The Back Door That Is Really a Window

The decision is described, by its critics in Brussels, as a back door: Britain declining to tax Chinese cars and so leaving a passage through which cheap vehicles might slip into the European market. The mechanism it actually creates is something else. It creates a comparison. The gap between the description and the mechanism is where this analysis lives.

Consider first the smuggling the metaphor implies. A car is not a bale of cloth that can be relabelled on a wharf at Dover. It carries a chassis number, a certificate of origin, and a paper trail that customs officers on both sides of the Channel already know how to read. Trade agreements between Britain and the European Union contain rules of origin for exactly this reason. A Chinese saloon that lands in Southampton does not become British by being admired there. If transshipment were the real danger, the remedy would be enforcement at the European border, which the Union already possesses. That the complaint is aimed instead at the British government’s tariff policy suggests the worry lies elsewhere.

Here is where it lies. When Jonathan Reynolds says, on behalf of the UK government, that Britain will not impose these tariffs, he is offering Europe an experiment it did not ask for. Two neighbouring markets, similar in wealth, taste and roads, will now price the same goods differently. A family in Lille and a family in Leeds will look at the same electric hatchback, and one of them will pay the tariff without being told that is what they are paying for. A tariff works best when it is invisible, when the higher price can be passed off as simply what cars cost. The British refusal makes the price legible. The back door, in short, is a window, and what alarms the people inside is being seen.

Whom does the window embarrass? The tariff is defended in the language of strategic autonomy and industrial resilience, the language protection has always used when it goes to petition. Some of that language is sincere. But the first and surest beneficiaries of a wall against cheaper rivals are the established manufacturers behind it, who may now hold their prices higher than competition would allow. The consumer, who pays, was not at the table when the wall was designed, and the consumer seldom is.

The strongest objection deserves its full weight, because it is a serious one. Chinese carmakers do not compete as private merchants. They are carried along by a state that subsidises capacity, credit and components, and a market flooded with goods priced below their true cost is not a free market but a rigged one, rigged from Beijing rather than Brussels. On this view the tariff does not suppress competition. It restores it, by cancelling an unfair advantage.

I grant the premise and question the conclusion. If a foreign government wishes to tax its own citizens so that British drivers may buy cars more cheaply, the British driver is the beneficiary of that folly, not its victim. The real cost falls elsewhere, and this is where the accounting must be honest. It falls on the men and women who build cars in Britain: the worker at the Nissan line in Sunderland whose skill was built over twenty years of fitting one assembly to another, and who cannot become a software engineer by Friday because a ministry has decided cheaper imports serve the nation. The division of labour gave that worker a trade so specialised that it is nearly worthless outside its own factory. A policy that serves the consumer while discarding this worker without retraining, without any public provision for the transition, is not a free-market policy. It is half of one.

So the British decision is better than its critics claim and less complete than its defenders suppose. Europe has chosen to protect its merchants and to call the cost security. Britain has chosen to let its consumers buy more cheaply and has not yet said what it owes those who make the cars. Each government has kept one ledger and mislaid the other.

There is a comedy in it that the trade lawyers will miss. For years the British were told that leaving the European market would leave them on the outside, pressing their faces to the glass. Now the Europeans have their faces to it, watching a man in a Leeds showroom sign the papers for his new car, and doing the arithmetic on what their own showrooms are charging them.