FabSwingers.com mobile

Already registered?
Login here

Back to forum list
Back to Politics

The reality of trading on WTO terms

Jump to newest
 

By (user no longer on site) OP   
over a year ago

This excellent article says it all .

Over the past couple of weeks, the media have been full of lurid scare stories about what will happen if the UK leaves the EU on WTO terms. One report was that “No deal will hike food bills by 12%”. Apparently, ‘senior executives from the big four supermarkets’ had claimed that with a ‘no deal’ Brexit ‘the biggest tariffs on imports from the EU could include cheese, up by 44%, beef, up by 40%, and chicken, up 22%’. I shall call this “the tariff delusion:” that when we leave the EU, WTO rules will require the UK to keep the EU’s current tariffs and impose them on imports from the EU, as well from the rest of the world. That delusion is simply not true. The UK will adopt the EU’s current tariff schedules at the WTO, but these specify the maximum level of tariffs. We will be fully free to charge lower tariffs or zero tariffs, if we feel fit; but whatever tariffs we decide to charge must be applied equally to imports from the EU and the rest of the world under the “Most Favoured Nation” (MFN) principle. WHY THE EU’S EXTERNAL TARIFFS ARE TERRIBLE FOR THE UK The EEC’s customs union was designed and built before we joined the EEC in 1973. The tariffs were set in order to protect continental producer interests, notably French farmers, German car makers, and Italian clothing and footwear manufacturers. Those were – and still are – the areas where the EU’s external tariffs are very high. Our consumers pay 100% of the elevated prices for food and clothing inside the EU’s tariff walls, but only part of the higher prices is collected by British producers. Average EU tariff by product type 2017 When we applied to join the EEC in 1972, part of the price of membership was to swallow the bitter pill of higher food prices. Edward Heath’s White Paper advocating EEC entry in 1971 estimated that “membership will affect food prices gradually over a period of about six years with an increase of about 2.5 per cent each year in retail prices” (para 88 on p.23). And yet we have doomsayers today claiming that leaving the EU will result in food prices going up. By what mad process of logic can it be right that joining in 1973 resulted in food prices going up, and leaving in 2019 will result in food prices going up yet again to even higher levels? WE PAY A SUBSIDY OF £16 BILLION PER ANNUM TO EU27 PRODUCERS BECAUSE OF THE EU’S TARIFF AND NON-TARIFF BARRIERS The EU’s tariffs mean that UK consumers pay a subsidy to producers in other EU countries. This is particularly easy to understand with goods which are not made or grown in the UK. The tariff on oranges was increased to 16% in October 2016. There is no production of oranges in the UK and therefore no domestic industry to protect. The British consumer can buy Spanish oranges tariff-free, but must pay 16% tariffs on oranges imported from the rest of the world. The effect is that UK consumers have to pay 16% more for their oranges than if oranges were let into the UK at world prices, and Spanish and other EU orange growers can raise their prices to match world prices plus 16% on top. In addition to tariffs raising prices inside the EU above world levels, the rules of the EU Single Market on goods create so-called “non-tariff barriers” (NTBs) against imports of many kinds of goods from outside the EU. Economists have estimated that the combined effect of the EU’s tariff and non-tariff barriers is to raise food and manufactured goods prices inside the EU 20% above world prices. Since we have a huge deficit of £95bn in our goods trade with the EU27, UK consumers pay £16bn per year over and above world prices to EU27 producers. We can cut both kinds of barriers on imports from outside the EU on the day we leave the EU without a withdrawal agreement. By contrast, under the Chequers plan, we could not reduce any tariffs on non-EU imports until the so-called “Facilitated Customs Arrangement” can be made to work (which seems to be either 2022 if you are really optimistic, or never), and we would be permanently locked in to the EU’s non-tariff barriers against goods imports from non-EU countries. TARIFFS ON IMPORTS AFTER BREXIT After Brexit, the UK will not have to charge any tariffs on anything unless we want to. This is what we should do. (1) GOODS THAT WE DO NOT MAKE IN THE UK No purpose is served by these tariffs. We should get rid of the 16% tariff on oranges and other foods that we do