Do we stand on the verge of a new trade war? In light of competition from elsewhere, the drawbridge is being pulled up to shelter local industry from these malevolent foreign forces. And that, argue some policy makers, is going to help keep money in the economy and create jobs.
I’m not talking about Donald Trump, steel and whiskey. I’m talking instead about the idea of councils buying their goods and services locally, an idea that has been dubbed ‘Corbynomics’ and has Preston as its poster child. But the parallels are striking.
In recent years Preston City Council in particular has been active in increasing its spend on local businesses, giving them preference over suppliers from elsewhere. This has brought both curiosity from some policy makers and strong support from others, with John McDonnell describing this brand of ‘municipal socialism’ as the kind of radicalism needed across the country.
What is curious though is how differently policies promoting protectionism are viewed at the local and national level. The lines against international trade barriers are well rehearsed, and Donald Trump has been roundly criticised for his approach, with even his economic advisor quitting over it. And yet paradoxically protectionism is welcomed at the local level, somehow viewed as a defence for small businesses rather than the same politics of populism.
The same applies to the idea of local currencies. There are a number of local currencies in the UK, such as the Exeter and Bristol (tagline “Our city. Our money”) and pounds. The principle is that they support independent businesses by encouraging people to shop locally – in a war of David (local independents) versus Goliath (big national or multinational companies), it is argued that these policies help level the playing field. Of course, this is exactly the argument that Trump makes about US steel (David) and China (Goliath).
The struggles of the US steel industry are unlikely to be down to unfair trade practices, nor the deluge of cheap Chinese products. (Chinese steel accounts for just 2 per cent of all steel imports into the USA.) Similarly, the challenges that weaker city economies face have little to do with local authorities spending their budgets with companies outside their areas, nor people choosing to buy from Amazon rather than their local high street. Instead these struggles are caused by the ability of places to attract high-skilled investment into their economies, and the ability of these businesses to ‘export’ their wares to a regional, national or international market. This is caused by a number of issues, of which low skills of the workforce is chief amongst them.
So as US trade tariffs have been criticised by many, we must also view protectionist policies at the local level in light of the same criticism. Successful cities are ones that are open to business, irrespective of where these businesses are based. We should be encouraging them to increase trade, not shut it down.
Paul Swinney is head of policy & research at the Centre for Cities, on whose blog this article first appeared.
You can hear him discuss these issues on a recent episode of Skylines, the CityMetric podcast.
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