Buy British is just bonkers: Why Nick Herbert is wrong about "buy local"
Thursday, March 25, 2010
Nick Herbert, Shadow Environment Secretary, has said that Whitehall should "buy British food" to show it "cares". Like most "buy local" schemes, this is economically illiterate and would do far more harm than good.
There's a common fallacy with this and other proposed "buy local" schemes. By attempting to shift demand away from foreign products to domestic producers, the trade barriers such schemes invariably involve temporarily stimulate local demand but that's about it for the good news.
Here's a nice example. Jonathan Owen cites a UK Department for Environment, Food and Rural Affairs report that illustrates how buying Spanish strawberries in the UK winds up being cheaper for the UK consumer and less costly on the environment: British farmers who grow and pick strawberries emit more greenhouse gases then their Spanish counterparts, even if you factor in the transport. But, more to the point, Spanish strawberries are cheaper and, consumers say, are at least as good.
Thanks to a more favourable environment, Spanish farmers are able to harvest strawberries at relatively little cost - compared to British farmers who have to use greenhouses and other highly energy-intensive growing techniques. The ensuing trade that takes place between these farmers and UK consumers benefits both parties and many other people along the way: farmers are guaranteed revenue for their product; UK consumers get more bang for their buck, and enjoy a slightly longer Spanish strawberry season; and transporters earn revenue by bringing delicious Spanish strawberries to markets in the UK and elsewhere. There are many other indirect benefits: perhaps the most significant is that UK producers are freed to invest in activities that are better suited to their comparative advantages, and these more productive activities is what leads to economic growth.
Maybe consumption of locally-grown strawberries would go up if and when consumers are compelled to only "buy local", but this "local stimulus" ignores all the other parties who benefitted from a free trade scenario who now lose out: the consumer forced to buy more expensive strawberries, the British retailers who shelve unnecessarily expensive produce, the Spanish farmers, and transporters who have just been put out of a job. Moreover, this buy-local scheme entrenches producers in the UK who are restricted to growing and picking strawberries instead of doing something more productive, which represents yet another drag on growth. And, of course, there is a chance that the Spanish government (or anyone else who is affected by the decision) could retaliate, demanding that Spanish consumers buy locally-produced versions of products that are made relatively efficiently in the UK.
The highly protectionist government procurement proposals to "Buy American", "Buy Chinese", or even "Buy New South Wales" weren't seriously proposing that consumers be compelled to buy locally-grown strawberries but now Nick Herbert's plan takes this absurd argument to the logical conclusion.
The benefits created by a global trade in strawberries apply equally to trade in all other areas. Why, then, does our Shadow Environment Secretary seek to restrict these benefits?
Trade enriches all participants in any transaction, and trade leads to many other desirable outcomes too. By restricting trade, governments constrain growth and make us all worse off.