‘Tariffs’, the ‘Lib Dems’ and (yes you’ve guessed it) the EU (Ronald Olden)


Ronald Olden

The subject of ‘Tariffs’ like many others, seems to have become something beyond which debate is no longer permissible. But we know from experience, that when any dogma arrives at that status of unchallengeable, the conventional wisdom is nearly always wrong. Usually because no discussion of the subject is permissible in ‘liberal’ company.

Until the early 1980s the ‘Left’ in Britain were not merely in favour of high selective tariffs, but demanded PHYSICAL import controls (but only, of course for unionised and nationalised industries). Anyone who said otherwise was a ‘Thatcherite’ bent on ‘destroying’ British Industry, or, unfashionably ‘Old’ Labour.

The EU itself, is still all for charging the maximum external tariffs it can get away with under World Trade Organisation (WTO) Rules. The EU however is, thought by ‘liberals’ to be the gleaming and World leading example of a ‘Free Trade’ organisation. The fact that the EU members, find it almost impossible to agree the terms of any Free Trade deals with anyone, apart from themselves (and only then after years of ‘negotiation’ which only ever ends with Germany either blackmailing or bribing  most of them) has led nearly all the rest of the World to walk away from ‘Trade Talks’ to avoid dropping dead from exhaustion during decades of ‘negotiation’  is thought to be everyone else’s fault.

Were Donald Trump ever to suffer the misfortune to of becoming engaged in ‘Trade Talks’ with the EU, they’d have to give him for ‘Anger Management Classes’ or more likely a sedative.

Nowadays however, the ‘Left’ have done a 180 Degree U Turn on Tariffs. They are now utterly dogmatic in their view, that in the event that we don’t get a suitable Brexit agreement, the imposition of even the small maximum permitted WTO tariff on goods traded between Britain and the EU, will cause a 1930s style slump in the UK.

Needless to say, the ‘Left’ are also of the view that the tariffs concerned will not similarly disadvantage, the EU itself, and will, in fact, benefit it.  Thus the EU will actively pursue a tariff  unless we do as we are told and we should all be grateful that they have, over  the years,  been willing over the years to have a Free Trade agreement with us, resulting in a massive Trade Surplus with us, and been good enough to export large numbers of their lowest skilled unemployed to us, so that we can gone them jobs,  and pay them Housing Benefit and Tax Credits.

Of course, no sane person, let alone a ‘libertarian’ is in favour of tariffs for the sake of them, but what specifically is so unacceptable about tariffs? All a tariff is, is a ‘Transaction Tax’, on imports. But WTO maximum permitted tariffs pale into insignificance compared with all the other Transaction Taxes we levy. In fact  nearly all the taxes we levy are ‘Transaction Taxes’ and some of them are actually much worse in their effect that are modest tariffs. And given that we have to levy taxes at all, and already do so on nearly everything, why should imports, (we (see below*) tax exports ferociously), be excluded from the ‘Tax Base’? The broader the Tax Base the better. It means we can have lower tax RATES all round.

For example, the Employers’ National Insurance Contributions (ENIC), a ‘Transaction Tax’ levied as a % of wage payments, and which we charge employers when they employ people to manufacture things for export is a huge Tax on Jobs. ENIC is a direct a tax on exports and particularly those which are labour intensive to produce, and/or which generate the highest wages. Yet the ‘Left’ are wildly in favour of this tax and actually want to put it up. Meanwhile they tell us that a (by comparison), minuscule, Transaction Tax levied by the EU on our exports must cause an economic slump.

If  the UK ends up having to conduct Trade with the EU under the WTO rules, it would involve the EU charging our exporters a small tariff. But we would charge exactly the same tariff on the things we import from them. And we import far more things from them than they import from us. So we would raise more (approximately £3 Billion a year more) from them, than they do from us.

