This is a no-sell to the majority of brexit voters – working class uneducated left-wing protectionists. They have voted for trade to be less, not more, free.
Like I said earlier, this oddball coalition of the wilder fringes of libertarianism and the wilder fringes of the labour movement is irreconcilable. It is likely to end in tears for all of us.
Ian B
Yes, Tim.
The working class voters will frankly not understand it but if we shut the border they’ll be happy with that. The economy is already predicated on free trade with the Eurozone anyway, remember. It’s not like it’s a change.
Bloke in Germany
Ian, the working class would like to sell their productive capacity in exchange for a slice of the pie. While we all understand that free trade is basically good for most people you will never get this through their skulls.
And those people will be hurt by unilateral free trade even if the balance overall is positive. Unilateral will benefit the rich, and throw more of the poor out of work. If you can’t see that wealth/income divide becoming (even more of) an issue you are not looking far enough ahead.
The Meissen Bison
BiG: Like I said earlier, this oddball coalition of the wilder fringes of libertarianism and the wilder fringes of the labour movement is irreconcilable.
And that oddball coalition numbers how many individual voters do you reckon?
It is likely to end in tears for all of us.
It’s certainly beginning with tears for the losers. And foot-stamping, pinching and hair-pulling too.
Almost worth voting Brexit for that spectacle alone.
The Meissen Bison
you will never get this through their skulls.
Oh, and I forgot superiority, arrogance and condescension.
Ian B
Unilateral free trade doesn’t preferentially benefit the rich. It keeps high street prices down, benefitting (poor) consumers.
Corn Laws, and all that.
The Inimitable Steve
I like your plan, Tim. But Theo (in the other thread) is right.
Logically, we’d just declare unilateral free trade on goods and services with the EU, and they’d do the same thing with us to maximise their utility. But we’re human beings dealing with other humans, so logic isn’t the only thing that comes into it.
The EU’s institutional leadership is probably prepared to cut off its member states’ nose to spite their face. We don’t want that to happen if it can be avoided.
The basis of all successful negotiation is that the other party must believe you’re prepared to walk away if you can’t agree on a deal. So we shouldn’t be too hasty to reassure our former EU partners that they’ll get unlimited access to our market come what may. We naturally want them to give our exporters the same courtesy.
We should also be reaching out to Merkel, Hollande, and the big export interests in France and Germany to present Junkers and co. with a fait accompli. If this gets left to the EU’s unelected lotus eaters they’ll look to create maximum drama.
Bloke in Germany
@Ian,
Those who cannot consume because their ability to produce (no matter how it was protected by market-bucking policy) is taken away cannot consume.
@TMB, I reckon the oddball coalition consists of significantly more lefties than libertarians. At least most of the latter show some ability to think.
Ian B
The primary concern in the EU Command Bunker at the moment is keeping the Euro going. They can’t afford any disruption, they will not want years of negotiations and brinkmanship.
Do the free trade offer in a spirit of friendship and in the pub by lunchtime. Start throwing threats at already jittery people and you’ll end up with rapid escalation and no deal.
Sometimes you should carry a big stick. Sometimes just having the big stick starts a fight.
Bloke in Germany
@IanB, the corn laws were designed to protect wealthy domestic producers. It is possible also to design tariffs to protect poor domestic producers (such as limits on immigration of unqualified people – exactly what the leftixt voters want).
Ian B
BiG-
Raising tariffs didn’t protect or create jobs in the 1930s and it won’t in the 2010s either.
Tomsmith
Anyone have good responses to criticism of Minford’s numbers here:
They’re using the gravity model of trade. And part of Minford’s point is that modern communications and transport mean the gravity model doesn’t really work anymore.
Container transport to Brisbane, Birmingham AL or Beijing isn’t notably different from that to Bari or Budapest.
Geographic proximity just isn’t as important as it used to be.
Bloke in Germany
@IanB,
No because everyone was doing it then. And reciprocating. Which basically turns tariffs into a rather complex and expensive to adnimister tax and taxes have deadweight costs (so do tariffs but the idea at least, rarely borne out, is that they work differently).
The key difference here is the “unilateral” thing. And acknowledged to the point of blue in the face that “in total”, unilateral FT will be good for the UK – but the spoils will not be divided evenly. Add in the rest of the libertarian agenda (depending on the libertarian of course: flat income taxes, UBI, elimination of property taxation) you have a recipe for further hammering the poor (who want the barriers) to benefit the rich (who don’t want the barriers).
Ian B
The problem with tariffs isn’t the deadweight costs. It’s the impoverishment of the consumer.
As with Labour’s disastrous “import substitution” nonsense after the War.
If we put up barriers, a trade war will start, and then we really will get the economic slump the Remainers are praying for.
Mr Ecks
Trade-type protectionism is not even on the mental horizon for most working class anti-Europe voters. They are against demographic invasion and takeover, not free trade. Make sure that the tide of low IQ migrants stops and that is job done. Some migrants–having useful skills and esp good character is not a problem. Mass invasion of intended displacers/replacements (complete with bad habits) is.
And free of EU cost-boosting, free trade is an advantage to us all.
acarraro
So your argument is: This time is different.
That always ends well…
bloke (temporarily not) in spain
The problem with Tim’s thesis is; it’s not countries who trade. It’s individual people & companies. So, with free trade on imports from the EU, of course the individuals buying the goods benefit. Because EU exporters are competing in an open market with domestic producers. But if the EU slaps tariffs on UK companies exporting to the EU, then those companies are prevented from being competitive in the EU market & suffer. The second order effect is; a proportion of those individuals’ incomes will be dependent on exports.
Yes, free trade is beneficial. But unilateral free trade isn’t,
Bloke in Germany
@Ian,
I would love to have global free trade pretty darn quick.
That is, however, not the world we live in, and probably never will be. There is politics. And that probably means we will never have a world in which goods, services, people, and capital move around with no regulation or cost whatsoever, and no international treaties to reciprocally minimise said regulations and costs. International trade is a classic area in which governments (and international organisations like the EU) can basically run a legalised protection racket.
Human nature being what it is, you will probably never be able to abolish that. So you need governments to cut deals with each other instead. And sometimes that involves agreeing to ban lead paint in kiddies’ toys.