not produce, as well as tariffs on textiles and clothing where there is no significant UK production. This would give an immediate ‘Brexit dividend’ to lower-income families, without harming any producer interest. (2) GOODS WHERE THERE IS SIGNIFICANT UK PRODUCTION Take beef, which the scare story I began with singled out as subject to 40% tariffs on leaving the EU without a deal. Beef farmers in the UK have a legitimate interest in not suddenly being subject to a sharp price fall which could happen if tariffs were to be scrapped overnight; but equally consumers have a legitimate interest in not having prices go up. The answer is to set a new lower UK tariff applied equally to beef imports from both the EU27 and the rest of the world, in order to maintain the price of beef in the UK domestic market at its current level. (3) COMPONENTS AND INTERMEDIATE GOODS Some industries with highly-integrated supply chains could suffer if tariffs were imposed between us and the EU. We cannot stop the EU imposing tariffs on inward-moving goods, but the UK is not obliged to nor should it levy tariffs on components coming in the opposite direction. For example, the UK should zeroize tariffs on car components. Under WTO rules, the tariffs would be made zero on components from the EU and also at the same time on components from the rest of the world. This would prevent car manufacturers having to pay unnecessary tariffs on components imported into the UK and assembled into a car here. Where existing supply chains involve acquiring components or sub-assemblies (such a gearboxes or engines) from within the EU27, a zero tariff policy on imports of components into the UK would avoid hitting car manufacturers with UK import tariffs, and would also allow them to source components from the rest of the world more cheaply than at present. Far from damaging the car industry in the UK, such a scenario would boost its competitiveness. (4) SWEEP AWAY POINTLESS TARIFFS We should scrap existing low-level tariffs on all kinds of goods. It is hard to see the purpose of tariffs which are below 5% or so, when foreign exchange rate has moved 15% or so in favour of UK industry over the past 18 months. Getting rid of low-level tariffs on a wide range of goods will cut costs to businesses, and reduce the administrative burden on customs of dealing with imports from the EU27 on top of imports from the rest of the world. NON-TARIFF BARRIERS ON IMPORTS FROM THE EU Much of the hysteria about ‘shortages’ of goods such as food and medicine seems to be based on the idea that the UK would impose non-tariff barriers against the importation of goods from the EU27. Not only would such an action be criminal stupidity, but it would require a positive amendment to the law to achieve it. The European Union (Withdrawal) Act 2018 ‘repatriates’ into UK law the corpus of existing EU laws. This includes laws which provide for example that it is lawful to import medicines made in a factory in Germany under the supervision of German authorities. So there will be no legal barrier against the continued importation into the UK after 29th March 2019 of goods made and certified under EU standards and rules, unless we were stupidly to create them. NON-TARIFF BARRIERS ON IMPORTS FROM THE REST OF THE WORLD EU law has successfully reduced NTBs on goods flowing between EU member states, but it has required us to impose unjustified barriers on imports from the rest of the world. It would be illogical to discriminate between goods from the EU27 and goods from the rest of the world once we leave. But instead of putting up barriers to imports from the EU, we should extend to the rest of the world the present EU rules which require imports to be allowed when there is no objective justification for excluding them. This would bring huge benefits to UK consumers. We should relax the present EU-imposed rules on intellectual property which allow multinational brand owners to force up prices of branded goods here by keeping out their own genuine goods which they sell in the rest of the world at lower prices. Tesco could then import and sell genuine Levi jeans from the USA – which it was stopped from doing by a case in the ECJ brought by Levi Strauss. Once we leave, trade agreements will produce additional benefits. But it often seems to be assumed that the benefits of an independent UK trade policy only come when we conclude trade agreements. This is just not true, since all the measures outlined above to gain the benefits of reduced barriers to imports can be reaped by unilateral action at once on 30th March 2019.

