Thursday, 9 March 2017

"Essentially, we will pretend the best option doesn't exist."

From the BBC:

As an EU member, the UK and UK-based firms can sell their goods to EU customers without having to pay additional taxes. Likewise, British firms and consumers can import from the EU tariff-free.

The prime minister has already ruled out continued membership of the EU's single market post-Brexit, with many assuming this means the UK will also leave the customs union.

So what will we do instead? Essentially there are two options:

◾ a newly negotiated trade deal like the EU has with Canada or South Korea, which eliminate most tariffs and many other trade barriers. But the EU's record is one of slow progress in similar talks, and political tensions from the Brexit process could also be an obstacle

◾ an arrangement sometimes called World Trade Organization (WTO) terms.


What about the third option? The UK declares unilateral free trade and abolishes all quotas and import tariffs, that requires no haggling whatsoever, if other countries want to be prissy and impose quotas and duties on UK goods and services, that's as can't be helped.

If I were 'negotiating' with the EU, I would point out to them that our starting position is unilateral free trade with all comers; if the EU is not happy with that, we're prepared to compromise and declare unilateral free trade; and if that is not acceptable, we'll just walk away and declare unilateral free trade. What time's the last Eurostar back to England?

To be fair, the idea gets a mention later in the article:

Some economists, including Patrick Minford of Cardiff University and one of the leading members of Economists for Brexit (now renamed as Economists for Free Trade), favour a more comprehensive exercise in cutting tariffs and other barriers unilaterally.

Hooray!

But these cuts would have to apply to goods coming from the EU as well.

Well of course they would, that's the whole point.

23 comments:

Graeme said...

The thing I find truly weird is that the WTO does not define what the "WTO terms" is. From my reading of their website, they just want tariffs to be as low as possible and for countries to work towards reducing them. As far as I can tell, unilateral free trade is a WTO option. I would be glad to be corrected here if I have got it wrong. You can never tell when the opposing arguments are put by untrustworthy morons such as Clegg

paulc156 said...

That's fine for consumers and importers. Still leaves the question of how barriers to trade would impact UK exports. We would end up compensating every sector of industry for the massive disruption to their supply chains and export markets. Even the Tories would be forced to go socialist! And once the Donald gets his chlorine washed chickens and GM crops over here as a part of our brave new world of free trade, we can at least free up farmland for development.

Lola said...

That is, as you may be unsurprised to learn, has always been exactly my position.
And what's more I am 99.99% certain the whole of the Commonwealth would join us on day 1.
That would utterly stuff up the EU (good), and release all the Continental nations from is thrall. (plus good). It would also give Trump pause for thought (double plus good)and make the Chinese sit up (double plus good in spades) as most of the SE Asian lot would want to get involved.

mombers said...

Turn the tables and say unilateral free trade with the EU from exit day 1. However, from then they have 2 years before we review what tariffs they have imposed on us and then impose our own if required. These can be done in very cynical ways, targeting vulnerable industries in each country. In the mean time we can continue weaning our exports off the EU (down to 42% I think?) and importing the best value from anywhere in the world, free from the worst of EU tariffs

Mark Wadsworth said...

G, that is also my understanding, nowhere does WTO demand minimum tariffs or quotas.

PC, they'd soon get over it. The point is, you are left-socialist and I am left-libertarian and we will never agree on protectionism.

Nobody says the UK has to change its own food etc safety standards. I have nothing against GM crops as such, just against people patenting the seeds. I don't see any need to import chickens from the USA, we've plenty of our own. So we allow farmers to buy GM seeds on the condition that the patent is invalid in the UK.

So don't play the "wicked importers will import children's toys painted with lead paint" or "Chinese cars that would fail MOT" cards.

L, it's win-win-win-etc.

M, that's what you can't do under WTO rules. If you have zero tariffs on stuff from one country, you can't have higher tariffs on imports from others. There is then a special get-out for customs unions i.e. the EU.

Bayard said...

"nowhere does WTO demand minimum tariffs or quotas. "

Not that you'd thinks so if you listen to the Bremoaner Bullshit Corporation. I have yet to hear the BBC mention the WTO Rules without adding that the tariffs under them "could be as high as 10%" and leaving it at that, implying that the maximum tariff is a certainty, rather than a possibility. The Bremainers have been doing this since before the referendum AFAICR, so it must have soaked into the public consciousness by now that WTO Rules = 10% tariffs. And the Bremainers complain about the Brexiteers lying.

DBC Reed said...

Please explain how total Free Trade works in practice.Northampton lost British Timken and Avon Cosmetics like a shot when the opportunity came for them to high-tail it off to Poland and its low wages.Trump is trying to get back American jobs that pissed off to Mexico.
I am longer in the tooth than most on here and bought and read Mosley on the advantages of the EU: a huge self contained market with no imports from low-wage areas.Not pleasant but honest.