More importantly the money we raise would come to our National Tax pot and could be used to reduce one of the other taxes on jobs, so negating the effect of the rise in the price of our exports completely. The money the EU raises, however, would inevitably to the EU Bureaucracy and get spent in ‘essential’ (sic) things like more Civil Servants etc. In fact they however, the EU would need all their tariff receipts and more, just to plug the £10 Billion or so gap in the budget caused by the UK not to be in the EU. So we have that money as well, to make business tax cuts (were any needed) to offset any tariffs they impose.

On top of all this, the fall in the value of the £ since the Brexit vote already far exceeds the effect on UK exporter’s competitiveness, than any tariff the EU can possibly impose under the WTO Rules Who cares if they impose a 3% Tariff when export prices have already fallen by five times that amount owing to the fall in the £? But, considering that their export prices to us have, for the same reason, risen by 15%,the rest of the EU, should think very carefully about the effect upon the, of tariff we would impose on their sales to us.

So what’s all the fuss about? This is another ‘red herring’, with which Euromaniac politicians who know nothing about the subject are currently obsessed.

But ideas they deem to be self-evidently correct and beyond argument one minute, are dispensed regularly dispensed with and replaced with exactly the opposite dogma, without apology, and at the drop of hat. So why should we waste our time listening to what they have to say about ‘tariffs’. The only thing that remains consistent in their approach to life is their certainty that they are always right, and that anyone who argues with them is ‘stupid’, (and usually) a ‘bigot’.

Being of a generous disposition I don’t myself accuse them of being disingenuous. I think they are just ignorant of anything to do with the things about which, they pontificate. And many of them, not ever having had any proper, let alone a demanding, job, imagine that this is the way the rest of us behave in life. They think we all go around spouting whatever rubbish comes to mind and suits us, and all concerned are duly impressed. Sadly for us however the rest of us have live lived our lives in a more demanding intellectual and social environment that people like Nick Clegg.

In the environment Nick Clegg has lived his life, he can get to be Deputy Prime Minister simply on the basis that he managed to become leader of a political party in which any potential rivals were transparently useless, obnoxious, too old, or unelectable for some other reason. The man he actually beat (still by only 500 votes) to become leader, ended up in prison for ‘Perverting the course of Justice’!

‘Liberal’ politicians have no interest in considering facts with a view to arriving at conclusions based on them. All their lives, they have learned to arrive at any ‘conclusion’ that suits them and then construct ‘reasons’ in support of their conclusion. And when they do, they simply say anything they think will fool the listener, regardless of whether it even makes logical sense.

A few weeks ago I heard Nick Clegg bemoaning the effect on ‘inflation’ of any tariff would have on food imported from the EU. He made his remarks solely on the basis that the WTO permits small tariffs on food. Clegg appeared to have no comprehension of the fact that there is no obligation on us to impose such a tariff. Why would we? UK agriculture has managed without tariffs on EU food since 1973 so, why would they need one now, especially as the £ has fallen by 15%. I assumed at the time that he was under the impression that tariffs were something the WTO OBLIGES, us to impose, or that the EU would decide whether we imposed them. Upon reflection however, I now think that he probably sees tariffs as something we use as a weapon of spite and retaliation against the EU, if they don’t give us what we want, regardless of whether the tariff damages us as well.

The BBC however duly reported his remarks as though he had thought up some new and devastating insight into why we shouldn’t have Brexit.

Not long after however, Nick Clegg’s ‘leader’ (sic) Tim Farron (who is also against tariffs with EU countries), was on the TV moaning that if we left the EU and had a Free Trade agreement with New Zealand the removal of tariffs with New Zealand would damage the lamb industry in his own constituency! Thus we must have Brexit. This again was duly reported by the BBC new economic insight.

The Lib Dems are therefore in favour of the EU having tariffs against non EU food producers, but against them on food imported from the EU. One is ‘inflationary’ and the other, (I assume), not. In fact if anything, the truth is the other way round. Non EU food producers (like New Zealand) produce a cheaper product and it’s only expensive because of the tariff. If EU food becomes too expensive owing to a tariff (which we don’t have to impose anyway), we can just buy from somewhere else.

