BBC is doing it again

From the BBC:

Will food be more expensive after 1 January?

Under WTO rules, supermarkets and other importers would have to pay substantial tariffs on many foods they bring in from the EU. Meat and dairy products face particularly high tariffs, but many other areas including fruit and vegetables would be also affected.

The BBC can't even be bothered to read its own summary of what the WTO is about:

The WTO was established in 1995, when it took over essentially the same functions from the General Agreement on Tariffs and Trade (Gatt), which came into force in 1948.

One of the motivations for creating the Gatt was a wish to dismantle the barriers to trade that had been erected between the two world wars. Most economists regard the establishment of these interwar trade barriers as misguided and say they probably aggravated the Great Depression of the 1930s...

A series of eight "rounds" of negotiations under the Gatt led to the progressive reduction in trade tariffs - taxes which are imposed only on imported products.

The minimum - and indeed the recommended - tariff imposed under WTO "rules" is precisely zero. Given how useless the UK government is, they might well impose tariffs on imported food, but this will be entirely self-inflicted. This will be the UK government waging economic warfare against its own people, and if the EU imposes tariffs on imports from businesses in the UK, that is them waging economic warfare against citizens of EU Member States.

Prolong The Chaos!

Gina Miller has set up a new site called End The Chaos "to give people the facts on Brexit" or some such slogan.

I dutifully watched the first video,which purports to explain WTO Rules. It states that if the UK chooses to trade under WTO rules it will have to impose a standard level of tariffs on imports and it will have equal and opposite tariffs imposed on exports from it.

Which is of course complete nonsense and lies from start to finish.

Fullfact.org explains it correctly. A country which is a member of the WTO can impose whatever import tariffs it likes, (subject to WTO overall upper limits, which the WTO is gradually reducing).

The actual WTO rule is that a WTO member must apply its tariffs equally to imports from all other countries. There's an exception if a country is also in a regional free trade area, in which case a country is allowed two tiers - a lower tier for imports from members of that FTA and a higher tier for imports from outside. (Quite where bilateral free trade agreements fit into this is anybody's guess).

What tariffs other countries or FTAs choose to impose on exports from the UK is entirely up to the other countries or FTAs.

"Brexit boost for consumers short-lived says IFS"

From the BBC:

Consumers could see prices fall by up to 1.2% if Britain were to abolish all tariffs once it has left the European Union, a report says.

But the study by the Institute for Fiscal Studies warns that any gains would be small and were based on "optimistic" assumptions. It also said that consumers had already seen prices rise by 2% since the referendum due to the weaker pound.

Costs linked to new EU trade barriers could also hit consumers, it said.
Those increased costs would "offset" any "rather limited" gains from becoming tariff free in the future, the report from the think tank says.

Agreed. EU tariffs (in £ or % terms) are not particularly high, ergo benefit from removing them not that great either. But that's only one aspect and not the only benefit in leaving the Customs Union.

What is relevant is that

1. The IFS has grudgingly admitted that there might be some benefits.

2. The IFS also now accepts that fall in GBP only led to a 2% increase in prices (it's probably less than that if truth be told). Observation tells us that a 10% change in GBP only leads to a 1% change in domestic prices so all the Brexit could result in high inflation and low growth, warns Mark Carney headlines were just Project Fear.

3. If removing tariffs only leads to a small fall in consumer prices, then why all the horror stories about the UK being forced to impose WTO tariffs and the impact on prices? There's no such thing as WTO tariffs - the WTO stipulates only maximum tariffs, so the UK could trade under WTO rules with zero tariffs - as the IFS now also admits. Even if the UK imposed higher tariffs, the upwards impact on prices would be just as small as the estimated downward impact of being free of EU import tariffs.

4. And so on.

"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).

Nobody move or the mozzarrella gets it!

City AM passes on some fear-mongering:

Food prices will soar on key supermarket items such as mozzarella, tomatoes and apples if the UK does not secure a transitional trade agreement, retail's industry body has warned.

If the EU and the UK fail to agree to maintain current tariff rates, trading of goods will come under the rules governed by the World Trade Organisation (WTO). This means tariffs on Italian mozzarella and Irish cheddar will jump to 45.5 per cent and 44.1 per cent respectively on the day the UK officially exits the EU.

Ray Symons, head of European and International Affairs at the British Retail Consortium (BRC) said: "If the UK and EU fail to reach an agreement...it is difficult to see how this couldn’t affect shop prices."

Nope.

The WTO does not set minimum or standard tariffs at all, the UK is free to impose lower rates or abolish tariffs unilaterally. The WTO is all about encouraging countries to reduce their import tariffs, abolish import quotas etc.

What a differencea few months make...

From The Guardian, shortly before the referendum...

Negotiations about the shape of the UK’s post-Brexit trade arrangements would have to start from scratch after a leave vote in the EU referendum, the head of the World Trade Organisation said as he admitted there had been no preliminary discussions with the UK government.

Roberto Azevêdo, the WTO director-general, said he expected any talks to be long and difficult, adding: “We haven’t had any discussions about the process. We don’t know what the process would be. We do know it would be a very unusual situation.”

From City AM, yesterday...

UK's transition out of the European Union will be fast and smooth and there will be no disruption to trade, the head of the World Trade Organisation (WTO) said today.

Roberto Azevedo vowed that the UK would not face a vacuum or a disruption when it leaves the bloc and it would continue to be a member of the WTO.

Azevedo has been in discussions with the trade secretary, Liam Fox, and vowed to make the transition as smooth as possible. His comments will reassure some who fear uncertainty and repercussions on trade if Britain did not secure a trading arrangement quickly.

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?

Nobody move or the exporters get it!

From Sky News:

British exporters are at risk of paying up to £5.6bn in duties if the UK votes Out, the head of the World Trade Organisation says.

Although director-general Roberto Azevedo believes Brexit would not stop the UK from trading with international partners, during a speech in London he warned "it could be on worse terms".

The WTO chief also said "it is impossible to tell how long it may take" for the UK to re-establish terms of trade within the EU - and said negotiations in the past had been known to take 10 years or more.

We've done this one. The UK would have no problems getting the same tariff-free terms as Iceland or Turkey, that is EU policy; or the UK could remain in the EEA/rejoin EFTA. As to third countries, there is the basic principle in international treaties that we would continue on the same terms. For example when Czechoslovakia split into two, each new country entered into a double tax treaty with the UK on identical terms to the old UK-Czechoslovakian one.

More to the point, this is the head of the WTO talking. His organisation is there to try and remove trade barriers and tariffs, and has been doing a reasonably good job over the decades, albeit at a slow pace. So it's like the police warning people to stay away from certain streets instead of policing them properly.

If he were taking his job seriously, he would be issuing a stern reminder to the EU that Brexit is not an excuse for stupid retaliatory mercantilist meaures.

As I've said before, I'm as cautious as the next man, if TPTB could come up with a couple of really good arguments for Bremain, then I might chicken out of voting for Brexit, but so far it's just been complete crap.

Which idiot put Nick Griffin in charge of the World Trade Organisation?