Mark Wadsworth said...

B, for sure, other WTO countries can retain 10% average tariffs on UK stuff, that's their call. But it's like unilateral disarmament, somebody's got to start.

DBC, Poland is a member state of the EU.

Lola said...

DBCR. In answer to your question about Timken and Avon. One word. Socialism. And/or I presume that you've heard of 'comparative advantage' and want no truck with it?

Shiney said...

@DBCR

Mercantilist clap trap. As I've said... you lefties are obsessed with jobs making stuff you can drop (or wear) on your foot. Irrelevant. As Lola says 'comparative advantage'.

Oh and, as Pirie at the ASI keeps pointing out, the best way to make poor people in other parts of the world richer is to buy stuff off them... side effect is then we become a valued customer and then they don't want to fight us.

And I thought socialists were 'internationalist' and concerned about poor people. I guess not..... unless they are 'our' poor people. Sounds a bit fascist to me.

Bayard said...

DBCR, you know why Avon And Timken pissed off to Poland: because the Poles are paid less. You also know why the Poles are paid less, because they don't have to hand such a huge chunk of their earnings over to banks and/or landlords. So what you are saying is that we should keep these industries in the UK via the force of law or tariffs so that the landlords and banks can continue to live in the style to which they have become accustomed.

L fairfax said...

We could add if you put tariffs on our goods - then you can forget any help from us in case of an invasion from another country - and that might trigger an invasion.

Lola said...

DBCR et al. Juliet Samuel doesn't get it either

http://www.telegraph.co.uk/business/2017/03/09/budget-2017-right-simply-has-no-answer-workers-low-pay-productivity/

We do not have - by international standards - a 'low pay problem'. What we have is a high tax, high rent, high deadweight cost of regulationism (i.e. socialism) problem.

DBC Reed said...

Despite my past hanging about with a group that the Blackshirts, hastily rebadged as the Union Movement, really didn't care for very much, leading to a lot of running away on our part, the fact remains that Mosley's description of the commercial advantages of an EU single market still makes some brutal sense:"A home market of 300 million people will be large enough for all our requirements of industry ,as well as being secure from dumping, under-cutting, cheap labour competition etc."
With Trump at war with the problems of "under cutting and cheap labour competition" this hardly seems the time for the Brits to come over all hippy and pansified and say we will wander with flowers in our hair ( because we can live off house price inflation)while industry is wiped out by "under cutting" and "cheap labour competition".
@MW Mosley's point about a United Europe, was that its constituents parts should have similar wage levels to start with.The accession of ex-Communist states to the EU appears to be some American move to destabilise this balance, leaving us to clear up the mess that the fall of the Iron Curtain created.
@L Socialism? What, Socialism kept rents low and trained a lot of highly skilled and well-motivated workers in Poland? Never mind: their economy was ruined when a private sector housing market was introduced becoming "broken" like ours but more quickly.

Shiney said...

@DBCR

Ah the true colours of the authoritarian socialaist-fascist are revealed at last... this quote really takes the biscuit "leaving us to clear up the mess that the fall of the Iron Curtain created" it really does.

mombers said...

@MW a bit less effective but you can just say tariffs on any fizzy wine or soft cheese from anywhere in the world. Or high performance cars. Etc. Funny thing is that unilateral free trade on agriculture won't require any tariffs - CAP makes such a mockery of the market. High tariffs lead to higher prices and hence higher rents. Less subsidised countries will sell us stuff for far less. EU farmers are welcome to match their low prices but won't break even.

paulc156 said...

L. "high deadweight cost of regulationism (i.e. socialism) problem."
We don't generally have a regulation problem.
The OECD’s product market regulation index rates the UK as the second least regulated economy in the developed world. When it comes to employment legislation, the picture is very similar, for both permanent and temporary workers. UK is 6th on the World Bank’s ease of doing business index. We are probably just the worlds best moaners.

MW. I'm not left socialist really. I don't identify strongly with any political philosophy though I'm probably most influenced by Chomsky in this regard. So left libertarian/anarcho syndicalist. But I do think that sometimes the state can do or at least initiate the really big projects better than any. Also some of the most valuable scientific work is largely dependent on the state-military sector. Cern is a great example. So very socialist on science but libertarian on the spin offs! I agree with the GM comments. Monsanto bad, genetic r&d good.

DBC Reed said...

