This sort of thing is always amusing. Someone shouting at us that this is just the truth, this is reality, we can;t argue at all. And managing to get the point wrong while doing so. So, over to Ian Dunt:
There are certain natural laws in trade. You trade most with the countries which are closest to you. Putting up obstacles to it means you trade less. Removing them means you trade more. Beyond all the ideological noise, these dynamics are inevitable. They are the gravity of the trading world. You can deny them until you are blue in the face, but that does not make them go away.
No, that’s not true.
It is, often enough, a reasonable shorthand of the truth but as with all shorthands it goes awry in certain circumstances. This being one of them.
So, a question. Olden times, did Newcastle trade more with Carlisle or London? 80 miles or 300? The answer is London and 300 miles, that coastal coal trade. Why? Because sea transport was easier and cheaper than slogging over the 80 miles of moorland to Carlisle.
So, it’s not geographic distance that defines that gravity model of trade. The model itself is true, the larger an economy the more you trade with it, the closer the economy the more you do as well. But it’s economic distance, not geographic, that determines it.
So, transport links, they’re one form of economic distance. So are cultural issues, linguistic – we should trade with New Zealand hardly at all, about as much as we do with Mongolia perhaps judging by distance, or Peru, Kazakhstan, by size, but that ain’t the way it works out – legal and so on.
In fact, you’d probably find, using purely geography and size of economy – you know, only 26 miles of Channel – that we undertrade with France even within the EU just as we still overtrade with much of the Anglosphere. Geography being not the most important part of economic distance. Not when a container costs $5,000 from anywhere to anywhere. We definitely overtrade with Holland with respect to France, despite that geography.
Which is also why Newcastle probably still trades more with London than it does with Carlisle….