But the moral of this sorry tale is that neither Clegg nor Farron is remotely interested in finding out what the effect of tariffs are. All they are interested in is constructing emotive sounding arguments to persuade us to stay in the EU.

In this instance Farron is actually correct. Opening up his lamb producing farmers to competition from New Zealand, is to their disadvantage. But in advancing the point in the way he does, he’s making a case for ‘protectionism’ rather than the Free Trade he and Nick Clegg purport to support. And here lies the hypocrisy. The EU is the most protectionist Trading Block of any size, on Earth. The likes of the Lib Dems however, pretend that they are supporting Free Trade by demanding we stay in it. But they only say that because ‘Free Trade’ is conventional wisdom and sounds vaguely ‘liberal’. The truth is, that all they’re really interested in is thinking up specious propaganda in support of the EU POLITICAL project.

As far as ‘tariffs’ are concerned, we might just as well tell the EU we don’t care whether we have a Free Trade agreement with them or not.  Perhaps in view of their massive Trade Surplus with us. we should be considering charging the EU for access to the UK Single Market, not pondering as to whether we will have to pay a ‘fee’ for access to theirs.

We might also point out to the EU that they have some 3 Million of their own Nationals working in the UK. These people are here on the assumption that we were in a Single Market and that we would have Free Trade with the EU to trade the goods and services they make. They wouldn’t be here otherwise. And we a much smaller number, living and working in the EU. I for one want them all to be allowed to stay. However, if the EU imposes tariffs, and our trade is affected, they can have their 3 Million people back forthwith. It would be invidious for the UK to stand by and see the EU set out to deliberately destroy jobs in this country, and expect their own citizens to carry on working, and in many cases claiming Tax Credits and Housing Benefits here unaffected

If we don’t get a Free Trade deal with the EU and they impose tariffs which we reciprocate they would lose far more than we would. What loony country in history has ever started a Trade War against a nation with which it, (as in the case of the EU with us), has a huge trade surplus, let alone one in which it has 3 Million of its’ citizens living and working? The ‘Remainers’ consistent reply to all this, is that a higher proportion of our trade goes to the EU than that which comes to us. So although we would both lose trade and jobs from any tariffs, we would lose proportionately more jobs than the EU. Well that would be obvious wouldn’t it? The UK on its own, is a smaller economic block than the EU, whereas on the other hand we have a higher proportion of our economy involved in external trade than they do.

But what possible reason would that be that for the EU imposing tariffs? The argument advanced is that the EU, out of vindictiveness, will cut off their noses to spite their faces.

https://en.wikipedia.org/wiki/Tariff

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8 comments

  • “If the UK ends up having to conduct Trade with the EU under the WTO rules, it would involve the EU charging our exporters a small tariff.” Is that correct? I thought the tariff would just be added to the final price paid by the consumer?
    I did have to laugh the other day when somebody threatened that the EU would impose a 10% tariff on the cars they buy from us. And we wouldn’t retaliate? BMW and Mercedes would have Merkel’s head on a block if she tried anything like that.

    • Indeed. The UK trades in high volumes with specific EU countries, one of which happens to be Germany. Although obviously its trade activity is spread out across the EU, the damage would be particularly pronounced in those countries, should they opt for tariffs.

  • If we do retaliate against any tariffs the EU might impose on our exports I suggest it should be done only for so long as it takes for the businesses involved to readjust to the situation by greater efficiency or by turning their export attention to other parts of the world. Any such retaliatory tariffs should be imposed to create the maximum adverse effect on selected factories and products: so tax spare parts for cars so residual values of EU made ones fall, tax the lower value cars more as they are more price sensitive, repeatedly remind the public of the benefits of buying other than EU made cars and assist by reducing tariffs on cars from elsewhere. A turn around of 20% in the relative prices of overseas made VW compared with (say) Toyota, would do significant harm to VW sales and their dealers’ profits.

