Three related articles.

1. There was an interesting article on page 15 of today's City AM, I can't find the text of the article online, but you can find a pdf here.

The headline was "Britain doesn't need a special trade deal to boost trade with the US" and the upshot was that the businesses in the UK and the US manage to buy and sell a huge volume of goods and services from each other, despite the fact that there is no 'free trade deal' between the US and the UK (qua EU Member State). The author gives half a dozen examples of particular restrictions which could be lifted on one side or the other, and concludes:

There's so much that can be done if both sides build on the strong foundations which already exist. Prioritising that rather than attempting a brand new FTA from scratch won't limit the scale of what we can achieve."

A good point. All-encompassing trade deals can take years to negotiate, because dozens of special interests on each side will hold the whole thing to ransom, so it's better to do it a bit at a time on an ad hoc basis.

(My caveat is that the author is Ben Digby, the CBI's International Director, and the CBI are Hard Remain, so they might be a bit biased, but fact is, we buy and sell a lot more from businesses in EU Member States than in the USA, so fair enough.)

2. The Daily Mash made a perfectly valid point with their article headed "If you don't want to eat chlorinated chicken, you could always just read the f***ing label, say experts."

3. I Tweeted the Mash article and @TraderPaulFX replied that most veg and salad in the UK are washed in chlorine. A quick Google indicates this to be correct, see e.g. here.

Do we benefit from low wages in other countries? Discuss!

TBH had a discussion with X (name escapes me) recently, which raises some interesting topics which we thought might be of interest. It went along the following lines:

X: "It is wrong for developing countries to subsidise their exports and dump cheap goods in developed countries. That hurts the non-subsidised businesses and their workers, as they are paying extra taxes to fund the subsidies which benefit exporters and overseas importers"

Non-contentious so far.

"This also unfair competition for businesses in developed countries, and business failures lead to unemployment. Therefore it is OK for developed countries to impose tariffs on such goods to cancel out the subsidies."

TBH, disagreeing: "Trade is always good, tariffs on trade are always bad. If we can buy cheap steel, cheap cars, short-term that is bad for our domestic steel or car makers and their workers; medium term it means we can move to producing higher value-added things instead, so overall is a win for us. Imposing tariffs does not help the people being oppressed in other countries, it just means that the benefit of the overseas subsidies goes to our government instead of to us as consumers."

In which I would agree with TBH. You can extend X's logic to any cheap imports from low wage countries, so it is clearly wrong. Who's going to make the decision whether
a) goods from a certain country are cheaper because workers are being exploited; or
b) goods from a certain country are cheaper because they are more efficient?
----------------------------------------------------------
But something else I have been mulling over is the widely held assumption that we benefit from low wages in developing countries because we can buy cheap stuff. The price of clothing or bog standard new cars has not increased in nominal terms for decades.

Which looks like a very good thing to me. Some go further and 'worry' about the day a few decades hence when wages and prices in e.g. the Far East have risen to Western levels.

Why is that a bad thing? When that day arrives it will be because business and workers in those countries are producing more stuff, either more of the same stuff or more value-added stuff.

So there's more stuff to go round; Westerners will be getting a smaller share of a much larger pie. Overall, people in the new developed countries will be better off (clearly) and people in the old developed countries will also be better off (however marginally).

Therefore, the conclusion must be that while we benefit from low wages in developing countries (first discussion) and shouldn't impede that with tariffs and quotas, we'll benefit even more once their wages have risen to our levels (second train of thought).

Allowing free trade* with developing countries is the main thing we can do to help them develop; once they have developed, even X's weak argument for tariffs and quotas falls away, so it's game set and match for free trade, as far as I can see.
--------------------------------------------------------
* "Free trade" does not mean developing countries should be forced to allow Western imperialist capitalists (mainly banks and miners), to steal assets, generally rent seek and wreck developing countries of course, quite the opposite.

Trump's point of no return

Caveat One: Trump might not the bumbling egoistical educationally sub-normal maniac we are told to think he is, he might be an all-seeing, all-knowing genius whose only aims are free trade and world peace and who can predict his opponents' moves several moves in advance.

Caveat Two: Countries don't trade with countries; individuals and businesses in Country A buy stuff from, and sell stuff to, individuals and businesses in Country B. But for short-hand, let's accept that Country A trades with Country B.
-------------------------------------------------------------------------
OK, here goes, from the BBC:

US President Donald Trump has issued a strong warning to anyone trading with Iran, following his re-imposition of sanctions on the country.