Do you actually understand that (ultimately) you need to produce in order to be able to consume? Or are you so far from having to live on your paychecks that you no longer have that experience – which the vast majority of your compatriots do?
I understand entirely why the leftxits want trade barriers, and that they are right to think it means their clientele get more of the pie, even if it is a smaller pie. You don’t seem to get that. You need to put yourself in the shoes of the less educated and less fortunate to see it.
Bloke in Germany
@Ecks,
The letxit voters want protection against free trade in what they produce – low-value labour. That is achieved most easily through controls on migration.
Honestly, is this really not elephant-in-room, staring-in-face obvious?
Ian B
We already have free trade with the Eurozone. The question is whether we are going to get into a situation where that stops. If we state from the outset that we have no intention of any barriers, the EU has no justification to impose any either. It’s not like we are currently two countries with massive tariffs trying to reduce them cautiously.
We are already in the right place. We just need to stay there.
Mr Ecks
“Do the free trade offer in a spirit of friendship and in the pub by lunchtime. Start throwing threats at already jittery people and you’ll end up with rapid escalation and no deal.”
Exactly so.
And if we do make the offer in a spirit of friendship and they throw it in our face then we still should not retaliate with tariffs I don’t believe they will be aggressive. Like a stabbed man bleeding out (they were already stabbed Julius Ceasar-like, ours is but one more major wound) they don’t have the resources.
They are in deep shit and any extra stress they put on themselves might well prove fatal.
Bloke in Germany
@Ian,
The EU has immense political reasons to inflict as damaging a deal on Britain as it can. And it will be playing with other peoples’ future prosperity – not its own, so the stakes are not that high (to the EU apparatus anyway). That’s a dangerous position to be in, especially with the manifestly unfit-for-office Juncker (who also has a personal beef with Cameron) at the helm. Even without Juncker’s revenge plans, Britain has to be treated like any other third country with no deal.
I am not sure the tariffs are actually much of a problem – I think the average tariff is around 3% (there’s a big list of them on some EU website, I went through a while ago when importing stuff from the USA). That’s not going to have remotely as much effect on trade as the swingeing taxes countries impose domestically on factors of production (such as labour). And the regulation is there whether you like it or not. You wanna sell you gotta meet the rules – wherever you are selling.
The biggest risks come from rescinding freedom of movement (which appears to be the biggest motivation for a substantial proportion of brexit voters), and from restrictions on capital flows and sales of services – the latter of which are still not properly single-marketed.
Trade in goods, and in particular tariffs on goods, is a red herring.
Bloke in Germany
It does occur that the expiration of Britain’s trade deals with the ROW via the EU is a far bigger problem than the risk of losing free trade with the EU. Whatever happens between Britain and the EU, it is back to square one with all of those.
Biggie–No it isn’t–cos most of them have jobs and the many of the migrants–esp RoP ones–don’t work at all or marginally. Poles aren’t taking many established jobs only cutting down on peoples chances of getting off the dole job.
Also “labour competition” has limits in that only European imports are much competition for lower paid jobs. The Rop and Sub-Saharans–excluding Doctors etc–are not just low skilled but have lower levels of IQ and work ethic. Nobody is very worried about islamists taking their job–just their country by demographic takeover.
BraveFart
The referendum was a good precedent for our EU exit negotiations. It showed the EU that, when the chips were down, we really were prepared to tell them to fvck off.
The only confident prediction I can make about the position the EU will take about our freedom to trade with them is that there will be no tariffs on Scotch Whisky. Jean Claude (Hic!) Juncker does not want the price (Hic!) of his breakfast to (Hic!) increase.
Mr Ecks
End of 1st para:”off the dole and into lower paying jobs”
Ian B
BiG-
We’re not discussing immigration policy, we’re discussing tariffs.
Bloke in Germany
@Ecks,
The ROP thing has little to do with the EU (OK, Germany has fucked that up big time the last year or so, which most dunces will conflate with the EU, but it seems to be getting back under control). Most of the UK’s ROP population dates back to the commonwealth, and most of the current expansion is likewise either fully legal immigration or marriages of convenience. In short, being in or out of the EU isn’t likely to make a lot of difference to the size of the ROP underclass.
Leftxit voters have been blaming Poles for stealing their jobs (or at least competing their wages down) for 10 years. Haven’t you noticed? And indeed they have. The point of free trade is lower prices – including lower prices for labour,. And still people don’t seem to realise that or understand why people don’t like it.
@IanB – immigration policy, as pertained to the EU (full freedom of movement) _is_ the very definition of free trade in labour – one of the most important and valuable commodities out there.
The Meissen Bison
BraveFart: isn’t Juncker’s tipple Cognac, though?
Bloke in Germany
From a purely personal perpsective, I, as a not low-paid professional have my pay set by the full force of global competition. Why should I also not benefit from the pay of people I hire being thus set?
A good number of commentators here are 1%-ers. “Back in the good old days”, many of us in that position would have had household staff. How many of you do now, apart from the odd cleaner and gardener? That’s the consequence of opening professional labour to global competition but protecting blue collar labour, be it by keeping migrants out or by keeping foreign products out.
Mr Ecks
Biggie–You mean the EU (a customs union) deals to increase the cost of other peoples goods going into the EU.
We’ll manage.
This “everything has to be settled” is a delaying and attack tactic by our foes.
As Stephen Molyneaux points out: What would have happened to abolishing slavery if it was said that before a single slave is freed we have to have a plan showing exactly how every jot of work those slaves do is going to be done once they aren’t slaves anymore. They “freed” slaves would still be picking cotton. In the face of an evil you move to end it. Swing the axe and let the chips fall where gravity dictates.
Also you assume that all those treaties were 1–worthwhile for anyone other than poli-bureaucratic dross and 2- going to last anyway.
What happens to those treaties on the economic collapse of the EU? Which is coming Brexit or not.
Ian B
Fine, put a tariff on migrants then if you like. Never heard of it before, since migrants aren’t a product but, give it a go why don’t you?
