Learning Lessons about Free Trade Is Child's Play; ECONOMIC ANALYSIS

The Evening Standard (London, England), February 8, 2018 | Go to article overview

Learning Lessons about Free Trade Is Child's Play; ECONOMIC ANALYSIS


Byline: Russell Lynch

ALEAKED Treasury analysis showing that trade barriers throw grit in the wheels of growth has caused a massive hoo-ha over the past week as Brexiteers stamp their feet and bemoan civil service bias. But are its findings really that controversial? One economist, who actually used to work at the Treasury, tried a famous free trade experiment on a classroom full of kids. Daiwa Capital Markets Europe's head of research Grant Lewis divided a class of 30 into three groups of ten and gave them all some sweets.

Then he asked them how happy they were with their lot, giving each group a combined score out of 100.

The first group was told if they wanted to trade sweets with each other, they had to pay one sweet to the teacher. This was the "WTO tariffs" option. Only six decided to trade, and at the end of the experiment their overall happiness with their situation rose slightly, from 72 to 78 out of 100.

The second group of 10 had to trade under the conditions of "non-tariff barriers", similar to staying in the EU under a free trade agreement.

That means no charge for trading, but every time the kids wanted to trade, they had to get a stamp on the back of their hands from the teacher.

Teach took her time about things as well, presumably in an effort to replicate visions of tardy customs officials and lorries queuing up at Dover in a post-Brexit version of Operation Stack. Still, despite the non-trade barriers, eight children traded and the average happiness with their lot rose from 62 to 77 out of 100.

The final group of 10 had the "free trade" option; that is, no non-tariff barriers, no tariff charges and one that coincidentally looks a lot like staying in the EU's single market, common standards, frictionless trade and all.

You may not be surprised to learn that all 10 of the children traded, and the group's "happiness" score jumped from 73 out of 100 to a mammoth 94.

Some critics attacked the experiment as an unfair reflection of the UK's true position. That's because it doesn't portray the EU's external customs union, which imposes common tariffs on those trading with the bloc from elsewhere. …

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