"Anyone doing business with Iran will NOT be doing business with the United States," the president tweeted.

If a large country or trading bloc imposes sanctions on a smaller country, then the loss, in absolute terms is probably the same for each side, but the larger country/bloc only loses 1% of its GDP and the smaller country loses 10%. So the larger country/bloc should ultimately 'win'.

So if the choice is between trading with the USA or trading with Iran, most countries would prefer to trade with the USA. But the USA has imposed sanctions on Cuba, Iran, North Korea, Russia, Sudan, Syria, and Venezuela and imposed fairly hefty tariffs on certain imports, especially those from PR China. By extension, any country - if not already the victim of the USA's import tariffs - that trades freely with those countries ends up itself on the USA's naughty list.

Surely, there must come a stage at which so many countries are on the naughty list, that they form a trade bloc which is actually larger than the USA, so third countries can benefit by turning their backs on the USA and freeing up trade between themselves and 'everybody else', thus accelerating the long term fall in USA's GDP as a percentage of global GDP?

Unlikely to happen, but theoretically possible.

Unintended but inevitable consequences

From the BBC:

Donald Trump has criticised the Harley-Davidson motorcycle firm over its plans to shift production away from the US in order to avoid European Union tariffs.

Ahem, the actual sequence of events was:
1. Trump imposes tariffs on imports to the USA, including from Europe
2. The EU imposed similar tariffs on imports from the USA
3. Harley-Davidson did the sensible thing.

From City AM:

BMW has indicated it could be forced to close its plants in the UK if it is unable to import components rapidly enough from the continent after Britain leaves the EU...

The warning from the car manufacturing giant comes hot on the heels of similar expressions of concern by Airbus and Siemens over the slow progress of the Brexit negotiations.

Last week, Airbus warned it could leave the UK in the event of a hard Brexit, putting around 14,000 jobs at risk. The firm said it would consider moving out of the UK if there is no transition deal involving ongoing membership of the single market and customs union*.

Siemens also issued stark warnings, with chief executive Jügen Maier criticising the government for thinking the negotiations were going to be easy and for using "unhelpful" slogans.

This cuts both ways, and is down to pig-headedness on the part of the UK government as much as the EU. Pan-European manufacturers worry they won't be able to get non-UK manufactures into the UK and won't be able to get UK manufactures into other EU Member States, or at least, nowhere near as smoothly as before, thus buggering up their highly organised and choreographed international 'just in time' assembly systems.

Overall, it's a loss to mankind.

If it made economic sense for each manufacturer to have a small, self-contained assembly system within each country (or trade bloc), they would do it anyway. For example, there are Coca Cola bottling plants dotted all over the world because it is not a particularly sophisticated technique so any economies of scale from centralising would be wiped out by transport costs. Car and aircraft manufacturing is pretty much the opposite of that, they source parts from all over the world, assemble in one giant assembly centre and then re-export the finished product all over the world.

* In this context, I am not sure why the 'customs union' is particularly important, it's harmonisation of standards and import/export procedures (the main elements of the 'single market') which are the more important.

Well that didn't last long.

When Trump said that the USA would introduce tariffs on steel and aluminium*, applying the usual protectionist-mercantilist-socialist-populist logic, right thinking people everywhere were up in arms.

* Given the tortuous nature of US lawmaking, it is as yet unknown whether it will actually happen and when. Interestingly, it appears that the idea is not too popular with the majority Republican congressmen and -women, but has widespread support among the minority Democrats, go figure.

Give it a couple of days and how does Juncker, claiming to speak on behalf of the EU (again, whether he has the authority to impose this or not is another question), respond?

By threatening that 'the EU' would engage in tit-for-tat protectionist-etc nonsense, at which, Trump merely upped the ante.

Free trade my left foot, remind me, how would the UK benefit by remaining an EU Member State and being dragged into all this? What happened to that much vaunted EU-US free trade deal that we were going to miss out on if we left?

AFAIC, the USA's loss is every other net steel-importing countries' gain, such as, for example, the UK. All things being equal, world steel prices will fall slightly as will world prices for "Levi's jeans**, bourbon and Harley-Davidsons". That looks likes a win-win for any country that is neither the USA, a member state of the EU nor a net steel exporter.