Reply privatelyReply in forumReply +quote
 

By *oo hotCouple
over a year ago

North West

Why do countries seek to improve on WTO trading terms by setting up bilateral trade deals? I mean what exactly is the point of spending years negotiating trade deals if WTO rules are so great? I wonder how many countries in the world are as clued up as you do that they don’t even bother negotiating anything, with anyone and just use WTO?

Asking for a friend.

Reply privatelyReply in forumReply +quote
 

By *abioMan
over a year ago

Newcastle and Gateshead

1.... if you are going to put up large blocks of text that are not your own... the it is usually practice that you state where it comes from....

so source please?

but there are certain things in there that are wrong that i can point out straight away...

1) you say the UK will adopt/maintain the EU's WTO schedule.....

They can't!!!!! that needs to be approved by all 165 members of the WTO... and australia, new zealand, argentina, india and other countries all objected!!!!

they will take the basic WTO unless deals are made otherwise...

we do NOT have MFN (Most Favoured Nation) status...... we would be treated as a "3rd party Country".... so all of that guff doesnt apply.....

Reply privatelyReply in forumReply +quote
 

By *asyukMan
over a year ago

West London

By definition, WTO terms of trade are the worst in the world unless you are subject to sanctions.

If you disagree please make some effort to indicate why other than a vague unsupported assertion.

Reply privatelyReply in forumReply +quote
 

By *avidnsa69Man
over a year ago

Essex


"By definition, WTO terms of trade are the worst in the world unless you are subject to sanctions.

If you disagree please make some effort to indicate why other than a vague unsupported assertion."

Article was pulled from "Briefings for Brexit" website which appears to be a repository for articles by Brextremists

Reply privatelyReply in forumReply +quote
 

By (user no longer on site)
over a year ago

I saw the humongous block of text, then looked at who posted it....

Nuff said really

Reply privatelyReply in forumReply +quote
 

By *illwill69uMan
over a year ago

moston

Having read many threads regarding the WTO, I think most here have not grasped or understood it function or the reality of trading under WTO rules only. The WTO is NOT some sort of world 'social worker' committed to raising the living standards of the poorest nations in the world, it is a neo-liberal capitalist organisation dedicated to forcing variable unit costs (of which wages (direct and indirect) are the largest cost) and regulation of capital down. The WTO only has 2 rules:

1 Those trading under WTO rules must apply the same tariffs to all countries they do not have bi or multilateral free trade agreements with (which by their nature remove them from the WTO rules).

2 That no country can vary its WTO schedule without the agreement of all WTO members.

If anyone takes the time to engage their brain and think about the above 2 rules and the reality of having to trade by them they will quickly realise that low wage low regulation states become the most profitable production bases for multinational organisations and such states have a vested interest in blocking any extension or raising of maximum tariff barriers by states that wish to keep their inferior products out.

We are a high cost state and economy. This is because we have a highly regulated internal market. Trading on WTO terms will mean we have to either deregulate and join the rush to the bottom or watch our economy being destroyed by vulture capitalists who will use WTO rules to asset strip the UK.

But hey what do I know...

Hold on what was it JRM said about us being able to become an economy like India, with an Indian type regulatory system (and by implication wages)...

Welcome to the reality of WTO folks.

Reply privatelyReply in forumReply +quote
 
 

By (user no longer on site)
over a year ago

The following quotes are taken from Noam Chomsky’s ‘Profit over People’ from a subchapter titled: The World Trade Organization: “Exporting American Values”

“The “new tool” (the WTO) allows the United States to intervene profoundly in the internal affairs of others, compelling them to change their laws and practices. Crucially, the WTO will make sure that other countries are “following through on their commitments to allow foreigners to invest” without restriction in central areas of their economy.”

Chomsky’s summary of the WTO -

“1. A “new tool” for far reaching US intervention into the internal affairs of others;

2. The takeover of a crucial sector of foreign economies by US-based corporations;

3. Benefits for business sectors and the wealthy;

4, Shifting of costs to the general population;

5. New and potentially powerful weapons against the threat of democracy.”

...Number 5 in Chomsky’s list “powerful weapons against the threat of democracy” we all saw during the Brexit referendum, with the harvesting of British people’s personal data from social media which was used by North American company SCL / Cambridge Analytica, who then used it on behalf of Vote Leave, to create algorithms to target Brits in a massive propaganda campaign, which Vote Leave were subsequently found guilty of breaking electoral law in doing.

So actually, far from ‘getting our country back’ or ‘regaining our sovereignty’, it seems more realistic to say the UK upon leaving the EU, will be handing over power to corporate America.

Reply privatelyReply in forumReply +quote
Post new Message to Thread
back to top