Sunday 10 April 2016

Why is everyone so obsessed with tariffs?

There's a europhile meme going round that if we left the EU, other countries like America wouldn't want to have trade talks with us. That's actually true. All of their top experts and diplomats are tied into TTIP. They are not going to suddenly drop everything because we ask for new talks. We will have to join the queue. The question is, does it matter? I don't think it does.

The reason being that the existence of tariffs doesn't actually stop us trading, it just makes trade expensive. But all the smart players have worked out that the main overheads are technical and physical barriers to trade. This can be anything from divergent labelling standards to lack of refrigerated storage in ports. So rather than having talks with nations we can talk to multinationals. A major country like Britain has huge leverage in its own right. We are the fifth largest economy. We can use tax breaks or even foreign aid to remove physical barriers to trade.

As to technical barriers, regulatory issue, there is actually no need to enter into protracted bilateral talks between nations. We can use multilateral forums at the global level to address very specific issues pertaining to specific sectors and products. For once we would have direct access.

We can identify where we have commonality and offer mutual recognition agreements. Where there is divergence we can offer assistance grants to help partner nations get up to standard, opening up new markets.

This is all part of the regular horse trading that goes on in global forums almost every week of the year. It can be the IMO, UNECE or the WTO or even more obscure ones that specialise in telecoms or web standards. All of this goes on above the EU and the EU is trailing in its wake. The EU merely adopts the regulations and standards made at the global level. In that regard the traditional "trade deal" over tariffs is neither here nor there.

Just one agreement to recognise qualifications or inspections in another country as being equal to that of our own means we can eliminate the need for port inspections. (Bad example since that is already the case under TIR) but it's just an example. Even one multilateral agreement of that nature can wipe out massive overheads.

Being free of the EU means we can choose our own topics for debate rather than adding them to the bottom of the EU pile. Many small increments can lead to massive improvements meaning that even with tariffs remaining in place, we still have a competitive advantage over the EU.

And this is the whole point of leaving. Using a combined trade and aid policy and our new found ability to join ad hoc trade alliances gives us hitherto unknown agility on the global stage.

More to the point, it's mutual recognition agreements between global and regional regulators we need to be wary of. I have serious concerns about UNECE looking to absorb or merge with far eastern operators who may well have competent standards but largely corrupt testing. Automotive standards especially. As members of the EU, we are forced to adopt the common EU position. What if we don't want cheap and shoddy Chinese safety products that haven't been tested? Where is our right of opt out?

There are legions of economists lining up to tell us that we would lose 3% of GDP if we left the EU - but they're not being honest. That's only if we leave the single market, which we won't. And if it did, they are always looking in the minus column. They never look at the potential of Brexit and what newly found global agility could bring.

This is because they believe the baloney about other countries not wanting to do "trade deals" with us. That's because economists are glorified accountants and most of them are oblivious to things like technical standards and mutual recognition agreements because most of them have never had a real job. The whole debate is mired by an obsession with tariffs. We are having the exact same debate we had in 1975. These people are dinosaurs and the world has moved on. So must we.

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