Bloke in Germany
@Ecks,
The baseline against which you should assess EU tariffs on goods from ROW (which as I pointed out earlier are mostly very low, roughly transaction-cost territory) is what you would have absent an EU. Which we don’t know. But it would likely be higher and messier than without. And you are also ignoring the Quid Pro Quo of no tariffs at all within the EU, which would not be the case absent an EU.
You can dream all you like about global free trade, the experience is that it only takes 1 country to decide it wants to start tariffing (USA anyone? Second time in a century?) and you have a problem created for those of your domestic producers hit by the tariff. This is going to involve costs and government involvement whether you like it or not. Which, incidentally, just proves that total sovereignty is a myth.
Bloke in Germany
@IanB,
Restrictions on migration reduce supply of labour in the country that applies the restriction. Is it really not obvious that this has the similar effect to a tariff – restrict supply, prices rise. That’s exactly what tariffs are intended to do, and do do.
Ian B
I’m not talking global free trade, but unilateral free trade, just like our host is.
Anyway, this is all academic I fear. It’s becoming increasingly clear that we are being betrayed on a scale that will make the Lisbon Treaty look like small fry.
We’ve been had, again.
Ian B
But just to make the point again, people and labour are different things. Migration policy is about people, not labour.
If you can move the labour without the people fine, knock yourself out.
Mr Ecks
Much of the RoP may have come via the Commonwealth –and CM is a problem at the top in the UK as everywhere in the West but we will not now have any of Merkel’s imports badged up by Germany and ready to bring the Rape-party to new highs over here. Likewise we will be bereft of any Keyser Soze act-alikes under the EU “deal”. So you are sort of right. NOW the EU isn’t going to make any difference to the size of the RoP underclass.
“The point of free trade is lower prices – including lower prices for labour,. And still people don’t seem to realise that or understand why people don’t like it. ”
You say that from a position of smugness Biggie –that no one is going to able to undercut whatever the Hell you do for a living. And so you look down on them poor folks.
And suddenly all sorts of people could do what you do for a fraction of your cost–so suddenly you are Big Breadwinner Hog no longer.
Of course you wouldn’t whinge about that.
Now I agree that in a free market lower labour costs ultimately free capital to produce other jobs.
But we live under the scummery of corporate socialism not Laissez-Faire. A scummery the EU is at the heart of. If your low-paying job goes the chance of getting a job in a new enterprise created from labour market savings is likely not there. Even the chances of getting a still lower paying job are far fewer than they would be in a free market.
And in fairness lots prefer life on the dole–an option that would not be there under free-markets ( friendly-societies and insurance to tide you over while you found new work yes–dole no). Benefits bill boosted by (and for) natives because of mass migration.
The migrants in low-paying jobs are also a benefits drain in many cases as they can claim tax credits and all sorts of other benefits. This is the UK taxpayer subsidising employers to pay below what they would have to pay in a free market.
Not much benefit to the taxpayer as low wages = little or no taxes either.
Some UK folk have benefited from mass migration–most haven’t. At best the calculation is neutral and the trouble caused isn’t worth it.
Skilled person of good character–come in -in the thousands. Mass import of the unskilled–no.
Mr Ecks
“Anyway, this is all academic I fear. It’s becoming increasingly clear that we are being betrayed on a scale that will make the Lisbon Treaty look like small fry.”
What leads you to say that Ian?
bloke (temporarily not) in spain
@BiG
“From a purely personal perpsective, I, as a not low-paid professional have my pay set by the full force of global competition. Why should I also not benefit from the pay of people I hire being thus set?”
Because you are a not low-paid non-professional. We have redistributative taxation as a matter of policy.The further you go down the pay scale, the more workers’ total benefits (wages – taxes + social provision) tilts towards the social provision until the net taxation goes from positive to negative. So the people you’re hiring will be subsidised out of taxation.
Van_Patten
The inimitable Steve:
‘If this gets left to the EU’s unelected lotus eaters’
Brilliant – that sums it up exactly, although I think you would need a classical education to understand how germane that reference is….
Luis Enrique
weak. Murphy level grasp of economics. Minford is a laughing stock. You need exports to pay for imports. Two of our biggest export industries – auto manufacturing and financial services – are making noises about upping sticks. Unilateral free trade on imports won’t help us if that happens. Sure exchange rates can mitigate but the new equilibrium can easily be one with reduced UK production + consumption.
Ian B
Luis-
You’re ignoring the effect on the receiving export market if they impose tariffs.
Ecks-
Have you been following developing events?
Mr Ecks
“Two of our biggest export industries – auto manufacturing and financial services – are making noises about upping sticks. ”
Our biggest industries? There is not a single UK car maker left. The owners could piss off any time they like. If they are “businessmen” who take a whole three and a half days to consider their future before announcing plans before they even know what is happening it is likely they won’t be in business too long.
“Unilateral free trade on imports won’t help us if that happens”
Should the assorted bizarre and unlikely circs you are whinging about eventuate then we will have to do something different.
If Yellowstone goes off we may all have to do something different. So what,
Had we gone on in the same old way things would be much worse.
Perhaps not for you Zorro or Biggie or some others who are alright Jack . But certainly for the rest of us.
Lets wait for the Italian Bank Collapse bailout plan before you start with your doomsday meltdown Zorro. That is a EURO own goal none of our doing.
Then come telling us of the bright future we have thrown away.
Mr Ecks
Ian–No –which events? Have you a link?
Bloke in Germany
@Fecks,
Actually, most people undercut me at what I do for a living. I make no secret about being one of the most expensive people at doing what I do anywhere in Europe. A few people in the US and Switzerland charge more, most people, especially Indians, a lot less. So I piss on nobody – having my pay set by the full force of global competition, while the people I hire to do stuff on my house (for example) are protected by limits on migration from outside the EU.
There is also a massive wave of IT- and automation/AI-related upheaval about to hit my industry. I’m only slightly more scared of it than of the last such waves.
Germany won’t be “stamping” any Syrians to ship to the UK any time soon – the process takes at least 8 years (just done it myself) and time spent on asylum don’t count. You need regular residency. And a job. And not (as far as can be told) an Islamist nutter. Or have rape convictions. And so on.
“Some UK folk have benefited from mass migration–most haven’t. At best the calculation is neutral and the trouble caused isn’t worth it.”
