Friday, 27 May 2016

Peter Lilley debunks "free trade deals"

Emailed in by MBK, from The Telegraph, Peter Lilley on top form as usual:

Trade and the Single Market are key referendum issues yet I am the only MP with first-hand experience of either. Sadly, when politicians debate issues of which they have no experience they seize on any plausible argument which supports their case, even arguments that are the reverse of the truth.

Let me bring some facts to bear on claims made by those who want us to remain in the EU.

How important are trade deals? It pains me to admit – their importance is grossly exaggerated. Countries succeed, with or without trade deals, if they produce goods and services other countries want.

Tariffs between developed countries now average low single figures – small beer compared with recent movements in exchange rates. The most worthwhile trade agreements are with fast-growing developing countries which still have high tariffs.

Is our net £10 billion contribution to the EU a price worth paying for tariff-free access to the EU market? If we left the EU with no trade deal – inconceivable given the tariff-free zone from Iceland to Turkey – our exports would face EU tariffs averaging just 2.4 per cent. But our net contribution to the EU budget is equivalent to a 7 per cent tariff. Paying 7 cent to avoid 2.4 per cent costs is miss-selling that dwarfs the PPI scandal!

Does EU membership help us negotiate free trade deals with the rest of the world? Tariff-free access to the fast growing, protected markets of Asia, Africa and Latin America would be worthwhile. Unfortunately, EU membership prevents us negotiating free trade deals – and the EU has negotiated few deals for us: none with China, India, Australia, Brazil.

Does the EU’s size mean it gets better deals than we could alone? This is the reverse of the truth. The more countries involved in a trade deal the harder, slower and worse the result.

All 28 EU members have a veto on their negotiations which is why EU deals take so long and exclude so much. Bilateral deals are simpler, quicker and more comprehensive. Hence Chile has deals covering countries with collective GDP five times the EU’s deals. Even Iceland – population less than Croydon – has a trade agreement with China – as does Switzerland.

Would Britain have to renegotiate from scratch the EU’s existing trade deals? Under the “principle of continuity” in international law we can adapt existing EU treaties to the UK. We should start that process before leaving the EU.

Would negotiating continued free trade with the EU take many years? Trade deals to remove tariffs involve complex trade-offs between differing tariffs on thousands of products and facing up to the vested interests they protect. Negotiating continuing tariff-free trade between the UK and EU simply means keeping zero tariffs.

Do only European Economic Area members have access to the Single Market? The Single Market is talked about as if it were some inner sanctum accessible to a privileged few. In fact, every country has access to the Single Market – with or without tariffs. The Single Market, involved harmonising product rules – sensible, since businesses can now make one product range for the European market, not 28. But that benefits American and Japanese exporters as much as German or British firms.

People assume Britain benefits from participating in setting these rules. But rules provide a framework within which all companies operate – not an advantage to any individual country.

Britain set the rules of tennis but rarely wins Wimbledon. British exports to the EU have grown less rapidly since the Single Market than they did before, less than our partners’ and much less than non-EU countries’ exports! Maybe that is partly because we suffer EU regulations on 100 per cent of our companies whereas non-EU firms need only comply with EU regulations on activities carried out within the EU.

Our shops are full of goods from countries with which we have no trade deal. They are not essential now tariffs between developed countries are so low. But outside the EU we will be able to negotiate speedily the really worthwhile deals to access fast growing protected markets such as China, India and Brazil which the EU has ignored. And we can retain free trade with the EU without paying our current entry fee which costs more than the tariffs we avoid.

12 comments:

Kj said...

And the biggest tariff of them all, with a minimum of 15% is both required and enforced by the EU for everyone trading with each other within the "free trade" area.

Lola said...

"How important are trade deals? It pains me to admit – their importance is grossly exaggerated. Countries succeed, with or without trade deals, if they produce goods and services other countries want."

My point precisely. The EU bureaucrats - in fact all state bureaucrats - are almost entirely dispensible.

Mark Wadsworth said...

Kj, exactly.

L, agreed, although I am in favour of product safety rules, up to a point.

Lola said...

MW. I did 'almost' entirely dispensible...

Physiocrat said...

British goods on sale in Sweden.

Spear and Jackson garden tools - promoted as ultra-high-end.
Fishermans Friends in eight flavours.
Cheddar and Stilton promoted as gourmet products
Large potatoes for baking.
Marmite and Lea and Perrin's sauce for expats.
Premier League football.
Fullers London Pride
Shepheard Neames Spitfire.

That's about it, folks.

Lola said...

P. You'll most likely also find GKN Drivetrain components in Volvos. And I am pretty sure we sell them defence equipment. And I bet Jaguar Land Rover are there as well.

paulc156 said...

I get the point about low tariffs in Europe and relatively large tariffs in developing countries (one reason why the TTIP treaty is nothing to do with free trade a more to do with extending patent protections, the opposite of free trade) but I keep seeing references to the 'easier' trade deals set up by the likes of Switzerland with China. A deal which on first appearances looks remarkably in China's favour. As in China get free access to Swiss people now whilst Switzerland has to wait a couple of decades! I somehow doubt the EU will be looking at that as something worth emulating.

Mark Wadsworth said...

P, so they've got Marmite, that's the main thing.

PC, you are still harping on about "deals", The point is that they aren't really that important, the whole article was about that.

paulc156 said...

MW. Why am I harping? I've an open mind on these things and you take from the article what you want (apparently) but that's not how I read the last paragraph that you quote here:

"Our shops are full of goods from countries with which we have no trade deal. They are not essential now tariffs between developed countries are so low. BUT outside the EU we will be able to negotiate speedily THE really WORTHWHILE deals to access fast growing PROTECTED markets such as CHINA" (selected words highlighted for effect).

So it should be obvious why I might mention China. He has. Specifically he mentions Switzerland got a quickie deal with them. But the deal offers tariff free entry into Switzerland for 99.7% of Chinese exports immediately with staggered reductions in tariffs for 84.2% of Swiss goods over the next couple of decades. Sounds like the sort of deal a minnow gets when negotiating with a colossus. Just sayin.

Mark Wadsworth said...

PC< OK, you're the expert. That looks a a good deal to me, especially for Swiss consumers. How does it compare with the EU-China terms?

Lola said...

P In other words Chinese consumers are being denied Swiss products at lower prices.
I'd be pretty fed up if I was a Chinese consumer.

Mark Wadsworth said...

L, exactly. And the more important question is, how does it compare with the EU-China terms? Better or worse?