    • I don’t really like such political meddling. I think what we should do is simply say to the EU that we will allow tariff-free trade for their goods as long as they will reciprocate. Put the ball in their court. The big German car makers will lean very heavily on Merkel and the EU to accept such an offer. If they don’t, it will show them to be adopting a ‘dog-in-the-manger’ attitude. Why do we need two years’ worth of ‘negotiations’? We could do this tomorrow.

  • All a tariff is, is a specific form of sales tax. Many libertarians cheer them on a second-best/least-worst types of tax. I’m not hugely in favour of it but they aren’t uniquely bad compared to more egregious taxes like the income tax or various taxes on employment.

  • I would be interested to know whether any regulars here are familiar with Dr Richard North and his option of Flexcit, devised with The Telegraph’s Christopher Booker? He and his son Peter, who have been arduous students of treaty law and the complex web of regulations that define our relationship with the EU, believe that we are headed for a trainwreck Brexit following Theresa May’s confirmation of Single Market departure (they favour EEA/Efta as a necessary interim stage to full exit), and that her willingness to walk away with no deal would be one of the most monumental incidences of economic self-harm in recent history. They excoriate politicians and most Brexiters for failing to appreciate or wilfully misunderstanding how complex this relationship is, and how difficult, lengthy, and careful the process of extrication must be. Most of the writers in the comments section of their blogs have been in regular, long-term interaction with the Flexcit proposal for years, so it is difficult to dip in and out. I have wondered whether anybody has the expertise to critique them, since I don’t find much direct challenges to their ideas online from ‘hard’ Brexiters online.

    • Richard North has many strengths. His opponents are usually men of little quality. His weakness, however, is his inability to appreciate the benefits of an unregulated market, and specifically of unilateral free trade. It would be convenient in the short term for our relationship with the European Union to continue much as before. A clean break would be inconvenient in the short term, but highly beneficial after that.

  • I am very familiar with Chris Booker’s position on this, and frankly I am puzzled by it. If it were anybody else I would just dismiss it, but both Booker and North are very intelligent and well versed in these matters.
    There is one word in Booker’s analysis to which I take exception, and that word is “some”. We would regain ‘some’ control over EU immigration under his plan. That is not good enough, not for me at any rate. It also illustrates a common misconception as to what the EU is all about. We often hear of ‘EU immigration’ and ‘non-EU immigration’. In fact there is no such thing as ‘EU immigration’. The EU is now, post-Lisbon, a new country called ‘Europe’. All those Romanian thieves, Polish builders and charming barmaids from the Czech Republic are now EU citizens, just as you and I and Her majesty the Queen are now EU citizens. We all share equal rights throughout the EU regardless of which ‘Member State’ we happen to reside in, just as a Yorkshireman can come to Sussex to live and work and/or draw state benefits.
    If and when we break free from the EU, they will once again be immigrants, and subject to our own rules on immigration (well, I suppose the Queen has been here long enough to count as British).
    As I see things, all we need to do is give notice to the EU under Article 50 and then walk away. Mrs May should, tomorrow, tell the EU that we will be happy to grant tariff-free access to imports from the EU, if they will be prepared to do likewise. There is no need for an extended period of negotiations – they can take it or leave it. Put the ball in their court – if they won’t play ball it will be their loss – they slap 10% on British cars we will do the same to them. BMW and Mercedes understand this well enough, and I am sure they will make Mrs Merkel aware of their feelings pretty damn quickly.
    There does not have to be two years of ‘negotiations’. If the other Member States don’t like what we are offering, we will walk away and trade under WTO rules. That would still be better than the current arrangement. And we can then sign trade deals with all the countries that are currently queuing up to do business with us, but are prevented by EU rules from doing so. What’s not to like?
    The only thing we will need to do – and this is already on the agenda – is to give legal force to all EU Regulations until we can repeal them as required. The Directives already have legal force, but the Regulations will all evaporate the moment we leave, cauing utter chaos.
    Incidentally I once worked out that if we were to repeal ten of these damn things a day it would take us forty years to be free of them all.

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