Friday, 23 June 2017

Nobody move or the German car makers get it!

Via MBK, from The Times, still working on Project Fear. (Didn't they get the memo? The Referendum was held a year ago and they lost):

A hard Brexit will put up to 18,000 jobs in the German car industry in danger because vehicles will become “significantly more expensive” for British consumers, analysts said yesterday.

The knock-on effects of border duties imposed between Britain and the EU at basic World Trade Organisation levels could mean sales of European-made cars will plummet by one fifth in the UK, Deloitte forecast.

A hard Brexit — defined by the report as leaving the EU single market and falling back on WTO trading rules — would mean a 21 per cent price increase for British consumers, Deloitte said, with the cumulative impact of the drop in the pound and extra trade costs.

The car industry would be one of the sectors that suffers the most because tariffs of 10 per cent for finished vehicles are higher than the WTO average for all goods. It has also come to rely on “just-in-time” supply chains which are highly responsive to demand and would be badly interrupted by the need for customs verification checks at either UK or EU border control posts.

1. WTO rules do not say anywhere that you have to impose a 10% tariff on cars.

2. Where did they get that "10% duty on imported cars" figure from? Funny you should ask, that happens to be the common tariff which EU Member States have to apply to cars imported from e.g. Japan.

3. If the EU want to play silly buggers and apply this 10% tariff to cars made in the UK, there's not much we can do to stop them. It is entirely up to the UK what sort of tariff we impose on imported cars, whereby the ideal tariff is of course precisely zero. On everything. That's good for UK consumers, good for UK producers in the medium and long term and will play well on the world stage.

4. Even if the UK were stupid enough to maintain the standard 10% tariff on cars and 3% - 4% on car parts, it would make naff all difference to most buyers. It would make no difference to people who buy cars made in Japan. Expensive German cars would get a bit more expensive in relative terms, but as we know, showroom prices in £££ are surprisingly stable and largely unaffected by exchange rates or tariffs. And hence the number of cars imported from Germany would fall be nowhere near one-fifth as stated in the article.

5. As per usual, the article fails to distinguish between the impact of tariffs imposed by the UK and those imposed by other countries, both are bad, but to some extent the damage cancels itself out, the effect is not cumulative. (In the same way that taxes and subsidies cancel each other out to some extent).

6. Even if the article is correct and we end up with fewer Audi and BMW drivers behaving like arseholes in the fast lanes of our wonderful motorways, is that really A Bad Thing?


Bayard said...

"(Didn't they get the memo? The Referendum was held a year ago and they lost)"

Ah, but it's all up in the air, now. This is the first shot in Project Fear Reloaded: the Second Referendum

Mark Wadsworth said...

To be followed by Project Fear: Best Out of Three etc.

Ben F said...

The UK has no cards because it makes nothing. So far I've seen two "threats":

1. we won't buy audis. Germans: whatever, we are selling them to the Chinese.

2. we won't provide credit. Germans: we can create fiat money, thanks.

I think the UK is fooked, in or out the EU. The road from rentier paradise to industry gets longer by the day.

James Higham said...

In my case, it makes zero difference.

Dinero said...

"show room prices in £££ are remarkably stable"
maybe car manufacterers account for tariffs in the expenses of global production and sales.

mombers said...

At least if we do reintroduce border checks, we can have someone with a little hammer smash the turning signals on all of the BMWs. Wouldn't want to risk any Bell End BMW drivers accidentally using them.

Mark Wadsworth said...

BF, to say we make nothing is a crass exaggeration, and even if were true, great, the EU can't threaten us with import tariffs.

And given the disgusting behaviour of UK banks, I can see why EU member states are happy not to deal with them.

JH, exactly.

Din, it's something called the kinked demand curve, which nobody really understands but it is observable.

M, another good point.