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Trade is an Intricate Business

There used to be a thing called ‘Sumptuary Laws’. These regulated what people could import particularly aimed at limiting the consumption of luxury items. Aristocrats did not want anyone else dressing like them. But they had another purpose.

In the 1660’s, the woollen industry in England promoted these laws to prohibit the wearing of light cloth. Wool was threatened by cheap and finer materials from the East, particularly silk from China and calico from India.

The woollen industry lobbied the English Parliament to outlaw the burial of anyone in anything other than woollen shrouds - the last industry to let you down.

Eventually, they were successful and cloth from Asia was heavily restricted by an Act of Parliament in 1701.

The law decreed: “All wrought silks, Bengals and stuffs, mixed with silk or herba, of the manufacture of Persia, China or East-India, all Calicoes painted, dyed, printed, or stained there, which are or shall be imported into this kingdom, shall not be worn.”

The woollen industry next fixed its sights on cotton and linen. Linen was manufactured mostly in Ulster. In this they did not succeed and the Linen industry was able to thrive throughout the Industrial Revolution.

Now the same protective instincts are abroad again as Joe Biden announces his ‘Buy American’ campaign and demands across the EU for reshoring and trade barriers increase. Reshoring means bringing manufacturing back from places like China and India.

Some of the larger Member States want to see an EU Industrial Policy, seen by many as a way to protect EU industry from outside competition. The ambition is to create an EU Amazon or an EU Facebook to compete with the US companies that dominate the digital space.

The rise of China is also a cause for concern. Chinese electricity, property and technology companies are buying up assets on the cheap in the EU during the pandemic.

The problem therefore for the EU is to get the balance right between on the one hand the obvious benefits of open trade and on the other preventing the undermining of EU companies as a result of other countries not playing by the rules. There is also a balance to be struck between economic growth and protecting our values.

The EU came up with a slogan to try to capture this balance - open strategic autonomy.

If this sounds like a contradiction, it is. Openness means globalisation and the World Trade Organisation making the rules while autonomy means making the rules in the EU.

Last year, Norwegian Air sold a stake to a Chinese company controlled by the Government. In the EU, this kind of state aid is forbidden (with certain exceptions). Otherwise, there is no ‘Level Playing Field’ for EU companies bidding for these assets.

EU companies already controlled by China include Pirelli, the tyre maker, Volvo and the Greek port of Piraeus.

It is not about scapegoating Chinese investment, which is very welcome in the vast majority of cases. It is about being smart about trade.

The globalised trading system is also criticised because it damages the environment (deforestation and long supply chains) or because it is designed to benefit big corporations (investment courts and uneven distribution of the benefits of trade).

However, trade has lifted millions out of poverty.

When the EU published its Trade Policy Review last month, Africa was mentioned 29 times. A new Africa Continental Free Trade Area (AfCFTA), an African Single Market, started trading in January and is signed by all African countries except Eritrea. It could boost trade by 50% by next year.

Ireland is one of the greatest beneficiaries of open trade in the world. While we are 124th in global population ranking, we are 30th in global trade ranking. In other words, we punch well above our weight.

The EU has provided us with an alternative to UK imports and exports since joining in the 1970s.

On balance, we should pursue open trade where we can and protect our interests where we must.

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