Hasan Afzal: The Conservatives should not let populism get in the way of principles when it comes to free trade
On April 9th, a major credit rating agency - Fitch Ratings - downgraded Greek debt down two levels from BBB+ to BBB-. It should be worth noting that level BBB is described by Fitch as ‘satisfactory’ levels of confidence of not defaulting on debt, whereas AAA, their highest grade, is described as ‘reliable, stable and the best quality of debt’.
This is news that was hardly covered in the British media, both Sky and BBC merely displayed this important piece of information on their news tickers on the bottom of your television screens.
So, why should we care about this? Well this is quite important - If we don’t have a change in government, the same will happen here.
The news that the Labour Party have pledged to block foreign mergers and acquisitions, should it not meet their definition of ‘national interest’, is one that should be met with condemnation and great abhorrence amongst Conservatives.
What the Labour Party forgets is that trade is a two-way deal. Just as British business people have the liberty to invest in foreign products and companies, our foreign counterparts have the free reign to do the same in our great nation.
Just as BAA, Cadbury’s and Corus are owned by Spanish, American and Indian businesses respectively - Segway, an innovative defence/humanitarian transport company; Greyhound Lines, an iconic American transport company and GlaxoWellcome, the pharmaceutical company now known as GlaxoSmithKline were all major foreign companies that are owned or were acquired by British business.
The free trade of products and services is especially important in the UK when you consider we are an export-orientated country. We are reliant on our comparative advantage against other nations to which we can freely trade and acquire those companies that we feel offers opportunities of growth.
We give and we take. The open transaction, exchange and trade of currency and credit is why we are such a successful country. This is the essence of the modern neoliberal economy - and now New Labour wants to take us backwards.
The idea that the state can intervene in a transaction because a group of politicians decide that the acquisition of a British firm is contrary to their political success is economic tyranny. It is protectionism and it is what this country does not need in a time where investors seek private liquidity in markets as levels of debt and trade deficits massively spiral out of control.
Labour’s policy of blocking foreign takeovers may have a populist streak but it is no way to manage an economy. It will attract similar tit-for-tat punishments from other governments and we will end up with a protectionist trade environment where governments actively hike up import taxes in sectors they feel they should protect their domestic firms. We need only to look at The Great Depression for an illustration of just that.
Whilst we are in over £900 Billion in debt, we find ourselves in the same position as the Greeks do today. As every time the Bank of England issue their gilts we are hostage to international investors who still have confidence in the British economy.
Once that confidence is lost, all it would take is one downgrade, just one, and we’d be in a worse economic situation than the Greeks are in today. Do you think Labour’s policy is one that increases confidence?
The Conservative Party should take a strong stance and show that we are the pro-business and pro-free trade political party. Innovation and entrepreneurialism should be welcomed and an environment should exist where we can foster growth in the private sector. Interference from politicians has no place here.
Such is the hypocrite that is Gordon Brown, just in 2009 he warned the World Economic Forum, “Protectionism protects nobody” - what has happened to the saviour of the world banks now?