** My Levi's denim jacket was made in Vietnam IIRC (I can't check because I cut off the label).

Like an early morning mist over County Down...

Graeme Leach on top form in City AM:

With free trade, the Irish border is an issue for the EU, not the UK

We are told this is a problem with no solution, that it will see us crashing out of the EU with no deal, or that the DUP won’t play ball, leading to the end of the party’s confidence and supply agreement with the Conservatives.

The problem is seen as unfathomable because the solution has to deliver so much: no membership of the Single Market or Customs Union, no physical border crossings, and no red line through the Irish Sea. And just for good measure, it has to avoid the threat of a veto by the Republic of Ireland and the rest of the EU.

All of this can be addressed in one fell swoop. If the UK chose to pursue genuine free trade post-Brexit, the border issue would become an ex-problem. If Britain decided to exercise its sovereign power and implement zero tariff and non-tariff barriers to imports, the border issue would disappear like an early morning mist over County Down*.

* I don't know much about weather systems over the nothern part of Ireland, but I'll take his word for it that the early morning mists disappear quickly.

"No EU-UK deal? It is not the end of the world", says WTO chief

From The Telegraph, via @montie:

Roberto Azevedo is not your typical Brazilian. Quietly spoken, and instinctively cautious, the director general of the World Trade Organisation is a career diplomat to his well-manicured fingertips. While a highly effective communicator – fluent in four languages – he belies the national stereotype for flair and flamboyance...

A bit of unnecessary stereotyping there to start the article, here's the relevant bit...

So what of the UK? If Britain fails to strike a free trade agreement (FTA) with the EU ahead of March 2019, when we’re scheduled to leave, then UK-EU trade reverts to WTO rules. While some claim this would be a disaster, not least parliamentarians determined to frustrate Brexit, Azevedo disagrees.

“About half of the UK’s trade is already on WTO terms – with the US, China and several large emerging nations where the EU doesn’t have trade agreements. So it’s not the end of the world if the UK trades under WTO rules with the EU. 

Acknowledging that an FTA would be best, with WTO rules involving reciprocal UK-EU tariffs, Azevedo still gainsays the gloom-mongers. “If you don’t have a fully functioning FTA with the EU, there could be rigidities and costs – but it’s not like trade between the UK and EU is going to stop. There will be an impact, but I suppose it is perfectly manageable.”

He points out that to maintain current levels of access in nations where the EU has already struck FTAs, the UK will need to negotiate new agreements with such countries after Brexit. But won’t the fact that EU agreements already exist with such countries help the UK to reach such deals?

“Trade deals are always complex,” says Azevedo. “But it may be helpful as some of the trade harmonisation is already there – that could act as a shortcut...”

AFAIAA, that's a non-issue, those trade terms will more or less automatically be replicated with new agreements between the UK and the other countries.

While the EU has cut around 50 FTAs, most are with very small countries. Despite 60 years of trying, Brussels has failed to strike deals with the US, China, Brazil, India and almost all other large economies. Why is this? “Trade deals are difficult but there is an additional complicating factor for the EU, which is agriculture,” says Azevedo. “Once you start negotiating with a big agricultural exporter, they want market access – and, for the EU, that’s a sensitive sector, both politically and economically, a sector that makes itself heard..."

After Brexit, Britain can be “more flexible in its approach and quicker to react within the WTO, as you don’t have to coordinate with all the other members of the EU”, observes Azevedo. “You will lose the weight of the EU as a market, but the UK is by no standards a minor economy or a minor player in the multilateral system.”

All good stuff. The article does not point out that adopting unilateral free trade is perfectly compatible with WTO membership, but maybe that's just taken as given? On a practical level, the UK doesn't really have the time and manpower to have anything else in place by 2019 (or whenever).

Killer Arguments Against Free Trade, Not (1)

PaulC156 left a comment here:

Not sure exactly what you disagree with or how N Korea gets a mention.

I do not argue above for or against free trade but simply refer to historical reality.

Britain absolutely was not remotely free trade until they achieved economic dominance well into its industrialisation period circa 1840's. Prior to that it was the most protectionist of nations. Even then it returned to protectionism in the 1870's! Alexander Hamilton came to typify the US approach to free trade in the 18th C. Protect nascent industries (tariffs, quotas) until they are strong enough to outcompete foreign producers. That policy stood until the second half of the 20thC. 

