Tariff Doublethink

From the BBC:

A no-deal Brexit could cost the farming industry £850m a year in lost profits, new research seen by the BBC suggests...

OK, enlighten us.

Farm business consultants Andersons said that without government support increasing significantly, some farms would inevitably struggle to survive. The government says it will "provide direct support to boost some sectors in the unlikely event this is required".

We own land! Give us money!

Under a no-deal Brexit, farms could have to pay a tariff on goods exported to the EU for the first time. Lamb and live sheep exports could face tariffs of 45-50%, while trade and farming groups say some cuts of beef could see tariffs of more than 90%. If European firms suddenly start having to pay more for UK meat, the fear is they could quickly switch to suppliers in other countries.

Tariffs are bad for the exporter then, OK.

Other so-called "non-tariff barriers", like extra veterinary and customs checks at the border, could also increase costs to farmers.

Non-tariff barriers are also bad, OK.

"It could wipe out the sheep industry in Northern Ireland," farmers Jo and Lindsay Best, from County Antrim, told the BBC's Victoria Derbyshire programme. "A large percentage of our sheep are exported into France and the Republic of Ireland, and the price of feed could go up as well. It could decimate both the sheep and cattle industry here."

Why would the price of feed go up? Not clear.

Farms already receive more than £3.5bn a year in EU subsidies under the Common Agricultural Policy (CAP).

We own land! Give us money!

Under a no-deal Brexit, dairy exports would attract higher tariffs and other restrictions which, it is feared, could lead to an oversupply of milk in the UK and falling prices. At the same time, tariffs on imports from outside the EU could be cut substantially, meaning British farmers would face competition from low-cost butter and cheese made overseas.

So tariffs are bad, but low or zero tariffs are just as bad. Make up your minds.

Colin Ferguson, who runs his own herd of 200 dairy cattle on the Machars peninsula in south-west Scotland, said that would be his "biggest concern". "[Produce from overseas] doesn't need to meet the high welfare or production standards that we conform to, therefore our market gets undermined by cheap produce and the consumer quite rightly will buy the cheapest item on the shelf," he added.

So, non-tariff barriers are good?

The research by Andersons shows the impact of a no-deal Brexit will not be felt equally across the industry. Lamb and beef farming are likely to be hardest hit, especially in Wales and Northern Ireland.

Other businesses - like fruit and vegetables, pigs and poultry - could see modest increases in profitability as rivals like Danish bacon attract import tariffs and become more expensive.

So tariffs are good?

Here's a thought, everything will adjust. UK farmers will probably export less, but UK consumers will import less, so it balances out. The UK is only about two-thirds self-sufficient in food, so we can easily consume the entire UK farming industry's output. So lower "food miles" as well, which is surely A Good Thing? And maybe those sheep or dairy farmers can move into fruit and vegetables, pigs and poultry?

If only...

From Sky News:

The Government will slash Britain's trade tariffs to more than at any point in history...

yeah!

... if the UK leaves the European Union without a deal, Sky News has learnt.

Ah.

No, Gove! Just no!

From the BBC:

Environment Secretary Michael Gove has promised that the government will apply tariffs to food imports in the event of a no-deal Brexit, to provide "specific and robust protections" for farmers.

His remarks come as the government is poised to release details of tariffs (taxes on imports) that would apply to thousands of products coming in from around the world, if the UK leaves the EU without a deal.

Many supporters of Brexit argue that tariffs on food and other items should be scrapped in order to lower prices for consumers.

The logic is perverse:

But farmers fear that cheap imports and lower standards would destroy many parts of British agriculture.

"Your concerns have absolutely been heard," Mr Gove told a conference of the National Farmers' Union (NFU). "It will not be the case that we will have zero-rate tariffs on food products. There will be protections for sensitive sections of agriculture and food production." He added that an announcement on a no-deal tariff schedule "should be made later this week".

"If you obliterate the tariff wall… we would be massively undermined by food produced to standards that would be illegal to produce to in this country," NFU president Minette Batters told the BBC. "It would decimate British agriculture - it is quite honestly as simple as that."

Let's follow the logic as far as we can.

1. The UK has a fairly similar climate to other European countries and the same standards, so there is a level playing field [sic] for things like potatoes, wheat, beef, milk etc. So that's no argument for UK tariffs on food from other EU Member States, i.e. no change to current situation.

