Sunday, 5 November 2017

The Guardian inadvertently argues FOR Brexit

From The Guardian:

Households face increases of up to £930 in their annual shopping bills if Britain walks away from Brexit talks without a trade deal, according to new research that reveals a disproportionate impact on poorer families and the unemployed.

Meat, vegetables, dairy products, clothing and footwear would be subject to the largest consumer price rises under a “no-deal” scenario, according to a study published in the authoritative National Institute Economic Review*, adding to inflationary pressures that have already forced the first interest rate rise in a decade this week.

Stalled negotiations resume next week in Brussels, but the government is also about to publish a trade bill that would result in Britain being required to apply swingeing new tariffs on European imports if it falls back on World Trade Organisation rules.

Since WTO tariffs are highest for fresh food – reaching 45% for dairy products and 37% for meat – and much of this is currently imported from Europe, the team of economists predict an inflationary surge that could match that already inflicted by the falling pound.

This would impact most on those least able to afford it, as poorer households typically spend a much higher proportion of their income on food and other essentials. For the 2m worst-affected households, the study predicts their weekly expenditure will rise by 2-4.7%, equivalent to £400-930 extra a year.

OK. Most would agree that higher food prices are A Bad Thing (unless you believe there is an Obesity Epidemic).

In the absence of a trade deal with the EU, the UK government will be free to set its own import tariffs. The UK is (arguably) a member of the WTO, so is bound by WTO rules. WTO rules do not stipulate minimum tariffs, or even standard tariffs, they stipulate maximum tariffs. All they say is that a country should have one set of tariffs which apply without discrimination to all other countries.

As the WTO themselves explain:

Tariffs: more bindings and closer to zero

The bulkiest results of Uruguay Round are the 22,500 pages listing individual countries’ commitments on specific categories of goods and services. These include commitments to cut and “bind” their customs duty rates on imports of goods. In some cases, tariffs are being cut to zero. There is also a significant increase in the number of “bound” tariffs — duty rates that are committed in the WTO and are difficult to raise.

There's another WTO rule that says a country can't offer preferential tariffs to some countries but not others unless they are a member of a customs union, like the EU. Which sort of contradicts Rule One, but hey.

To sum up, having left the EU, the UK could easily set zero tariffs on imported food. The EU imposes fairly high tariffs on food imported from most third countries. Therefore, food could just as well become cheaper. Which is an argument FOR Brexit, not AGAINST it.

NB, this presupposes that the UK does the decent thing and imposes zero tariffs, or lower tariffs than those which the EU imposes, it is unfortunately not certain that they have the brains to do so. Tim Worstall and Physiocrat have already pointed this out in the comments at the NIESR link above.

* Actually, the organisation is called the "National Institute of Economic and Social Research".
There's another bald claim making the rounds on Twitter today, that "After Brexit, the UK will lose access to 759 international trade deals negotiated by the EU".

Again, this is simply not true.

As the EU Referendum blog has explained, there is a general rule (or tradition, or convention of whatever you want to call it) of international law that if a country leaves a bloc or a single country splits up into successor countries, existing treaties between third countries and the bloc or predecessor country continue as between those third countries and the leaving country or the successor countries.

So the UK will more or less automatically enter into treaties with all those other countries on the same terms and conditions as those which apply to it as a Member State of the EU.


Lola said...

What can anyone add to that...?

Physiocrat said...

Almost everything said by the Guardian and FT about Brexit is misleading.