As for Korea, South Korea is typical ditto Japan and modern day China. Massive state led investments allied with protection was the story for all these countries whilst they were industrialising. Still the case in China. S. Korea only liberalised in the 80's well after its industries were well established.

Ho hum.

1. North Korea is very relevant because it has just about the least free trade in the world, and its economy is pretty much on its arse as a result.

2. I certainly wouldn't hold up British Empire as a model of free trade, pretty much the opposite as far as 'everybody else' was concerned. Ditto USA.

3. As to the ASEAN countries, let's agree for the sake of this argument that they protected they 'nascent industries' until they were ready to compete on a world stage. (With those countries, the distinction between government and private, or between society and economy is pretty blurred - are businesses partly state-owned or do business leaders control the government? If Prussia was an army with a country, South Korea is a vast conglomerate with a country. The ASEAN countries also seem to have a sense of national cohesion that allows this. So to say that 'the government protected its domestic industries' is a bit like saying that 'businesses looked after themselves' which is perfectly acceptable.)

But hey, even so, I'd hardly call the UK a developing country, so the justification simply does not arise.

"Free trade case in a nutshell"

Physiocrat on top form.

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.
-------------------------------------
Sorted.

"The perfect trade deal"

Spotted by Lola at The Adam Smith Institute:

We would, and we have here and elsewhere, go further and offer the design of the perfect trade deal:

1.There will be no tariff or non-tariff barriers on imports into the UK.

2.Imports will be regulated in exactly the same manner as domestic production.

3.You can do what you like.

4.Err, that’s it.

Now that we've solved the entirety of Britain's trade stance before breakfast we'll get on with the more difficult things later in the day.

The Sage in the comments claims that #2 is a kind of non-tariff barrier. Yes it is, but there is such a thing as *sensible* regulations, i.e. health and safety stuff like cars having to pass an MOT; you can't import nuclear weapons and so on.

Fun Online Polls: Post-Brexit trade deals & Encryption

The results to last week's Fun Online Poll were as follows:

Post Brexit, the UK should…

Impose trade barriers and tariffs - 1%
Remain in the Single Market/EEA - 10%
Rejoin EFTA - 6%
Try and negotiate a custom deal with the EU - 10%
Revert to trading on WTO terms - 13%
Abolish trade barriers and tariffs unilaterally - 58%
Other, please specify - 2%

Good, I was with the majority on that one. Thanks to everybody who took part.
---------------------------
There has been some mumbling along the usual lines about whether the services like Whatsapp should be forced to provide the police with 'encrypted' messages if the police obtain a warrant. See e.g. PC World (the magazine, not the shop):

"It used to be that people would steam open envelopes or just listen in on phones when they wanted to find out what people were doing, legally, through warranty,” [Amber Rudd, Home Secretary] said “But on this situation we need to make sure that our intelligence services have the ability to get into situations like encrypted WhatsApp."

Rudd told Sky News that end-to-end encryption has its place, but it is not incompatible with providing a system for law enforcement agencies to have access to information with a warrant, if absolutely necessary."

I personally don't see a problem, surely we can accept that a judge can sign off a warrant to tap your 'phone, steam open your letters or search your house if the police make a reasonable case.

Why should Whatsapp messages be any different? That's far from saying that the police should be able to routinely view all messages, emails and so on. The police have always been able to obtain warrants to search houses - that has not led to a situation where they routinely enter people's houses on a whim and have a rummage, has it?

Vote HERE or use the widget in the sidebar.

"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.

Outbreaks of common sense in right leaning think tanks!

Exhibit One: Philip Booth (of the Institute for Economic Affairs) in today's City AM:

Cafod argues that we should remove our trade barriers without expecting anything in return from other countries. There is much to be said for this. Our trade barriers hurt British consumers and poor-country exporters and, ultimately, harm UK industries with an export focus. For example, we still have very high tariff barriers of up to 30 per cent on processed foods such as coffee and chocolate. We should just remove them...

Trade deals have become extraordinarily complex because most trade barriers relate to regulation. When it comes to agriculture, for example, regulation of GM foods is used to keep imports out. In financial services, we make enormous efforts to make already complex national regulatory systems internationally compatible. This all requires a great deal of commercial expertise. The result can be a marathon process and trade deals that create regulatory regimes that benefit incumbents and large firms.