2. The UK does not have a similar climate to much warmer countries outside the EU, where you can grow bananas, olives, oranges. Quite possibly these countries have lower standards, but there aren't UK banana, olive or orange farmers to be protected, so there is no reason to "protect" them by imposing tariffs on bananas.

3. "But chlorinated chickens!!" shouts the crowd. That's a different topic, if these are proveably unhealthy, the UK government should just ban the import thereof.

Outbreak of common sense

From the BBC:

Lorries will be able to drive straight off ferries and Channel Tunnel trains without making customs declarations in the event of a no-deal Brexit, the government has announced. New guidance for importers and hauliers says firms would file a simplified form online in advance and pay duty later...

Charlie Elphicke, the Conservative MP for Dover - home to the UK's busiest Channel port - described the plans as a "common sense move". He said he had long argued that "checks can be done away from the border - so traffic can keep flowing smoothly".

Seems fair enough, it's the Seldon Plan, if in doubt, do nothing and see how things work out, start with a blank slate and tweak things later in the light of events.
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I'm not sure why the Channel Tunnel (when did we stop calling it the Chunnel?) gets so much coverage. According to The Guardian

The new figures showed that Dover [i.e. Channel Tunnel, from the context] handles up to 17% of the UK’s entire trade in goods worth up to an estimated £122bn last year.

Yup, from British Ports:

In 2017 the sum of UK exports and imports of goods totalled £822bn. Not all of this will have passed through sea ports; there is of course the Channel Tunnel, Heathrow airport and the border between Northern Ireland and Ireland. But around 70% of goods transported into and out of the UK go through a sea port.

There are approximately 50 of these and they have competed and become increasingly efficient over the years. Greater economies of scale have resulted in increased concentration in the industry. The latest data reveals that around 75% of dry cargo by value is handled by just seven ports, the largest being Southampton, Felixstowe and Dover [the sea port].

So if the French want to be arsey about it (and they do) and the Chunnel is effectively shut down, I'm sure Rotterdam will happy to take on the new business and ports like Felixstowe, London/Tilbury, Dover, Southampton etc will be able to pick up the slack.
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Huffington Post picks up the low/no tariff story and runs with it:

Ministers are secretly planning to unilaterally cut tariffs on all imports to zero in the event of a no-deal Brexit, in a move that could flood the market with cheap goods and “ruin” industry, HuffPost UK has learnt. Trade Secretary Liam Fox wants to use executive powers – reserved only for ministers – to make a last-minute change to the Trade Bill which would allow the government to dramatically slash tariffs on all foreign goods.

It has been described by manufacturing union the GMB as “the ultimate Brexit betrayal”. Fox revealed his strategy to industry leaders in behind-closed-doors meetings this week, blaming fears that inflation could see prices sky-rocket if Britain crashes out of the EU on March 29.
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Predictably enough, a few months ago, the self same Huffington Post trotted this out:

“Food prices alone have now been inflationary for more than a year and the BRC estimates that consumers could face up to a 29% increase in prices of products such as beef in the event of a ‘no-deal’,” she said.

A report commissioned by Barclays bank and published last week found food retailers and suppliers could lose £9.3 billion as a result of tariffs brought in after a “no-deal”.

NOW That's what I flip-flopping! It's Schrödinger's Tariffs!

Tariffs are simultaneously A Very Good Thing because they protect domestic producers and A Very Bad Thing because they push up prices for consumers. Low tariffs are A Very Good Thing if they are thanks to the EU but A Very Bad Thing if 'because of Brexit'. In this DoubleThink scenario, the EU is protecting domestic producers by imposing tariffs (glossing over the obvious fact that many of our low cost competitors are in the EU and face zero tariffs) but protecting consumers by not imposing tariffs on imports from elsewhere in the EU.
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How high are EU tariffs on non-EU goods anyway, the only ones the UK can impose (except booze and fags duty)?

From Statista, the UK collects about £3 billion a year in tariffs, it keeps a handling charge and hands most over to the EU. It can't be much more than that, The Sun couldn't find a higher figure so just multiplied it by five to get a good headline.