You don’t seem to realise you are making the same argument as I am as to why left-wing voters backed brexit. The difference is you don’t agree with the libertarian (and correct) view that free trade is a net plus – full marks however for getting what the libs don’t, which is that the pie is not evenly shared.
Pat
When a country (or the individuals within it) exports goods or services they capture the producer surplus. When a country imports it captures the consumer surplus. I don’t know of any work showing that one is systematically larger than the other.
We can be assured of the consumer surplus as Tim says, by simply declaring free trade.
However a bit of negotiation with a view to capturing both seems worth a try.
Indeed, simply because EU nations are used to free trade with Britain it shouldn’t be too hard to persuade them to keep it that way. The more so if reports are correct that they want things done and dusted in a hurry.
As to benefitting the poorer members of society that will require some work and expenditure which will be more affordable if the country as a whole is richer.
Rob
“Germany won’t be “stamping” any Syrians to ship to the UK any time soon – the process takes at least 8 years (just done it myself) and time spent on asylum don’t count.”
So they change the rules. Suddenly it isn’t eight years.
Who saw that coming?
Mr Ecks
Free trade is uniformly good in a free market. As has already been said Christ knows how many times we live under corporate socialism and thus complete freedom in some areas does not always lead to good results all round. We SHOULD live in a free market NOT arguing against freedom but mass migration is unacceptable.
Also your claims that you have lots of competition in a high tech industry doesn’t convince. How many are there in numbers? 700,000+ Poles and more of other EE groups in numbers have arrived here. That is a lot of competition for low pay jobs. I also suspect you have a lot more potential employers than most people looking for low paying jobs around Norwich etc.
Bloke in Germany
@Fecks,
As you will have noticed, I did not restrict my job search to a 3-mile radius around East Bumfuck. Like Norman Tebbit’s father, I got on my bike.
As did those 700,000 Poles.
Perhaps if some of Britain’s feckless would likewise get on Norman’s dad’s bike and participate in the far wider economy that they have access to (more than 3 miles from East Bumfuck) they would be better off.
Mr Ecks
That is just smugery Biggie.
You have no idea how long and far some have looked for work. Some will be feckless dole signers no doubt. But that is down to the absence of a free market where no such options exist.
I suppose 700,000 of them could have pissed off to Poland to take the jobs the ones over there ran away from. But then they could all have committed suicide instead. That would tie up loose ends for the comfortably off. And save on benefits.
If you mostly work online then you could work anywhere so putting yourself up as a Westward-the-Wagons-on-The-Trail-of-Tears type is iffy. You choose to live in Germany and travel–as in your recent trip to save Japan from nuclear catastrophe–
tomsmith
“They’re using the gravity model of trade. And part of Minford’s point is that modern communications and transport mean the gravity model doesn’t really work anymore.
Container transport to Brisbane, Birmingham AL or Beijing isn’t notably different from that to Bari or Budapest.
Geographic proximity just isn’t as important as it used to be.”
Hmm, but it sounds like Minford’s model is the older approach and fails to match reality as well as the gravity model, according to the authors of that article:
“Minford uses a 1970s-style trade model in which all firms in an industry everywhere in the world produce the same goods and competition is perfect. There is no product differentiation – a German-made car is identical to a Chinese-made car. Importantly, trade does not follow the gravity equation – everyone simply buys from the lowest cost producer.
As a consequence, after Brexit, the UK does not care about the tariff barriers exporters face in accessing the EU Single Market as they can sell as much as they like anywhere in the world. The fact that France is closer than Fiji essentially makes no difference in the Minford world – there is just one fictional world market into which all goods can be effortlessly sold.
If this sounds crazy, that’s because it is crazy.
In reality, the UK will still continue to trade extensively with our closest geographical neighbours, it’s just that the higher trade barriers mean that we will do less of it.
Comparing Minford’s approach with modern trade models
Modern trade models like the one we use in Dhingra et al. (2016) are ‘computable general equilibrium models’ like Minford’s. But they build in the gravity relationship, so do not have the extreme magnifying force of welfare gains from unilateral trade liberalisation. This is why we find that ‘Britain Alone’ only generates modest offsets to the losses of trade with our main partners.
All models simplify. But when the simplifications imply that the EU has created no new trade, despite the abundance of evidence (e.g. Magee 2008, HM Treasury 2016) to the contrary, it is the theory that must go back to the drawing board, not the data.
Our work and that of the other economic studies relies on data that show what has actually happened to trade after joining the EU, rather than just asserting what should happen in a theoretically dubious model.”
Tim Worstall
“In reality, the UK will still continue to trade extensively with our closest geographical neighbours,”
EU trade, as a proportion of trade, has been falling steadily….
Bloke in Germany
@TimW,
Which is hardly surprising as trade with those parts of the world which were not worth trading with 30 years ago is growing.
And the trade arrangements with those places are tied up with Britian’s EU membership. Which is why leaving is, as I said, less about the rather trivial tariffs that the EU applies to third countries than the loss of those deals with places with which trade is growing, and the urgent need to renegotiate them independently. The exact nature of Britain’s new relationship with the EU is actually the easy part, and the least important.
Mr Ecks
Because all those countries won’t want a deal with a nation escaped from the EU customs union–of course they won’t.
I bet they won’t even talk to us.
And of course–trade deals ares all govt to govt shit. I’m sure business to business things will go very well.
Andrew M
Any of our exports to you will accord with whatever regulations you have in your country. Just like British exports to the US, or China, currently do for those countries.
Hah. Such naivety. Tomorrow the Germans slap a seemingly-trivial regulation on bagless vacuum cleaners (thereby banning all Dysons). The next day they declare that JCBs have to be 10mm narrower than the ones made by JCB UK. The Belgians decide that Cadbury’s chocolates don’t contain enough cocoa solids. The French declare that our films aren’t French enough. And so on.
It’s trivial to protect domestic high-value-added sectors by tinkering with regulations. Our only remaining exports will be Walkers crisps and Vimto. We’ll all be driving third-hand cars and holidaying in Blackpool. At least the high street charity shops will be happy.
Bloke in Wales
So we pass a rule that says car brand names can’t use any of the letters ‘B’, ‘M’, or ‘W’.
If they want to be stupid, we can out-stupid them. Er, or something like that.
