Tuesday, 11 October 2016

Can anybody understand that British Retail Consortium letter?

From the related BRC press release (I can't find the letter itself):

While UK retailers have been very successful in insulating consumers from the cost of rising business rates and labour, the recent devaluation of the pound in relation to our most important trading currencies is compounding economic headwinds, while years of deflation have left little margin to absorb added cost from import tariffs and administrative burdens.

There is of course a huge cushion to absorb these extra costs, it is called "rent". As long as rents go down in line with the extra costs, retailers in general will be just fine (successful tenants will replace inefficient owner-occupiers). But that's not the weird part:

Moreover, failure to strike a good Brexit deal by 2019 would have a disproportionately severe impact on retailers and their customers, because if the UK fell back on to World Trade Organisation rules the new tariff rates that the UK would apply to imports from the EU would be highest for consumer staples like food and clothing.

For example, the average duty on meat imports could be as high as 27%, while clothing and footwear would attract tariffs of 11-16% versus the current zero-rating for all EU imports.

Falling back on to WTO rules would also increase the cost of sourcing from beyond the EU. The import cost of women’s clothing from Bangladesh would be 12% higher, while Chilean wine would be 14% dearer for importers. This contrasts with duty rates that would apply to raw materials and semi-finished products, many of which would be zero-rated or attract rates of duty of below 10%.

Hang about, I thought that the WTO has a system of maximum import tariffs which a country can impose (subject to loads of silly exceptions), not minimum tariffs?

They way they say it, the UK would have to impose higher tariffs on certain things. Can this possibly be correct? Can't WTO members just unilaterally abandon import tariffs?


Shiney said...


I was confused by this as well.

PJH said...

Could it be a perpetuation of what's stated in the first paragraph of http://www.eureferendum.com/blogview.aspx?blogno=85650 ?

"Having already dealt with the persistence of Ruth Lea in insisting that WTO rules are the default option in the event of us leaving the EU, it is easy to forget that such myths can have long half-lives, making them extremely dangerous to the cause."

Steven_L said...

I'm surprised we don't already have to pay the maximum tariffs on Chilean wine.

Once we've left the single market we can repeal the ridiculous spirit drinks regulations and protected geographic origins regimes. Then we can export 'Somerset Calvados' *(or even just 'cider brandy' which is banned terminology under EU law) and 'Devon Parmesan' to Chile in exchange for their rather fine wine.

We could start a whole new British 'Eau de Vie' industry (because under EU law, although you can make 'London Dry Gin' in Marsaille, 'eau de vie - 'water of life' - can only be lawfully manufactured in France.

mombers said...

Retailers have naff all to worry about. Maybe higher inflation from the weakened pound will help them with debt by pushing up nominal revenues. It's only exporters who need to worry about tariffs. Sure, the government could retaliate against any tariffs imposed on us. But I suspect that the retail lobby is much more powerful than the exporters' one, based on our trade deficit.

Mark Wadsworth said...

S, ta.

PJH, whether we HAVE TO remain a member of WTO and abide by their rules is a separate topic. My view is we don't have to, be we ought to, but there's nothing in their rules that says we have to have any tariffs at all.

SL, exactly!

M, that's probably all true but doesn't answer the question.

Bayard said...

Looks like a load of Bremainer crap to me. A little case of substituting "would" for "could". Very much in the spirit of the Bremainer lies during the campaign.

Mark Wadsworth said...

B, perhaps it's as simple as that.

Shiney said...


Redwood just asserted on Newsnight that the value of tariffs on UK exports, were we to revert to WTO rules, would be about half of the current contribution to the EU. Iknow he's a bit of a plonker but is he right? Anyone with any info on this?

If he is right we could just bung our exporters this number, not impose any inward tariffs (satisfying the BRC) and still be better off.... what say you?

Lola said...

S. I think redwood is right. It all pales into insignificance compared to out potential contingent liabilities to the EU banking system of about £982Bn. Better off out. End of.

Mark Wadsworth said...

S, Redwood is probably right. UK exporters sold £134 bn of goods to EU customers in 2015, average EU tariffs are 2.9% = total tariffs £4 billion odd, less than half our current net contribution.

UK exporters also sold £80 billion of services to EU, it is difficult to find out true tariff rates on 'services' so I will ignore these.

Apparently, the weighted average tariff imposed by all countries world wide is now under 3%, and UK exporters manage to export more to the rest of the world ex-EU than we import from rest of world.

So tariffs are an irritant but not really that important and I wouldn't waste £4 bn a year subsidising exporters.

L, yes, there's that as well.

Mark Wadsworth said...

S, update, TPTB reckon that the UK can buy tariff free access to the Single Market for £5 billion a year, half our current net contributions.

Given where we are, that seems like a reasonable alternative to me.

Shiney said...


We have to assume TPTB are a bit wet - if we played hardball, gave a bit on free movement (which personally I have no problem with, but understand its a dog-whistle/headline-in-the-Daily-Mail issue), I bet that number could be halved.

If we put the dosh into some sort of "Eastern Europe economic development fund" rather than it just ending up in Brussels I'm sure that Poland and The Baltic states would go for it.

So £7.5 billion in tax cuts here we come... Phil, are you listening?

Shiney said...


How much is that off VAT as a percentage?

Mark Wadsworth said...

S, exactly.

I've been doing some numbers from UK govt's point of view, + for saving, - for tax foregone or expenditure, in billions.

EU gross contributions +£13
EU market access fee/Eastern European Development Fund -£4
Replace certain EU subsidies to UK stuff excl. farm subsidies -£2.
Get rid of tariffs on food imports -£6.
This mainly benefits poorer countries so we can get rid of most aid payments +£10

That's an overall saving of £11 bn. That's only enough to reduce VAT from 20% back to 17.5% but better than nothing.