@Sh Are you really saying that the arrival on the EU scene of hundreds of thousands of Poles, Lithuanians etc was invariably beneficial? Why then is this country and its smirking government trying to ban them in the future and is slow about guaranteeing continued residence to those already here? The way their accession was handled ,as a source of cheap labour, undercutting British rates was bound to be disruptive and was probably intentionally so.
I cannot see what the Americans did to ease the transition though they remain autistically committed to causing the Russians as much grief as possible, at all times, for ever.The spirit of the Statue of Liberty "Give me your tired, your poor, your huddled masses, yearning to breathe free" was ,as usual, startlingly absent from proceedings ,liberating though it might have been for those like the Poles escaping the low rent, full-employment terror of the Russian sphere. One advantage of the EU ,especially during the de Gaulle era, was that it did not stick its arse in the air to the Americans and treated everything they said, did and proposed with appropriate suspicion.

Shiney said...

Yes... they are just people - as saintly, evil, lazy, hardworking or whatever as anyone born here or anywhere else. And if we could buy stuff off them they'd probably prefer to stay at home and work rather than travel thousands of miles to pick sprouts in a freezing Lincolnshire field.

AS far as this govt.. they are politicians... all you need to know.

Oh FFS - first you say the USSR and its satellites were OK, and now you think de Gaulle and the EU are a paragon of virtue. He was a mecantilist like you and only cared about 'France Fort' - the EEC for him (and the rest of the French elite in the 50s and 60s) was about shackling the Germans.

Mike W said...

DBC REED asked: @Sh Are you really saying that the arrival on the EU scene of hundreds of thousands of Poles, Lithuanians etc was invariably beneficial?

Shiney answer:Yes... they are just people - as saintly, evil, lazy, hardworking or whatever as anyone born here or anywhere else. And if we could buy stuff off them they'd probably prefer to stay at home and work rather than travel thousands of miles to pick sprouts in a freezing Lincolnshire field.

Shiney Sentence 1 Surely true, Sentence 2 agreed (I lived in Lincoln). But you are not answering the DBC question posed.

If we take immigration purely as a economic issue (it is not of course)then would not a market determined answer (that I am sure you would commit to) show that UK economy is booming at years x, y, z. There is not enough 'skilled' labour; so it moves from Poland which is in depression in years x,y,z.Then moves back again when UK enters recesssion and Poland booms. Is there any such pure market relationship? I bet not! Not even close.
As a Georgist here, my concern is the horror story of the unreported rent seeking that must be going on in Poland, that means it spews nearly 1 million of its most valuable citizens across UK in the manner you state.( In my opinion, the Polish government threatening Blair that if he doesn't solve this social crisis caused by EU Banks then Poland might like to talk to Putin!)Then Blair doing what Blair did best.

Derek said...

I'm okay with the unilateral free trade thing. It's not the fundamental cause of the UK losing jobs to the Poles, Chinese or anyone else although it does look like it is on the surface. For the fundamental cause you have to look at the taxation structure within the UK. Which is far more favourable to UK rentiers than the Polish tax structure is to Polish rentiers, or the Chinese to Chinese rentiers.

So to make unilateral free trade work, you need to do a couple of other things which should be well known to regular readers of this blog. Abolish VAT, introduce LVT/CI, etc.

The most important one to my mind is the replacement of VAT. But any measures which reduce taxation on the Makers and increase it on the Takers will help a bit, even if they are not the measures that this blog recommends.

However without the introduction of changes along these lines, I fear for the UK's future. Unilateral free trade is not enough on its own to compensate for the new hurdles that UK exporters are going to face. We also need a long overdue restructuring of taxation. It doesn't need to be a reduction. It does need to be a change of focus.

DBC Reed said...

Since Shiney has decided I have shown my true colours as an "authoritarian socialist-fascist" ( worse an "authoritarian socialaist- fascist" ,which must be much worse) I should point out that I was brought up to believe in the kind of international trade arrangements delineated by Wikipedia in its entry on British Empire Economic Conference 1932.
If push came to shove I would have to say that I still incline to that kind of common market . The Blackshirts/Union Movement would have included the white Dominions within the ambit of their European common market but not anywhere predominantly black; not at all in the spirit of 1932.
Note the antipathy of the Americans to the 1932 project: there was a lot of talk in "our circles" of the Americans having used the war to dismantle the Chamberlainite free trade area, as a war aim.
There is a lot of uncertainty about the future: there is more uncertainty about the past!
For now we should stand pat; committing to leaving a workable arrangement with no binding promises for the future is madness which only Tories with their bribed homeowner voters beginning to diminish in influence would embark upon.

Lola said...

Paul156.
The regulatory deadweight costs and direct imprests in FS (which I happen to work in) run between 18% and 30% of revenue depending where you operate with FS.
And regulatory failure was largely responsible for the 2008 banking failures. (that and Brown's utter incompetence). £1.5 Tr and counting.
We ain't got light regulation. It may be lighter than other, but it ain't 'light'.