Mr Ecks
The EU has enough economic trouble already here and on the way to sink both sides at Jutland.
A trade war is the last thing they need.
Mr Ecks
The EU has enough economic trouble already here and on the way to sink both sides at Jutland.
This is a no-sell to the majority of brexit voters – working class uneducated left-wing protectionists. They have voted for trade to be less, not more, free.
Like I said earlier, this oddball coalition of the wilder fringes of libertarianism and the wilder fringes of the labour movement is irreconcilable. It is likely to end in tears for all of us.
Yes, Tim.
The working class voters will frankly not understand it but if we shut the border they’ll be happy with that. The economy is already predicated on free trade with the Eurozone anyway, remember. It’s not like it’s a change.
Ian, the working class would like to sell their productive capacity in exchange for a slice of the pie. While we all understand that free trade is basically good for most people you will never get this through their skulls.
And those people will be hurt by unilateral free trade even if the balance overall is positive. Unilateral will benefit the rich, and throw more of the poor out of work. If you can’t see that wealth/income divide becoming (even more of) an issue you are not looking far enough ahead.
BiG: Like I said earlier, this oddball coalition of the wilder fringes of libertarianism and the wilder fringes of the labour movement is irreconcilable.
And that oddball coalition numbers how many individual voters do you reckon?
It is likely to end in tears for all of us.
It’s certainly beginning with tears for the losers. And foot-stamping, pinching and hair-pulling too.
Almost worth voting Brexit for that spectacle alone.
you will never get this through their skulls.
Oh, and I forgot superiority, arrogance and condescension.
Unilateral free trade doesn’t preferentially benefit the rich. It keeps high street prices down, benefitting (poor) consumers.
Corn Laws, and all that.
I like your plan, Tim. But Theo (in the other thread) is right.
Logically, we’d just declare unilateral free trade on goods and services with the EU, and they’d do the same thing with us to maximise their utility. But we’re human beings dealing with other humans, so logic isn’t the only thing that comes into it.
The EU’s institutional leadership is probably prepared to cut off its member states’ nose to spite their face. We don’t want that to happen if it can be avoided.
The basis of all successful negotiation is that the other party must believe you’re prepared to walk away if you can’t agree on a deal. So we shouldn’t be too hasty to reassure our former EU partners that they’ll get unlimited access to our market come what may. We naturally want them to give our exporters the same courtesy.
We should also be reaching out to Merkel, Hollande, and the big export interests in France and Germany to present Junkers and co. with a fait accompli. If this gets left to the EU’s unelected lotus eaters they’ll look to create maximum drama.
@Ian,
Those who cannot consume because their ability to produce (no matter how it was protected by market-bucking policy) is taken away cannot consume.
@TMB, I reckon the oddball coalition consists of significantly more lefties than libertarians. At least most of the latter show some ability to think.
The primary concern in the EU Command Bunker at the moment is keeping the Euro going. They can’t afford any disruption, they will not want years of negotiations and brinkmanship.
Do the free trade offer in a spirit of friendship and in the pub by lunchtime. Start throwing threats at already jittery people and you’ll end up with rapid escalation and no deal.
Sometimes you should carry a big stick. Sometimes just having the big stick starts a fight.
@IanB, the corn laws were designed to protect wealthy domestic producers. It is possible also to design tariffs to protect poor domestic producers (such as limits on immigration of unqualified people – exactly what the leftixt voters want).
BiG-
Raising tariffs didn’t protect or create jobs in the 1930s and it won’t in the 2010s either.
Anyone have good responses to criticism of Minford’s numbers here:
http://voxeu.org/article/how-economists-brexit-manage-defy-laws-gravity
They’re using the gravity model of trade. And part of Minford’s point is that modern communications and transport mean the gravity model doesn’t really work anymore.
Container transport to Brisbane, Birmingham AL or Beijing isn’t notably different from that to Bari or Budapest.
Geographic proximity just isn’t as important as it used to be.
@IanB,
No because everyone was doing it then. And reciprocating. Which basically turns tariffs into a rather complex and expensive to adnimister tax and taxes have deadweight costs (so do tariffs but the idea at least, rarely borne out, is that they work differently).
The key difference here is the “unilateral” thing. And acknowledged to the point of blue in the face that “in total”, unilateral FT will be good for the UK – but the spoils will not be divided evenly. Add in the rest of the libertarian agenda (depending on the libertarian of course: flat income taxes, UBI, elimination of property taxation) you have a recipe for further hammering the poor (who want the barriers) to benefit the rich (who don’t want the barriers).
The problem with tariffs isn’t the deadweight costs. It’s the impoverishment of the consumer.
As with Labour’s disastrous “import substitution” nonsense after the War.
If we put up barriers, a trade war will start, and then we really will get the economic slump the Remainers are praying for.
Trade-type protectionism is not even on the mental horizon for most working class anti-Europe voters. They are against demographic invasion and takeover, not free trade. Make sure that the tide of low IQ migrants stops and that is job done. Some migrants–having useful skills and esp good character is not a problem. Mass invasion of intended displacers/replacements (complete with bad habits) is.
And free of EU cost-boosting, free trade is an advantage to us all.
So your argument is: This time is different.
That always ends well…
The problem with Tim’s thesis is; it’s not countries who trade. It’s individual people & companies. So, with free trade on imports from the EU, of course the individuals buying the goods benefit. Because EU exporters are competing in an open market with domestic producers. But if the EU slaps tariffs on UK companies exporting to the EU, then those companies are prevented from being competitive in the EU market & suffer. The second order effect is; a proportion of those individuals’ incomes will be dependent on exports.
Yes, free trade is beneficial. But unilateral free trade isn’t,
@Ian,
I would love to have global free trade pretty darn quick.
That is, however, not the world we live in, and probably never will be. There is politics. And that probably means we will never have a world in which goods, services, people, and capital move around with no regulation or cost whatsoever, and no international treaties to reciprocally minimise said regulations and costs. International trade is a classic area in which governments (and international organisations like the EU) can basically run a legalised protection racket.
Human nature being what it is, you will probably never be able to abolish that. So you need governments to cut deals with each other instead. And sometimes that involves agreeing to ban lead paint in kiddies’ toys.