That's not a very big number when compared to the total value of UK imports from non-EU countries, which are about £300 billion a year (from Parliament.uk). So the average tariffs are about 1% overall i.e. not much. Retaining them or scrapping them is not going to make much difference to anything, it's within normal daily or weekly currency fluctuations.
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As to the customs formalities:

1. The UK knows how to deal with the half of imports which are not from the EU, it's hardly a learning curve to extend that to all imports (if that's what we want to do).

2. They can cut them down to the bare minimum by just making the UK importer sign for them. IKEA knows that on a certain ship there are twenty containers of their finest flat packed, they tell the port, the port nods them through. Clearly, there will be occasional spot checks, but any importer wishing to stay in business will make sure he doesn't get involved in anything dodgy or he will have his sign-off rights revoked and will be out of business within days.

3. If we really want UK importers to pay tariffs, they can include it on their next VAT return, which is how it works with VAT, levied at 20% on all imports. Under normal rules, a UK importer 'declares' the VAT on its imports but can 'reclaim' them as input VAT on the same return. So all that is needed is to restrict the import VAT reclaim accordingly.

UPDATE: Re Mombers' comment, perhaps this will ram the point home that the UK imposes a domestic tariff of TWENTY PER CENT on all final sales, against which the official import tariffs pale into insignificance. It's called VAT.

4. Policy Exchange have done a long but even handed summary of why this is all nothing to worry about - assuming the UK government doesn't do something really stupid, which we can't rule out - here.

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.

Many a crocodile tear shed over Trump's steel tariffs.

From the BBC:

EU leaders have a "gun held to their head" over the threat of US tariffs on steel imports, the head of trade body UK Steel has warned. Gareth Stace said the EU needed to impose safeguards to curb Chinese steel once destined for the US that will now be heading to Europe...

Mr Stace said US tariffs would be "purely protectionist... The Trump administration says protecting America's steel and aluminium producers is a matter of national security. What President Trump is proposing to do here is not free trade and it's against WTO rules," he told BBC Radio 4's Today programme...

Mr Stace admitted that there was a problem of global over-capacity in the steel industry, but said most of that was in China. About 20 million tonnes of Chinese steel would need to "find a new home to go to and, because we are a free and open market here in the UK/the EU, it'll come here, we believe, and therefore further damage our sector - not only from the direct impact of tariffs in the US but the surge of steel coming here", he said.

Does the man not listen to himself? He appears to be arguing against and for tariffs at the same time. As to over-capacity, who's to say that the over-capacity is 'in China'?? The Chinese would have a better argument that it is the higher cost producers in Europe who are the over-capacity.
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It appears to be agreed across the board* that Trump's tariffs are A Bad Thing, which they are IMHO. Can these people now apply the same logic to the 20% tariff which the UK government imposes on most ostensibly free-market transactions, even where both supplier and customer are within the UK?

* I do have the impression that if a left-wing government of a developing country were to impose such tariffs, a lot of the same people would fully support them.

A painted Boris Johnson is right twice a day

From the Daily Mail:

Under the [customs] partnership, officials would track shipments into the UK and collect tariffs for Brussels on goods ending up in the EU. Mr Johnson said this would simply lead to more red tape.

"It’s totally untried and would make it very, very difficult to do free trade deals," he added, "If you have the new customs partnership, you have a crazy system whereby you end up collecting the tariffs on behalf of the EU at the UK frontier.

"If the EU decides to impose punitive tariffs on something the UK wants to bring in cheaply there’s nothing you can do...

"That’s not taking back control of your trade policy, it’s not taking back control of your laws, it’s not taking back control of your borders and it’s actually not taking back control of your money either, because tariffs would get paid centrally back to Brussels."

If you think about it, it is indeed a really stupid idea that will make things more complicated, not simpler. As he says, if the EU wants to tax imports, that's for them to sort out. And in turn, we can set our own tariffs (preferably at zero, but that's another debate) on things we import.

In any event, EU member states and the UK, like most countries, have the concept of customs-free transit. So if goods from Country X are taken off the boat here and put straight onto another boat to Country Y, they are not subject to any UK tariffs and Country Y just treats those goods as if they had arrived directly from country X. Which would sort out most of the perceived problem.

"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.

What's sauce for the goose...

From the BBC:

The Association for Consultancy and Engineering (ACE), which represents companies involved in designing the UK's infrastructure, admitted some people were suspicious of road pricing.

