The economic consequences of Brexit (Vol 2)
Discussion
Toaster said:
Can any one tell me why if Zero Tarrifs are so good why are they not in place already and why this wasn't done in the 1970's to get the UK out of the mire (its manufacturing base was a lot bigger then today)
Because politicians aren't very bright.Because the tiny minority of losers from each individual tariff reduction know who they are and lobby government for protection, while the benefits are spread throughout the population
As for zero tariffs not being in place. They are in place within the EU, it was the big argument for forming the common market in the first place. Unfortunately it's now gone rogue and puts protectionist tariffs on ROW imports. The whole point of the WTO and it's predecessor GATT was to bring tariffs closer to zero.
Unilateral zero tariffs were introduced by the UK in the 1840s and worked very well. |It was only politics that prevented other countries imitating the practice and eventually caused the UK to reintroduce tariffs.
Hong Kong and New Zealand have scrubbed tariffs unilaterally and benefited immensely.
The notion that zero tariffs are an eccentric idea condemned by most economists is wide of the mark. The harm done by tariffs is one of about 2 or 3 things that nearly all economists agree on.
Another incidentally is the damage caused by rent controls, which governments often insist on imposing for very similar reasons that they like tariffs.
Toaster said:
Can any one tell me why if Zero Tarrifs are so good why are they not in place already and why this wasn't done in the 1970's to get the UK out of the mire (its manufacturing base was a lot bigger then today)
The mire of the 1970s was mainly caused by the, then, Labour government spending more than it raised by a long chalk. This was compounded by incessant union action which reduced UK manufacturing output quite significantly thereby further reducing the government coffers. Tarrifs were, IMO, not really part of the equation back then.Garvin said:
Toaster said:
Can any one tell me why if Zero Tarrifs are so good why are they not in place already and why this wasn't done in the 1970's to get the UK out of the mire (its manufacturing base was a lot bigger then today)
The mire of the 1970s was mainly caused by the, then, Labour government spending more than it raised by a long chalk. This was compounded by incessant union action which reduced UK manufacturing output quite significantly thereby further reducing the government coffers. Tarrifs were, IMO, not really part of the equation back then.
otherwise the UK would have been in milk and honey all the way.As that fine Commission stalwart Delors - a socialist and committed federalist - told UK Unions, the european project is socialism by the back door. We needed more EU way before the EU existed and knew we needed the EU. More and more EU. See, milk and honey.
jsf said:
What cant we do under WTO? buy ham or have zero tariffs?
I've cured your ham problem http://www.carmarthenham.co.uk/
If you leave the EU without a trade deal, we revert to WTO rules, so far, so simple. The argument I hear a lot is that since we import much more from the EU in the way of goods than we export, the EU won't look to impose punitive tariffs on us as it mitigates against their own interests. It's a leap of faith that overlooks both what we have now I.e. membership of the SM, CU & all and moreover, the way WTO rules work.I've cured your ham problem http://www.carmarthenham.co.uk/
Leaving the EU but simultaneously being a WTO member as we are. automatically creates the UK as a most favoured nation status country. Under that, the EU is obliged by law (as a WTO member itself) to impose the same tariff schedule as it does for other member countries. This is underpinned by the principle of non discrimination, equal treatment between trading nations.
Years of negotiated trade agreements confers (for now) tariff concessions that we benefit from. On the face of it that appears a contradiction - WTO rules on non discrimination in trade vs EU trade agreements discounting tariffs but you have to understand that the EU is a customs union & therefore can alter concessions while other members can't - one of the benefits of being a member of the bloc, right?
The UK as a no deal scenario WTO member couldn't impose protectionist tariffs on the EU nor burn the fences without doing the same to all other WTO members - not legally that is, so the point being that it's a race to the bottom with extremely serious consequences for UK Plc if it's pursued.
It's therefore unlikely to be a serious consideration by any sensible politician which I imagine is why Theresa floated it publicly & Nige continues to bang on abut it to this day. The devil really is in the detail. And furthermore, to pound the perspective drum again, manufacturing whilst growing at what? 1-1.4% p/a remains around 10% of the economy. Any reasonable analysis of the overall piece will focus on regulatory & standards compliance to ease both services & manufacturings future prospects, which is what most FTA;s are really about in greater part anyway. The focus on tariffs in the debate is inexplicably onanist under any scrutiny.
