Tuesday, 5 February 2019

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.
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.
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.

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.
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.
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.


Lola said...

Them's £3.4 Bn collected from tariffs on imports. Do they not see that this is actually collected from UK consumers?

Mark Wadsworth said...

L, sorry, I pressed publish too soon. Now tidied up. And yes, UK consumers pay that to the EU, see article.

mombers said...

@both, the tariffs fall partly on labour, just like VAT. But to a tiny extent in comparison as you've pointed out. Why on earth people get riled up about import tariffs when we have an internal tariff of TWENTY PERCENT is beyond me. And then we have to waste so much government expenditure in partial VAT refunds to low and middle earners via UC/working age benefits. And public servants. And pensioners, etc etc

Mark Wadsworth said...

M, good point, I have updated.

The Stigler said...

So if the French want to be arsey about it (and they do)

There's a bit of a conflict there. The likes of Macron would like to defend the EU but people like the local government in Calais and the producers would like it to all run smoothly.

Mark Wadsworth said...

TS, true, but I didn't want to o get bogged down in detail, I discussed the farmers v macron/vradakar/EU last week.