animist wrote: Nick wrote:
Moe confusion from Ian Dunt.
His economics is all over the place.
ISTM he was only reporting the IFS paper; anyway please elaborate
By special request!
For the last few weeks, senior Brexiters have had a very specific script.
Jacob Rees Mogg told anyone who would listen that post-Brexit tariff reduction would massively reduce the cost of "food, clothing and footwear".
I have an almost allergic reaction when anyone uses the word "massive". It's a (massive) warning that nonsense is about to be spouted.
He estimated the savings to be around 21%.
Nope. What he has said is that tariffs on those items, on imports from outside the EU are of that order. (I seem to remember him saying 20%, but ho hum...)
Former secretary of state Owen Paterson also cited the 21% estimate.
Haven't heard of this, but as he got the first point wrong, I have no confidence in the second.
"If we come out of the customs union and escape from the common external tariff, a lot of everyday products like clothing, footwear, and food will be coming down in price," he insisted.
It's not a matter of insisting anything! The use of the word "insist" is showing the blatant prejudice of the the writer. If tariffs are removed, then the price of those items will reduce by the amount of those tariffs
Leading Leave figure Liam Halligan clearly had the same briefing.
Haven't heard of him, so not exactly a mover and shaker.
He told LBC that "we never hear about the upsides of Brexit". For instance, "outside the customs union, food, clothing and footwear will be much, much cheaper, about 20% cheaper."
So? Osborne said unemployment would rise if we voted out. Just because someone has said something, it is not a proof of anything. For heavens sake! Some people think Corbyn would be a good PM!
Today, the respected Institute for Fiscal Studies (IFS) offered a different assessment.
... because they are addressing a different question.
Tariff reduction after Brexit would reduce prices by 1.2% at most -
Quite possibly. Given that most prices are based on domestic activity, this rather confirms the size of the tariff penalty, which could be swept away by Brexit.
a figure dwarfed by the two per cent rise in consumer prices as a result of the devaluation of sterling in the wake of the vote.
This is largely because of uncertainty, not fundamentals. Furthermore, in the light of our continuing, and rather serious balance of payments deficit, this may well be a jolly good thing! It way well boost employment, import substitution and exports.
And that is actually an extremely generous assessment. The real figure is likely to be much lower.
No, it's a pretty meaningless assessment.
So what's going on here? Why is the figure so low? Firstly, EU tariffs on the kind of goods the UK consumes are not generally very high. The average for countries the EU has no trade agreement with is just 4.6%, so there isn't much there to save. Once you include the various little bits and bobs of trade agreements the EU has, it's more like 2.8%.
OK, let's accept that for now.
Even where these tariffs can be cut down, they won't affect many goods. Of every £100 spent by UK households, just £26 is affected by tariffs on goods.
Exactly the point I made earlier, which he "insists" JRM is completely unaware of.
Taking all this into consideration, the authors conclude that even if the UK cut all tariffs to zero it would save shoppers just 1.2%.
So how much is that? £20 billion per annum, perhaps? Not exactly chicken feed.
This is very kind of them.
The real number is likely to be much lower.
The costs of the 4.6% of tariffs which currently apply aren't all passed on to consumers, so the savings from their eradication wouldn’t all be passed on either.
This flies in the face of 200 years of economic thought. There's a Nobelprize awaiting if he can make that one stick!
And even this very minor outcome is too generous, because the UK is very unlikely to reduce all its tariffs to zero. Doing so would make plenty of domestic producers unemployed.
So if it's "plenty", this shows that the impact of tariffs is, in fact, substantial, the opposite of what you were asserting a moment ago. Secondly, it makes no allowance for their ability to afford more of our imports, which would create emplyment. Thirdly, if our producers are only sustained by tariffs, that demonstrates that they should, in fact, be doing something else anyway. Tariffs destroy jobs overall, they don't create them. We leant this when we abolished the Corn Laws.
This is why almost all countries have tariffs on at least some goods.
That's politics. Doesn't make it a good thing, does it? Rather demostrated by this article.
So in reality the UK would be more likely to reduce tariffs only on the goods it doesn't produce. Things like oranges, basically.
Only if the UK were to be as protectionist as the EU. Which is not what is being advocated, is it? Oh, and the tariff on oranges is 25%
Now we're talking about an even smaller range of products – just 22% of the value of UK imports. But there are a few items here with high tariffs which we can make cheaper, like pasta and broken rice. Broken rice is a thing I did not know existed until this report and have now Googled (no, it isn't couscous).
This is just plain ridiculous! We import huge amounts of stuff we also produce ourselves! One obvious example: cars. Drivel!
So here we have found a genuine saving.
Completely ingoring the benefits of an increase in trade!
But because we had to narrow the areas so much, it doesn't add up to much. In fact, the authors expect it to lead to an overall price reduction of just 0.4%.
Well, if you make stupid assumptions, you are going to get stupid answers. GIGO.
This is the horrible reality for the Global Britain lot. Tariffs are already quite low and anyway don’t apply much to the type of goods we consume.
Given the errors above, that's not a logical conclusion, is it?
Plus we're likely to protect our domestic producers anyway, so only some items can be slashed.
Except that the whole thrust is away from tarifs, not towards them. And you are facing in all directions at once: tariffs don't matter as they are too small to affect consumers, except that they will affect consumers dramatically and render producers unemployed, except that they won't be reduce anyway.
This is really a sad little number, but it's all they've got.
Not as sad a number as this article.
After all the other promises have been stripped away, the one remaining positive from Brexit is reduced prices from our independent trading status. And that will save shoppers about 0.4%. Stick that on the side of a bus.
If you strip away all the other benefits of Brexit, then you are ignoring all the other benefits of Brexit, aren't you? I'd like to stick Dunt on the side of a bus!