectionist trends since the 2008 recession – with the G20 being amongst the biggest culprits.
Whilst some of these measures can be explained through combating unfair competition, such as dumping, if we are to see a world of more open trade then the biggest economies need to lead by example.
Whilst the WTO has been the bedrock of the international trading system, underpinning fundamental trade rules and providing the means through which these can be enforced, its effectiveness can be hampered by having to satisfy 164 individual members.
But this should not be an excuse for members to abandon global ambitions.
The UK, after all, was a key architect of the General Agreement on Tariffs and Trade which later became the WTO – and we will work within the WTO to build on its successful work in taking an axe to red tape across borders, phasing out distortive export subsidies, and scrapping trillions of dollars’ worth of tariffs.
However, where progress has stalled at the multilateral level, the UK must be ready to look to more bespoke plurilateral and bilateral arrangements to ensure that the global marketplace remains fair and free.
We cannot allow foot dragging by those unwilling to seize the benefits of free trade hinder progress on important issues for the rest, such as eradicating nontariff barriers in services, digital or intellectual property.
If other nations are hanging back, then the UK will happily lead the charge for global free trade.
We will corral coalitions of the willing who share a belief that a more open and free trading world is the one which will provide the brightest economic future for our citizens.
The UK is a full and founding member of the WTO, though we have chosen to be represented by the EU in recent years.
As we establish our independent position post-Brexit, we will carry the standard of free and open trade as a badge of honour.
UK at the forefront of global trade
Going forward, we should be confident and optimistic about what can be achieved.
The global influence Britain enjoys today is largely down to our proud trading history, a history steeped in innovation and endeavour.
250 years ago we pioneered canal networks and invented railways so we could move goods faster than ever before.
Steam engines transformed the textile industry and led to the sprawling growth of our great northern cities.
We were, quite simply, the workshop of the world.
A small island perched on the edge of Europe became the world’s largest and most powerful trading nation.
More recently, as members of the European Union, we have played a huge role in ensuring that the single market remains open to trade, championing its expansion into a greater services and digital economy.
We will continue to encourage this liberalisation as long as we are members of the EU and after our exit.
Through the WTO the UK has helped pushed through the Trade Facilitation Agreement which, once implemented, could add over £70 billion to the global economy annually of which £1 billion will come to the UK.
As a newly independent WTO member outside the EU, we will continue to fight for trade liberalisation as well as potentially helping developing markets trade their way out of poverty by giving them preferential access to our markets.
For the British people, trade is in our DNA.
What Napoleon called a “nation of shopkeepers” has sold tea to China, wine to France and boomerangs to Australia.
But the UK has experienced a deteriorating trade performance since 2011, with our exports growing more slowly than some of our G-7 counterparts including United States, Germany and France.
Despite a stellar performance by our best exporters it is a sad fact that only 11% of British companies export anything beyond our borders and the value of our exports is well below that of our European neighbours.
We know from the performance of our best that we could do much better overall.
In gross terms, our export to GDP ratio is only 27.3% of compared to the EU average, excluding the UK, of 47.3%.
Even if we take a value added estimate, we still lag by 21% to 33.8%.
We also cannot leave our current account deficit, which currently stands at a record level of 5.4% of GDP, to be dealt with at some point in the future.
Improving the UK’s productivity must be at the heart of this.
We must also rebalance our economy through trade in a holistic way with exports, inward investment and overseas investment all playing a part.
However, I believe the UK is in a prime position to become a world leader in free trade because of the brave and historic decision of the British people to leave the European Union.
Those who believe that the referendum was a sign of Britain looking inwards have it completely wrong – it is the beginning of Britain increasing its global engagement.
We are leaving the EU, we are not leaving Europe and we are ready to take our place in an open, liberal and competitive globalised trading environment.
Flexibility and agility will be key to success in the globalised era where we can trade at any time with any market that is functionally similar without it having to be geographically proximate.
We are the fifth largest economy in the world and ranked in the top six countries in the world as a place to do business.
Our economy is strong with record employment. As we move towards exiting the EU, free trade will play an even more important role in building an economy that works for all.
And capabilities exist right across the UK.
Here in the Northwest of England, a car rolls off the production line in JLR’s Halewood plant every 80 seconds, exported to 170 markets worldwide.
The West Midlands is the only UK region which has a trade surplus in goods with China, and every 2.5 seconds a Rolls-Royce powered aircraft takes off or lands somewhere in the world.
We will harness all these advantages as we seek to shape a new role for our country outside the European Union.
I am delighted that under our new government, trade is back at the heart of the government’s agenda.
Two new departments have been born with the sole purpose of making sure the UK makes a success of our new relationship beyond the EU.
We will be working across Whitehall with the Treasury, the Foreign & Commonwealth Office, the Department for International Development and the new Department for Exiting the EU to ensure the UK not only leaves smoothly but is at the forefront of global trade when we do.
We understand that globalisation brings its challenges and, as the Prime Minister said in her speech at the United Nations General Assembly, it is the role of governments to mitigate any negative effects for their people; but this can never be an excuse for turning back to protectionist practices.
Free trade has, and will continue to transform our lives and enrich our societies.
Free trade means the freedom to do business, the freedom to escape from poverty and freedom to engage with and shape the world.
The British people have presented us with a glorious opportunity to reset our global trading relationships, place ourselves back in the centre of an increasingly interconnected world and build an economy that works for all.
It is a challenge where success will buy prosperity, stability and security, not only for the people of Britain, but that which can be shared across the globe.
That is why we will not fail.