However, in its report "Funding Roads for the Future" it said charges for road usage should be introduced which took into account:

- whether a driver's journey was on motorways or country lanes
- the time of day
- how much congestion was on the network
- drivers' financial circumstances - for example, whether they were students, pensioners or unemployed

ACE said relying on money raised through fuel duty, Vehicle Excise Duty and the HGV levy was outdated. "The growing uptake of zero-emission vehicles means revenue from Vehicle Excise Duty and Fuel Duty will continue to decline as a percentage of the UK's GDP in the future," it said.

That's the beauty of fuel duty, it acts like a rough and ready road pricing (which is a good thing, in principle, it's rent for road space). If you drive during the rush hour, you cause more inconvenience, use more fuel for a given distance and pay more per mile. Lorries cause more wear and tear, accidents and pollution, but use a lot more fuel and pay a lot more per mile. Whizz round in a small car at the weekend, you're not getting in anybody's way, using less fuel and paying less per mile. It all sorts itself out nicely.

Fuel "costs" average 15p/mile, two-thirds of that is VAT and fuel duty, so petrol/diesel drivers are already paying 10p/mile road-user charge. The actual fuel cost is more like 5p/mile.

Cost of electricity/mile, at residential tariff is in the region of 2p - 4p/mile, i.e. not a huge difference in absolute terms. The real saving is not because electricity is "cheaper" than petrol or diesel, but because the former is lightly taxed (5% VAT) and the latter is heavily taxed. Depending on how the electricity is generated, the amount of C02 emitted (to the extent that we worry about this) is pretty much the same either way.

So by all means, level the playing field by having road pricing of 10p per mile, or whatever, but as a quid pro quo, ditch VAT and duties on fuel completely. This is the problem with electric and hybrid cars and all that nonsense - the end result is we will need road user charges to reduce congestion.

The notion of having means-tested road user charges should be consigned to the dustbin of shit ideas, obviously.
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From City AM (comment appeared as reader's letter today):

Why should we pay the EU for access to the EU market on services, financial or otherwise, if they will not be paying us for access to our domestic market on goods?

Let's be consistent about this, if the EU really believes in payment of fees for market access then they could start with an offer of the fees they are prepared to pay us for access to our wine market, our car market etc etc. Then we could add up all the market access fees payable in each direction, and given that they enjoy a chronic massive trade surplus with us they could pay us the net annual fee.

Or, if they prefer, let's go back to tariffs and they can pay us through that mechanism.

Denis Cooper

Who bears the burden of tariffs?

The debate raged somewhat inconclusively in the comments to yesterday's post.

Short answer is, nobody really knows - is it the exporter in the other country (who has to accept lower net selling prices) or is it the consumer in the importing country (who has to pay higher gross selling prices) or some combination of both? Similarly, tariffs must lead to a lower volume of trade, which doesn't just hurt the exporter and the consumer but has bad knock-on effects all round (which are nigh impossible to measure).

You can't generalise, except to say that a tax is borne by the less elastic factor - supplier or consumer. So domestic VAT is almost entirely borne by the supplier. I can choose whether to spend my hard-earned on taking the family to a local restaurant for a meal, or to the local cinema to see a film (so demand for either is highly elastic); the local cinema owner can't just turn off his screens and start serving meals and vice versa (inelastic).

(It puzzles me that the protectionists get so het up about WTO "standard tariffs" which average around 5% while ignoring the immensely more damaging effects of our domestic tariff (VAT) which is 20%, but hey.)

A factory in China bashing out TV sets for sale world-wide has, from its point of view, more or less infinite demand. If one or the other country puts a tariff on Chinese TV sets, well what do they care? The tariff is borne by the consumer in the importing country (especially if there are no domestic TV manufacturers). If volumes drop, the Chinese TV factory will switch to making radios or hair dryers or something else which suffers lower tariffs or which they can sell to non-tariff countries.

Compare that with tobacco companies. Demand is price inelastic (addictive), suppliers supply internationally so supply is elastic. Tobacco duties are passed on more or less 100% to the consumer, the domestic government collects it and producers (domestic or foreign) aren't really affected at all (barring from the small reduction in volumes).