Outside the EU, the UK government can be more relaxed about not using trade deals to harmonise regulation except, perhaps, in extreme cases of health and safety. Products and services that abide by UK regulations can be clearly labelled as such and consumers can then make their own choices.

We cannot go on negotiating trade deals that resemble the Encyclopaedia Britannica. Such deals should go the same way as the hard copy of that great set of books. We should give an intellectual and political lead so that countries such as India and most African nations might follow. Such a policy would enrich consumers and disempower elites.

He doesn't specifically say "Sod this, let's have unilateral free trade" but I think we can assume that's what he meant.

Which is what I and others have been saying here, free trade agreements (which sometimes take ages to sort out) are themselves a hindrance to free trade, not least because a free trade agreement with any one particular country automatically means less favourable terms for other countries. Far better to start with unilateral free trade as a general assumption and - if needs be - impose embargoes now and then.
----------------------------------------
Exhibit Two: David Bentley (of Civitas) in The Times (via MBK):

[The government's] goal is to increase the amount of land brought forward for development and the speed at which it is built on. There are various proposals for achieving these objectives and one fundamental obstacle to both: the right of landowners to hold back potential sites and squeeze as much profit from them as they can.

Securing planning permission for homes on greenfield sites usually results in an enormous windfall for the landowner. These are often life-changing sums for a farmer, say, who happens to occupy the land that is needed for new homes due to the expansion of the local town or city.

The average hectare of agricultural land in England is worth about £21,000; with permission to build homes on it that rises to about £2 million (excluding London, where values are very much higher still). If the owner does not think they are getting a good enough price, they can sit tight and wait while the market rises, as it usually does, or someone comes along with a better offer.

But the right to extract every last penny from sites like this — enshrined in the 1961 Land Compensation Act — is to the cost of the rest of the community. The more the developer pays for the site, the less money there will be for infrastructure or social housing, and the more the new homes will have to fetch to turn a profit...

Underlying the housing crisis is the issue Mark Twain was addressing: that land is inherently scarce and inflates in value as the population grows and more people come to draw on it. The question is, who should benefit from this progress?

He's falling for the "increasing supply will push down prices" myth but at least he's grasped some of the basics. I don't like his suggested solution to this either, as Richie in the commenters says: "Three words, 'land value tax'.", but hey, it's a start.

Lifted directly from http://ec.europa.eu/trade/policy/

2. Open up markets with key partner countries

We seek to create growth and jobs for Europeans by increasing their opportunities to trade with the world. This is particularly important in the context of current economic conditions.

One way of opening markets is to negotiate better access and conditions for trade and investment through free trade agreements.

The EU has concluded a number of Free Trade Agreements and is continuing negotiations with others.
--------------
I'm struggling here, stated EU policy appears to be in favour of FTAs, but where does it say "except with the United Kingdom of Great Britain and Northern Ireland"?

It's also well worthwhile following the first link to "trade and investment through free trade agreements", all good stuff but it doesn't exclude the UK there either.

Bremoaners and Brexiteers shooting each other in the foot.

Going back to that BRC letter...

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.

Yes, we would expect the UK to remain a member of the WTO which is an advisory/co-ordinating body rather than a supra-national quasi-government. The obvious point is that the WTO has no rule stipulating minimum or default tariffs.

(Nobody questioned why the BRC specifically mentioned Bangladeshi clothes or Chilean wine. It turns out that they were cherry picking:

Bangladesh has been a WTO member since 1995 and, as a least developed country, benefits from the EU's "Everything but Arms" arrangement, which grants duty free, quota free access for all exports, except arms and ammunition.

The EU and Chile concluded an Association Agreement in 2002, which included a comprehensive Free Trade Agreement that entered into force in February 2003. The EU-Chile Free Trade Agreement is broad and comprehensive and covers all the areas of EU-Chile trade relations.)

Daniel Hannan, who is good on principles but useless on facts fell for it, as gleefully reported by The Daily Mirror, and tweeted thusly:

This is idiotic. Chilean wine 14% more expensive? It's currently subject to a 32% EU tariff, which we can now scrap.