Eddie Strohacker said:
If you leave the EU without a trade deal, we revert to WTO rules, so far, so simple. The argument I hear a lot is that since we import much more from the EU in the way of goods than we export, the EU won't look to impose punitive tariffs on us as it mitigates against their own interests. It's a leap of faith that overlooks both what we have now I.e. membership of the SM, CU & all and moreover, the way WTO rules work.
Leaving the EU but simultaneously being a WTO member as we are. automatically creates the UK as a most favoured nation country. Under that status, the EU is obliged by law (as a WTO member itself) to impose the same tariff schedule as it does for other member countries. This is underpinned by the principle of non discrimination, equal treatment between trading nations.
Years of negotiated trade agreements confers (for now) tariff concessions that we benefit from. On the face of it that appears a contradiction - WTO rules on non discrimination in trade vs EU trade agreements discounting tariffs but you have to understand that the EU is a customs union & therefore can alter concessions while other members can't - one of the benefits of being a member of the bloc, right?
The UK as a no deal scenario WTO member couldn't impose protectionist tariffs on the EU nor burn the fences without doing the same to all other WTO members - not legally that is, so the point being that it's a race to the bottom with extremely serious consequences for UK Plc if it's pursued.
It's therefore unlikely to be a serious consideration by any sensible politician which I imagine is why Theresa floated it publicly & Nige continues to bang on abut it to this day. The devil really is in the detail. And furthermore, to pound the perspective drum again, manufacturing whilst growing at what? 1-1.4% p/a remains around 10% of the economy. Any reasonable analysis of the overall piece will focus on regulatory & standards compliance to ease both services & manufacturings future prospects, which is what most FTA;s are really about in greater part anyway. The focus on tariffs in the debate is inexplicably onanist under any scrutiny.
So why can't we charge zero tariffs?Leaving the EU but simultaneously being a WTO member as we are. automatically creates the UK as a most favoured nation country. Under that status, the EU is obliged by law (as a WTO member itself) to impose the same tariff schedule as it does for other member countries. This is underpinned by the principle of non discrimination, equal treatment between trading nations.
Years of negotiated trade agreements confers (for now) tariff concessions that we benefit from. On the face of it that appears a contradiction - WTO rules on non discrimination in trade vs EU trade agreements discounting tariffs but you have to understand that the EU is a customs union & therefore can alter concessions while other members can't - one of the benefits of being a member of the bloc, right?
The UK as a no deal scenario WTO member couldn't impose protectionist tariffs on the EU nor burn the fences without doing the same to all other WTO members - not legally that is, so the point being that it's a race to the bottom with extremely serious consequences for UK Plc if it's pursued.
It's therefore unlikely to be a serious consideration by any sensible politician which I imagine is why Theresa floated it publicly & Nige continues to bang on abut it to this day. The devil really is in the detail. And furthermore, to pound the perspective drum again, manufacturing whilst growing at what? 1-1.4% p/a remains around 10% of the economy. Any reasonable analysis of the overall piece will focus on regulatory & standards compliance to ease both services & manufacturings future prospects, which is what most FTA;s are really about in greater part anyway. The focus on tariffs in the debate is inexplicably onanist under any scrutiny.
Toaster said:
Dr Jekyll said:
Because politicians aren't very bright.
Totally agree, but then again they are bright enough to be in a position of power and influenceOr are more interested in exercising 'power and influence' over others than in actually achieving anything.
Eddie Strohacker said:
You have this backwards. Reduce tariffs unilaterally & you'll increase cheap imports. Doesn't really matter what on, say Cauliflowers - you put cauliflower growers out of business as the market votes with its feet. Applies to anything you care to name.
Yet when we had unilaterally cheaper exports (before the vote, thanks to higher exchange rates), cauliflower growers were happily in business. That's not backwards, it's simple, clear evidence.You may think the economy is a brittle thing, upset by any change, but the evidence - not the guesses of economists (70% of whom turn out to be wrong) - shows otherwise.