Do you actually understand that (ultimately) you need to produce in order to be able to consume? Or are you so far from having to live on your paychecks that you no longer have that experience – which the vast majority of your compatriots do?
I understand entirely why the leftxits want trade barriers, and that they are right to think it means their clientele get more of the pie, even if it is a smaller pie. You don’t seem to get that. You need to put yourself in the shoes of the less educated and less fortunate to see it.
@Ecks,
The letxit voters want protection against free trade in what they produce – low-value labour. That is achieved most easily through controls on migration.
Honestly, is this really not elephant-in-room, staring-in-face obvious?
We already have free trade with the Eurozone. The question is whether we are going to get into a situation where that stops. If we state from the outset that we have no intention of any barriers, the EU has no justification to impose any either. It’s not like we are currently two countries with massive tariffs trying to reduce them cautiously.
We are already in the right place. We just need to stay there.
“Do the free trade offer in a spirit of friendship and in the pub by lunchtime. Start throwing threats at already jittery people and you’ll end up with rapid escalation and no deal.”
Exactly so.
And if we do make the offer in a spirit of friendship and they throw it in our face then we still should not retaliate with tariffs I don’t believe they will be aggressive. Like a stabbed man bleeding out (they were already stabbed Julius Ceasar-like, ours is but one more major wound) they don’t have the resources.
They are in deep shit and any extra stress they put on themselves might well prove fatal.
@Ian,
The EU has immense political reasons to inflict as damaging a deal on Britain as it can. And it will be playing with other peoples’ future prosperity – not its own, so the stakes are not that high (to the EU apparatus anyway). That’s a dangerous position to be in, especially with the manifestly unfit-for-office Juncker (who also has a personal beef with Cameron) at the helm. Even without Juncker’s revenge plans, Britain has to be treated like any other third country with no deal.
I am not sure the tariffs are actually much of a problem – I think the average tariff is around 3% (there’s a big list of them on some EU website, I went through a while ago when importing stuff from the USA). That’s not going to have remotely as much effect on trade as the swingeing taxes countries impose domestically on factors of production (such as labour). And the regulation is there whether you like it or not. You wanna sell you gotta meet the rules – wherever you are selling.
The biggest risks come from rescinding freedom of movement (which appears to be the biggest motivation for a substantial proportion of brexit voters), and from restrictions on capital flows and sales of services – the latter of which are still not properly single-marketed.
Trade in goods, and in particular tariffs on goods, is a red herring.
It does occur that the expiration of Britain’s trade deals with the ROW via the EU is a far bigger problem than the risk of losing free trade with the EU. Whatever happens between Britain and the EU, it is back to square one with all of those.
EM Smith has an interesting view on trade etc. from the far side of the pond
https://chiefio.wordpress.com/2016/06/25/brexit-the-night-after-the-morning-after/
Biggie–No it isn’t–cos most of them have jobs and the many of the migrants–esp RoP ones–don’t work at all or marginally. Poles aren’t taking many established jobs only cutting down on peoples chances of getting off the dole job.
Also “labour competition” has limits in that only European imports are much competition for lower paid jobs. The Rop and Sub-Saharans–excluding Doctors etc–are not just low skilled but have lower levels of IQ and work ethic. Nobody is very worried about islamists taking their job–just their country by demographic takeover.
The referendum was a good precedent for our EU exit negotiations. It showed the EU that, when the chips were down, we really were prepared to tell them to fvck off.
The only confident prediction I can make about the position the EU will take about our freedom to trade with them is that there will be no tariffs on Scotch Whisky. Jean Claude (Hic!) Juncker does not want the price (Hic!) of his breakfast to (Hic!) increase.
End of 1st para:”off the dole and into lower paying jobs”
BiG-
We’re not discussing immigration policy, we’re discussing tariffs.
@Ecks,
The ROP thing has little to do with the EU (OK, Germany has fucked that up big time the last year or so, which most dunces will conflate with the EU, but it seems to be getting back under control). Most of the UK’s ROP population dates back to the commonwealth, and most of the current expansion is likewise either fully legal immigration or marriages of convenience. In short, being in or out of the EU isn’t likely to make a lot of difference to the size of the ROP underclass.
Leftxit voters have been blaming Poles for stealing their jobs (or at least competing their wages down) for 10 years. Haven’t you noticed? And indeed they have. The point of free trade is lower prices – including lower prices for labour,. And still people don’t seem to realise that or understand why people don’t like it.
@IanB – immigration policy, as pertained to the EU (full freedom of movement) _is_ the very definition of free trade in labour – one of the most important and valuable commodities out there.
BraveFart: isn’t Juncker’s tipple Cognac, though?
From a purely personal perpsective, I, as a not low-paid professional have my pay set by the full force of global competition. Why should I also not benefit from the pay of people I hire being thus set?
A good number of commentators here are 1%-ers. “Back in the good old days”, many of us in that position would have had household staff. How many of you do now, apart from the odd cleaner and gardener? That’s the consequence of opening professional labour to global competition but protecting blue collar labour, be it by keeping migrants out or by keeping foreign products out.
Biggie–You mean the EU (a customs union) deals to increase the cost of other peoples goods going into the EU.
We’ll manage.
This “everything has to be settled” is a delaying and attack tactic by our foes.
As Stephen Molyneaux points out: What would have happened to abolishing slavery if it was said that before a single slave is freed we have to have a plan showing exactly how every jot of work those slaves do is going to be done once they aren’t slaves anymore. They “freed” slaves would still be picking cotton. In the face of an evil you move to end it. Swing the axe and let the chips fall where gravity dictates.
Also you assume that all those treaties were 1–worthwhile for anyone other than poli-bureaucratic dross and 2- going to last anyway.
What happens to those treaties on the economic collapse of the EU? Which is coming Brexit or not.
Fine, put a tariff on migrants then if you like. Never heard of it before, since migrants aren’t a product but, give it a go why don’t you?
@Ecks,
The baseline against which you should assess EU tariffs on goods from ROW (which as I pointed out earlier are mostly very low, roughly transaction-cost territory) is what you would have absent an EU. Which we don’t know. But it would likely be higher and messier than without. And you are also ignoring the Quid Pro Quo of no tariffs at all within the EU, which would not be the case absent an EU.