Haha! cry the Bremoaners, he didn't know that there was an EU-Chile FTA! Others pointed out that the EU default tarrif on wine is 8p per bottle (although some official sources did incorrectly give the figure as 32%, which is about par for the course for EU tariffs on food, so a forgivable mistake on Hannan's part). So, they argue, Hannan's lack of grasp of finer detail undermines his general point! No it doesn't. His general point was and is sound.

And so bloody what? The BRC were clearly cherry picking examples, thus making their whole letter questionable, and they still haven't explained where it says that WTO members must impose a minimum tariff of 14% on imported wine. Because it simply doesn't, I've checked.

The final point is the general principle of continuity of international treaties, so if the UK leaves the EU, we are then almost automatically in a UK-Bangladesh FTA and a UK-Chile FTA on the same terms and conditions as the EU-Bangladesh FTA or the EU-Chile FTA, and so on, until and unless one party abrogates it.

Fun with free trade deals

From the Australian Financial Review:

Australia's High Commissioner to the United Kingdom, Alexander Downer, says Britain's departure from the European Union will not hurt free trade negotiations with the bloc and suggested Brexit could be an opportunity to ease restrictions on Australians working in the UK...

"No this will definitely not kill any chance of us negotiating a FTA with the European Union. I think we can negotiate a high quality Free Trade Agreement with the European Union. Obviously, the UK is our closest partner in the European Union but we do have very close relationships with other countries - France, Germany, Italy and obviously Ireland as well."

From The Times (via MBK):

Mr Johnson wrote in The Daily Telegraph that he wanted “access” to the single market, but also said he wanted Britons to be able to work and stay in the EU, along with a points-based system for new arrivals from the EU.

This approach is unlikely to be agreed by the rest of the EU, according to officials and experts. They added: “It is a pipe dream. You cannot have full access to the single market and not accept its rules. If we gave that kind of deal to the UK, then why not to Australia or New Zealand. It would be a free for all.”

Now a lot of this is Doublespeak (which takes somebody with JohnB's mental gymnastic ability to decipher), but most countries have "access to the single market" without having any sort of explicit free trade deal (USA, China etc). But let's assume that in the second excerpt the Eurocrat uses this as synonymous with "tariff and quota-free access to the single market" (what the UK has at present, by and large). He implies that free movement of people and adopting EU regulations are pre-conditions and/or follow automatically from this.

Which will be news to the Aussies and Kiwis. Or is it genuinely expected that ANZ will be able to negotiate FTAs which are refused to the UK out of spite?

Project Fear - Yankee style

From an IBISWorld press-release:

Britain’s exit, or Brexit, from the EU also sent the pound plunging to its lowest level since 1985. While the sharp drop in the pound makes British imports comparatively cheaper for US buyers in the short term, it poses a serious long-term threat: disruption to trade.

US companies sourcing British imports face looming uncertainty over the price and availability of a wide range of goods. The United Kingdom is a major exporter of petroleum products, such as hydraulic oil and gasoline, as well as gas turbines, hydraulic motors and other aerospace and industrial equipment and machinery. In fact, the United States imports about $58 billion worth of goods annually from the UK, according to the US Census Bureau, making it our seventh-largest trading partner.

Pending the formal exit process, which could take up to two years, Britain will remain a member of the EU. However, trade relations with the United States will need to be renegotiated once Britain’s separation is complete. Given political gridlock in Congress and the often lengthy nature of trade negotiations, it could be many years before a new bilateral agreement between the two countries is hashed out—in an interview with the BBC in April, President Obama warned it could take up to 10 years. Meanwhile, Britain will face higher trade barriers with the United States.

For now, tariffs, quotas and rules governing trademarks and patents with the UK will remain unchanged; however, these trade mechanics may change with whatever new agreement emerges from future negotiations. IBISWorld suggests that buyers looking to maintain continuity in their supply chains to consider alternative sources for any British products. By diversifying their supply chains, buyers are less likely to experience supply disruptions or price volatility associated with Brexit.

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.

Post-Brexit, the UK would have no free trade agreements with the USA or China… er...

As somebody on the internet pointed out (I can't remember who): "So what?".

The UK is a Member State of the EU, which in turn has no formal free trade agreement with China or the USA (yet).

Those countries have their domestic rules, we/the EU have ours and things seem to work fairly well, don't they? The TTIP will almost certainly make things worse, so the absence of a formal free trade agreement is not really a problem.