Eddie Strohacker said:
This is an example of Economists for Brexit's unilateral trade model. But in any event, it's not feasible to think that we can go naked into trading with the world & expect reciprocation. For one, other countries are not likely to follow suit & especially not Europe - but good luck buying Parma ham from Indonesia & moreover, we can't do it, WTO rules disallow it, it's a fundamentally flawed idea.
Here's an interview with the head of the WTO, before the vote and clearly encouraging the Remain line.http://uk.reuters.com/article/uk-britain-eu-airpor...
He clearly states it is possible under WTO rules, but then goes on to obfuscate around political negotiations. It's true that dropping all tariffs would be a shocking thing to do - no denying that - but against the rules? Nope.
Eddie Strohacker said:
Thirdly, it's misleading in any event to focus on tariffs, it's a running narrative in Brexit but if you look at FTA's and tariff levels, there's a general downward pressure on them, reducing the figurative importance & besides, FTA's tend to be more about regulatory convergence & standards in any event. But in our case, it's like two bald men arguing over a comb, our economy is overwhelmingly service based, the focus on tariffs is not relevant to what this country is about economically. It is in Port Talbot & Cowley, but not in UK Plc as a whole & not by a long, long chalk.
Regulatory convergence - like our electrical systems, the side of the road we drive on, the units of measurement we use in the pub and the definition of a biscuit? It's true that these international bodies believe that without them we'd be unable to trade. You know why half of those standards were introduced? So the governments could agree what tariffs to apply.The point here is really simple. Yes, our economy is hugely service based these days, but the man on the street - each and every one of us - eats food, drives cars, wears clothes, consumes goods. I'd welcome any proposals that improve our services, make them cheaper to offer and more profitable. We should be doing that as well. But when it comes to EU negotiations, we must not follow your lead ot behaving as though the EU have got us over some regulatory or trade barrel and we cannot exist without them.
That mindset - that hobbling our economy is for our own good, that without the benign regulation of Brussels we could not trade - is the most toxic thing about Brexit at this point. It really, really doesn't matter how you voted, these are the basics of economics and trade negotiations. The only reason for jumping through hoops to maintain the insane complexity of a trade system designed for 28 nations is if you are trying to stay a member.
Tuna said:
Eddie Strohacker said:
You have this backwards. Reduce tariffs unilaterally & you'll increase cheap imports. Doesn't really matter what on, say Cauliflowers - you put cauliflower growers out of business as the market votes with its feet. Applies to anything you care to name.
Yet when we had unilaterally cheaper exports (before the vote, thanks to higher exchange rates), cauliflower growers were happily in business. That's not backwards, it's simple, clear evidence.You may think the economy is a brittle thing, upset by any change, but the evidence - not the guesses of economists (70% of whom turn out to be wrong) - shows otherwise.
Eddie Strohacker said:
This is an example of Economists for Brexit's unilateral trade model. But in any event, it's not feasible to think that we can go naked into trading with the world & expect reciprocation. For one, other countries are not likely to follow suit & especially not Europe - but good luck buying Parma ham from Indonesia & moreover, we can't do it, WTO rules disallow it, it's a fundamentally flawed idea.
Here's an interview with the head of the WTO, before the vote and clearly encouraging the Remain line.http://uk.reuters.com/article/uk-britain-eu-airpor...
He clearly states it is possible under WTO rules, but then goes on to obfuscate around political negotiations. It's true that dropping all tariffs would be a shocking thing to do - no denying that - but against the rules? Nope.
Eddie Strohacker said:
Thirdly, it's misleading in any event to focus on tariffs, it's a running narrative in Brexit but if you look at FTA's and tariff levels, there's a general downward pressure on them, reducing the figurative importance & besides, FTA's tend to be more about regulatory convergence & standards in any event. But in our case, it's like two bald men arguing over a comb, our economy is overwhelmingly service based, the focus on tariffs is not relevant to what this country is about economically. It is in Port Talbot & Cowley, but not in UK Plc as a whole & not by a long, long chalk.