You can dream all you like about global free trade, the experience is that it only takes 1 country to decide it wants to start tariffing (USA anyone? Second time in a century?) and you have a problem created for those of your domestic producers hit by the tariff. This is going to involve costs and government involvement whether you like it or not. Which, incidentally, just proves that total sovereignty is a myth.
@IanB,
Restrictions on migration reduce supply of labour in the country that applies the restriction. Is it really not obvious that this has the similar effect to a tariff – restrict supply, prices rise. That’s exactly what tariffs are intended to do, and do do.
I’m not talking global free trade, but unilateral free trade, just like our host is.
Anyway, this is all academic I fear. It’s becoming increasingly clear that we are being betrayed on a scale that will make the Lisbon Treaty look like small fry.
We’ve been had, again.
But just to make the point again, people and labour are different things. Migration policy is about people, not labour.
If you can move the labour without the people fine, knock yourself out.
Much of the RoP may have come via the Commonwealth –and CM is a problem at the top in the UK as everywhere in the West but we will not now have any of Merkel’s imports badged up by Germany and ready to bring the Rape-party to new highs over here. Likewise we will be bereft of any Keyser Soze act-alikes under the EU “deal”. So you are sort of right. NOW the EU isn’t going to make any difference to the size of the RoP underclass.
“The point of free trade is lower prices – including lower prices for labour,. And still people don’t seem to realise that or understand why people don’t like it. ”
You say that from a position of smugness Biggie –that no one is going to able to undercut whatever the Hell you do for a living. And so you look down on them poor folks.
But what if this was invented:
https://www.youtube.com/watch?v=wiVcPQJLk2A
And suddenly all sorts of people could do what you do for a fraction of your cost–so suddenly you are Big Breadwinner Hog no longer.
Of course you wouldn’t whinge about that.
Now I agree that in a free market lower labour costs ultimately free capital to produce other jobs.
But we live under the scummery of corporate socialism not Laissez-Faire. A scummery the EU is at the heart of. If your low-paying job goes the chance of getting a job in a new enterprise created from labour market savings is likely not there. Even the chances of getting a still lower paying job are far fewer than they would be in a free market.
And in fairness lots prefer life on the dole–an option that would not be there under free-markets ( friendly-societies and insurance to tide you over while you found new work yes–dole no). Benefits bill boosted by (and for) natives because of mass migration.
The migrants in low-paying jobs are also a benefits drain in many cases as they can claim tax credits and all sorts of other benefits. This is the UK taxpayer subsidising employers to pay below what they would have to pay in a free market.
Not much benefit to the taxpayer as low wages = little or no taxes either.
Some UK folk have benefited from mass migration–most haven’t. At best the calculation is neutral and the trouble caused isn’t worth it.
Skilled person of good character–come in -in the thousands. Mass import of the unskilled–no.
“Anyway, this is all academic I fear. It’s becoming increasingly clear that we are being betrayed on a scale that will make the Lisbon Treaty look like small fry.”
What leads you to say that Ian?
@BiG
“From a purely personal perpsective, I, as a not low-paid professional have my pay set by the full force of global competition. Why should I also not benefit from the pay of people I hire being thus set?”
Because you are a not low-paid non-professional. We have redistributative taxation as a matter of policy.The further you go down the pay scale, the more workers’ total benefits (wages – taxes + social provision) tilts towards the social provision until the net taxation goes from positive to negative. So the people you’re hiring will be subsidised out of taxation.
The inimitable Steve:
‘If this gets left to the EU’s unelected lotus eaters’
Brilliant – that sums it up exactly, although I think you would need a classical education to understand how germane that reference is….
weak. Murphy level grasp of economics. Minford is a laughing stock. You need exports to pay for imports. Two of our biggest export industries – auto manufacturing and financial services – are making noises about upping sticks. Unilateral free trade on imports won’t help us if that happens. Sure exchange rates can mitigate but the new equilibrium can easily be one with reduced UK production + consumption.
Luis-
You’re ignoring the effect on the receiving export market if they impose tariffs.
Ecks-
Have you been following developing events?
“Two of our biggest export industries – auto manufacturing and financial services – are making noises about upping sticks. ”
Our biggest industries? There is not a single UK car maker left. The owners could piss off any time they like. If they are “businessmen” who take a whole three and a half days to consider their future before announcing plans before they even know what is happening it is likely they won’t be in business too long.
“Unilateral free trade on imports won’t help us if that happens”
Should the assorted bizarre and unlikely circs you are whinging about eventuate then we will have to do something different.
If Yellowstone goes off we may all have to do something different. So what,
Had we gone on in the same old way things would be much worse.
Perhaps not for you Zorro or Biggie or some others who are alright Jack . But certainly for the rest of us.
Lets wait for the Italian Bank Collapse bailout plan before you start with your doomsday meltdown Zorro. That is a EURO own goal none of our doing.
Then come telling us of the bright future we have thrown away.
Ian–No –which events? Have you a link?
@Fecks,
Actually, most people undercut me at what I do for a living. I make no secret about being one of the most expensive people at doing what I do anywhere in Europe. A few people in the US and Switzerland charge more, most people, especially Indians, a lot less. So I piss on nobody – having my pay set by the full force of global competition, while the people I hire to do stuff on my house (for example) are protected by limits on migration from outside the EU.
There is also a massive wave of IT- and automation/AI-related upheaval about to hit my industry. I’m only slightly more scared of it than of the last such waves.
Germany won’t be “stamping” any Syrians to ship to the UK any time soon – the process takes at least 8 years (just done it myself) and time spent on asylum don’t count. You need regular residency. And a job. And not (as far as can be told) an Islamist nutter. Or have rape convictions. And so on.
“Some UK folk have benefited from mass migration–most haven’t. At best the calculation is neutral and the trouble caused isn’t worth it.”
You don’t seem to realise you are making the same argument as I am as to why left-wing voters backed brexit. The difference is you don’t agree with the libertarian (and correct) view that free trade is a net plus – full marks however for getting what the libs don’t, which is that the pie is not evenly shared.