Then we get to comparative advantage, which brings a third party into the mix - the domestic producer who is at a small cost disadvantage. If the tariff on the cheaper foreign product is larger then the cost difference, the cost is borne by consumer (higher price) and foreign producer (lower volume); a large part of the benefit of the tariff goes to the domestic producer (higher price and lower volume).

And so on.

... thus neatly disproving her own point.

From City AM:

As a member of the Customs Union, Britain applies the same import duties on goods as all the other members of the union, and we trade freely with our allies in the bloc.

When we exit this arrangement, our tariffs will change overnight. Importers will have to start paying extra for goods coming in from the EU, which make up 70 per cent of our food imports, according to the Institute for Fiscal Studies.

Yes, 70% of food imports, but food imports in turn are just under 40% of all food we eat by value i.e. less than 30% of food we eat by value. most of that is fancy stuff not necessary to sustain life, i.e. luxuries. Nice to have but costly, if it ends up costing a bit more, so be it.

If we don’t negotiate a new trade agreement by March 2019 (the “no deal” scenario), then the new tariffs will be those we have lodged with the World Trade Organisation (WTO)...

Yes, but we decide our own tariffs, they are not imposed by the WTO, as she then says herself:

It is possible for the UK to eliminate tariffs on goods coming from the bloc, however, under WTO rules, it would have to extend this tariff-free access to all members of the WTO.

Which would be a very good thing indeed, overall, the price of food (and pretty much anything else) would be slightly lower.

And, if we removed all tariffs, we would have no basis on which to negotiate new free trade deals with the likes of the US and Australia.

Maybe, maybe not, but these free trade deals are a contradiction in terms. If a country unilaterally abolishes tariffs, quotas and all but a sensible bare minimum of domestic regulations (like cars having to pass an MOT, rechargeable batteries not being liable to explode etc), that is about as free as trade will ever get. Trade between people in two such countries is vastly freer that trade between people in two countries with a free trade agreement (which is just thousands of pages of detailed rules to shut out people in third countries).

Then the author resorts to this statistical flourish:

The British Retail Consortium has warned that if Brexit secretary David Davis walks away from talks with “no deal”, the effective tariff rate on some items could rise by as much as 80 per cent. Tariffs on Italian mozzarella and Irish cheddar cheese will jump by 46 per cent and 44 per cent respectively.

1. Hang about here. Isn't the current tariff on Irish cheese imported into the UK precisely zero? Have I missed something? So any new tariff would be an increase of infinity per cent.

2. We need absolute not relative figures. If a tariff goes up from 1% to 1.5%, that's no biggie - it's not an increase of 50%, it's an increase of 0.5%.

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?

That'll save their bacon.

From The Daily Mail:

Denmark is considering a tax on red meat over fears cattle flatulence was causing climate change.

A government think tank said consumers were 'ethically obliged' to change their eating habits in a bid to cut greenhouse gas emissions.

The Danish Council of Ethics said cattle accounted for around 10 per cent of the CO2 released into the atmosphere, while food production makes up around another 20 per cent.

Ho hum, the article only mentions cattle and not pigs.

As we well know (having quickly Googled it), Danish pig farmers export nearly half their output, with a value of DKK 30 billion a year (about £3 billion), so this will knock back domestic demand for "red meat" (presumably more likely to be imported) and hence boost domestic demand for pork and bacon.

Win-win for Danish pig farmers!

Tim Worstall on top form

He has written this so many times he can probably write it in his sleep, but hey.

From City AM:

With calls to tackle “unfair dumping” should more be done to block cheap Chinese steel imports?

No

Far from rejecting cheap Chinese steel, we should thank the oppressed Chinese taxpayer for making us all richer. Subsidies are a distortion to a market and we normally don't like such distortions. But think through what the allegation here is.

The Chinese government is subsidising the price of the steel which is flooding out of China. Some call this a subsidy to those steel producers: it isn’t, it is a subsidy to steel consumers. That’s us, of course – we are all consumers of steel in tin cans, cars, fridges and the skeletons of lovely high rise buildings. This can indeed be seen as unfair on other producers of steel. But we don’t run the economy for the interests of producers; we run it for us, the consumers.

The Chinese government is, quite literally, sending us free money that it has taken from its citizens. This might not be a bright idea for the Chinese, but what else should we do but say “thank you. May we have some more?