Regulatory convergence - like our electrical systems, the side of the road we drive on, the units of measurement we use in the pub and the definition of a biscuit? It's true that these international bodies believe that without them we'd be unable to trade. You know why half of those standards were introduced? So the governments could agree what tariffs to apply.The point here is really simple. Yes, our economy is hugely service based these days, but the man on the street - each and every one of us - eats food, drives cars, wears clothes, consumes goods. I'd welcome any proposals that improve our services, make them cheaper to offer and more profitable. We should be doing that as well. But when it comes to EU negotiations, we must not follow your lead ot behaving as though the EU have got us over some regulatory or trade barrel and we cannot exist without them.
That mindset - that hobbling our economy is for our own good, that without the benign regulation of Brussels we could not trade - is the most toxic thing about Brexit at this point. It really, really doesn't matter how you voted, these are the basics of economics and trade negotiations. The only reason for jumping through hoops to maintain the insane complexity of a trade system designed for 28 nations is if you are trying to stay a member.
Tuna said:
Yet when we had unilaterally cheaper exports (before the vote, thanks to higher exchange rates), cauliflower growers were happily in business. That's not backwards, it's simple, clear evidence.
You seem to have forgotten China dumping steel & killing Redcar & almost Port Talbot too. Fairly extreme example, but illustrative of what happens when unilateral trade decisions are taken to their logical conclusion.tuna said:
You may think the economy is a brittle thing, upset by any change, but the evidence - not the guesses of economists (70% of whom turn out to be wrong) - shows otherwise.
Yet you're adhering to Minford, an economist widely derided. It's a point of view you're offering, not evidence.Tuna said:
Regulatory convergence - like our electrical systems, the side of the road we drive on, the units of measurement we use in the pub and the definition of a biscuit? It's true that these international bodies believe that without them we'd be unable to trade. You know why half of those standards were introduced? So the governments could agree what tariffs to apply.
I don't believe that's true & in any event, I'd like you to prove it.PurpleMoonlight said:
Sway said:
Name a nation that has unilaterally dropped tariffs and not seen an improvement in economic growth...
This isn't some untested economic theory up for debate - every single time a nation has done it, it has benefitted.
Who has done is successfully?This isn't some untested economic theory up for debate - every single time a nation has done it, it has benefitted.
Dr Jekyll said:
Toaster said:
Dr Jekyll said:
Because politicians aren't very bright.
Totally agree, but then again they are bright enough to be in a position of power and influenceOr are more interested in exercising 'power and influence' over others than in actually achieving anything.
Sway said:
Dr Jekyll said:
PurpleMoonlight said:
Who has done is successfully?
Hong Kong.New Zealand.
The UK in the 19th century.
Every single one has seen a big uplift in economic growth in the period after doing so.
The other point to be made is that the people singing the praises of complicated trading arrangements are the ones in charge of those complicated trading arrangements. The notoriously Remain oriented CBI have been remarkably quiet over the matter.
Dr Jekyll said:
Or not bright enough to make it in a proper job so have to resort to politics.
Or are more interested in exercising 'power and influence' over others than in actually achieving anything.
I would argue it is a 'proper job', however many may not carry it out properly, its the latter which is irksome, and agree those who like power and influence over people may tend to lack abilities in other area's. But then again in both instances they get handsomely paid whether they are innefectual or actually achieve some good. Or are more interested in exercising 'power and influence' over others than in actually achieving anything.
Sway said:
Dr Jekyll said:
PurpleMoonlight said:
Who has done is successfully?
Hong Kong.New Zealand.
The UK in the 19th century.
Every single one has seen a big uplift in economic growth in the period after doing so.
Hard as it is for trade liberators to hear you have to accept that to trade is to regulate, hence why dipping chickens in chlorine is a more effective trade barrier ultimately than slapping on or tearing off a tariff. Exporting to 19th century England is one thing, but if you want to export to somewhere credible, the US, say, then you have to accept that that comes with a bureaucratic framework that seeks to meet the rules of the destination country. I see this every day in my business & it's never going away - good luck shipping anything on an untreated wooden pallet to Australia.
The roots of unilateral trade liberalisation are flawed. They rely on the notion that goods & labour are fungible, which they aren't to anything like the extent the idea requires. On top of that, you can slash tariffs & merrily trade away with the world, but if you're comparative product doesn't meet the standard of your trading partners product, all competitive advantage is gone & you're right back where you started before you bet the farm on cheap imports. It's a goose chase of an idea & unworkable in the real world.
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