When a country (or the individuals within it) exports goods or services they capture the producer surplus. When a country imports it captures the consumer surplus. I don’t know of any work showing that one is systematically larger than the other.
We can be assured of the consumer surplus as Tim says, by simply declaring free trade.
However a bit of negotiation with a view to capturing both seems worth a try.
Indeed, simply because EU nations are used to free trade with Britain it shouldn’t be too hard to persuade them to keep it that way. The more so if reports are correct that they want things done and dusted in a hurry.
As to benefitting the poorer members of society that will require some work and expenditure which will be more affordable if the country as a whole is richer.
“Germany won’t be “stamping” any Syrians to ship to the UK any time soon – the process takes at least 8 years (just done it myself) and time spent on asylum don’t count.”
So they change the rules. Suddenly it isn’t eight years.
Who saw that coming?
Free trade is uniformly good in a free market. As has already been said Christ knows how many times we live under corporate socialism and thus complete freedom in some areas does not always lead to good results all round. We SHOULD live in a free market NOT arguing against freedom but mass migration is unacceptable.
Also your claims that you have lots of competition in a high tech industry doesn’t convince. How many are there in numbers? 700,000+ Poles and more of other EE groups in numbers have arrived here. That is a lot of competition for low pay jobs. I also suspect you have a lot more potential employers than most people looking for low paying jobs around Norwich etc.
@Fecks,
As you will have noticed, I did not restrict my job search to a 3-mile radius around East Bumfuck. Like Norman Tebbit’s father, I got on my bike.
As did those 700,000 Poles.
Perhaps if some of Britain’s feckless would likewise get on Norman’s dad’s bike and participate in the far wider economy that they have access to (more than 3 miles from East Bumfuck) they would be better off.
That is just smugery Biggie.
You have no idea how long and far some have looked for work. Some will be feckless dole signers no doubt. But that is down to the absence of a free market where no such options exist.
I suppose 700,000 of them could have pissed off to Poland to take the jobs the ones over there ran away from. But then they could all have committed suicide instead. That would tie up loose ends for the comfortably off. And save on benefits.
If you mostly work online then you could work anywhere so putting yourself up as a Westward-the-Wagons-on-The-Trail-of-Tears type is iffy. You choose to live in Germany and travel–as in your recent trip to save Japan from nuclear catastrophe–
“They’re using the gravity model of trade. And part of Minford’s point is that modern communications and transport mean the gravity model doesn’t really work anymore.
Container transport to Brisbane, Birmingham AL or Beijing isn’t notably different from that to Bari or Budapest.
Geographic proximity just isn’t as important as it used to be.”
Hmm, but it sounds like Minford’s model is the older approach and fails to match reality as well as the gravity model, according to the authors of that article:
“Minford uses a 1970s-style trade model in which all firms in an industry everywhere in the world produce the same goods and competition is perfect. There is no product differentiation – a German-made car is identical to a Chinese-made car. Importantly, trade does not follow the gravity equation – everyone simply buys from the lowest cost producer.
As a consequence, after Brexit, the UK does not care about the tariff barriers exporters face in accessing the EU Single Market as they can sell as much as they like anywhere in the world. The fact that France is closer than Fiji essentially makes no difference in the Minford world – there is just one fictional world market into which all goods can be effortlessly sold.
If this sounds crazy, that’s because it is crazy.
In reality, the UK will still continue to trade extensively with our closest geographical neighbours, it’s just that the higher trade barriers mean that we will do less of it.
Comparing Minford’s approach with modern trade models
Modern trade models like the one we use in Dhingra et al. (2016) are ‘computable general equilibrium models’ like Minford’s. But they build in the gravity relationship, so do not have the extreme magnifying force of welfare gains from unilateral trade liberalisation. This is why we find that ‘Britain Alone’ only generates modest offsets to the losses of trade with our main partners.
All models simplify. But when the simplifications imply that the EU has created no new trade, despite the abundance of evidence (e.g. Magee 2008, HM Treasury 2016) to the contrary, it is the theory that must go back to the drawing board, not the data.
Our work and that of the other economic studies relies on data that show what has actually happened to trade after joining the EU, rather than just asserting what should happen in a theoretically dubious model.”
“In reality, the UK will still continue to trade extensively with our closest geographical neighbours,”
EU trade, as a proportion of trade, has been falling steadily….
@TimW,
Which is hardly surprising as trade with those parts of the world which were not worth trading with 30 years ago is growing.
And the trade arrangements with those places are tied up with Britian’s EU membership. Which is why leaving is, as I said, less about the rather trivial tariffs that the EU applies to third countries than the loss of those deals with places with which trade is growing, and the urgent need to renegotiate them independently. The exact nature of Britain’s new relationship with the EU is actually the easy part, and the least important.
Because all those countries won’t want a deal with a nation escaped from the EU customs union–of course they won’t.
I bet they won’t even talk to us.
And of course–trade deals ares all govt to govt shit. I’m sure business to business things will go very well.
Hah. Such naivety. Tomorrow the Germans slap a seemingly-trivial regulation on bagless vacuum cleaners (thereby banning all Dysons). The next day they declare that JCBs have to be 10mm narrower than the ones made by JCB UK. The Belgians decide that Cadbury’s chocolates don’t contain enough cocoa solids. The French declare that our films aren’t French enough. And so on.
It’s trivial to protect domestic high-value-added sectors by tinkering with regulations. Our only remaining exports will be Walkers crisps and Vimto. We’ll all be driving third-hand cars and holidaying in Blackpool. At least the high street charity shops will be happy.
So we pass a rule that says car brand names can’t use any of the letters ‘B’, ‘M’, or ‘W’.
If they want to be stupid, we can out-stupid them. Er, or something like that.
The EU has enough economic trouble already here and on the way to sink both sides at Jutland.
A trade war is the last thing they need.
The EU has enough economic trouble already here and on the way to sink both sides at Jutland.
A trade war is the last thing they need.
Even stupidity has its limits.
Not according to Einstein. And the EU seem to be doing the best they can to prove him right.
My contacts in the WWC tell me they voted Leave so they can raise immigration barriers against Mad Muslim Mullahs.
Wot, they’re still allowed in? We’ve voted to stop white Christians coming in? That’s not what we were promised!