Sunday, 5 August 2018

More drivel from Briefings For Brexit

"A senior private-sector economist, who prefers to remain anonymous, suggests an alternative to the Chequers White Paper. This involves ditching the transition period and instead adopting a temporary period of unilateral free trade that will radically alter the dynamics of the current negotiation process with the EU" boasts Briefings for Brexit.

I can see why it's anonymous. I wouldn't put my name to this crap either. One detects though that this might very well be the dead hand of shady Shanker Singham or somebody close to him. It smells like Westminster bubble drivel. 

I will not give this the full demolition treatment because the whole tactic of them producing this drivel is to suck up our time in rebutting it - and there is no point in that since well constructed arguments do not make a dent. There are, however, one or two points to address.

Firstly, there is the matter of non tariff barriers in which the author claims...
Much has been made of non-tariff barriers. The Treasury has claimed these might average 20-30% of UK export values to the EU. This number is as much as 10 times too high – a careful study by Kee & Nicita suggests the average tariff equivalent of NTBS facing UK exporters to the EU, weighted by imports, would be just 3.4%. A detailed study of post-Brexit NTBs for several sectors in the Netherlands found they might total around 1% of trade values.
These abstract figures might as well be plucked out of the air for all the use they are. This is analysis is presumably based on normative operational conditions - which, of course, a no deal Brexit is not. What we are talking about when we talk about no deal is a very sudden change to the trading regime in terms of customs and regulation. 

Though we might be porting over EU regulation is does not function as a standalone set of rules without the systems for authorisations and mutual recognition. We therefore become a third country overnight without the necessary preparations to handle the level of customs declarations while the whole system grinds to a halt thanks to the imposition of third country controls at Calais. Here's what the Road Haulage Association says about that...

So we are then looking at a ripple effect through just about every supply chain, which worsens depending on the sector and the level of third country import requirements. This is major for food, pharmaceuticals and chemicals, the latter two requiring a re-start of the product authorisation process. The article makes mention of this,noting that the barriers are "far from insurmountable" but what they don;t mention is the millions it will cost firms to go through the re-authorisation process.

They then go on to say: 
So we should not be scared of the impact of shifting to WTO-based trade with the EU as many of the supposed downsides for exporters are relatively modest or can be largely mitigated. There are a number of areas where agreements would be helpful – on aviation for example and mutual recognition of automobile approvals. But for many of these issues, there are existing third country precedents that can be invoked. The EU itself has made clear it wants a deal on aviation.
This is something we see quite often. We are told there are means of mitigation but we are not told precisely what they are or what they cost - but always concede that a from of deal is required for the continued functioning of the aviation and automotive sectors. That, by definition, is not no deal. That's the UK going cap in hand back to Brussels to ask for the sort of agreements available to third countries - which by and large require observance of EU rules with direct implementation of ECJ decisions.

The author then makes the Minford case for unilaterally eliminating all of our trade defences: 
My proposal is for a temporary period of unilateral free trade that will radically alter the dynamics of the current negotiation process with the EU. This would involve the UK ditching the proposed transition period and announcing that from March next year, an independent trade policy will be followed. Initially, the UK will not apply any import tariffs against any country – as it is allowed to do under WTO rules – and will recognise EU goods as being compliant from a regulatory perspective. The UK will also conduct minimal border checks, perhaps 0.1% of consignments from the EU. These can be dispensed with entirely for large trusted firms such as the car manufacturers.
So we ditch the transition principle and go straight of the cliff edge while unilaterally dropping all of our standard trade defences to the EU. This is the zombie argument already debunked by The Leave Alliance (now viewed 135029 times). Staggeringly, though, the author causally claims that this would be for two years only. 
This period of unilateral free trade will last two years, at the end of which, the UK’s MFN tariffs will revert to the current rates applied by the EU, meaning substantial tariff barriers on UK agricultural imports from the EU and the 10% car tariff. At the end of the period, the UK will also adopt its own set of product regulations which imports must conform to, having built the capacity to do this in the meantime. During the two-year period, sensitive sectors such as agriculture will continue to receive subsidies broadly similar to now plus assistance to alter their pattern of production.
So after two years of of chaos we then impose a raft of non tariff barriers, and in accordance with the MFN principle, these presumable apply to all and not just the EU. My question being, how does that hep anybody and what does it serve?

Unilateral trade liberalisation of itself is a terrible idea in that it exposes UK businesses to predatory competition, often subsidised, which then sees a collapse of UK livestock production and subsequently production of arable feedstuffs. It gets worse though. 
But crucially, this proposal also allows the UK to turn the tables on the EU on trade. During this two-year ‘open border’ period, all the UK’s trading partners will be invited to talks on free trade agreements, to avoid having to face MFN tariffs at the end of the two-year period. Trade partners such as the US, Australia, New Zealand and perhaps the EFTA states will be keen to reach agreements with the UK as soon as possible to lock in their improved market access and steal a march on EU producers. 
This is all very well if the author can supply a single instance of a comprehensive trade deal being agreed in anything like two years - especially without years of preceding research. This tells you the author has no practical knowledge of trade whatsoever. It really is a flight of fantasy. I've forgotten more about trade than this author knows.

Skipping to the conclusions...
It is likely that the EU will eventually decide to strike a broad-based free trade deal with the UK under these circumstances. But even if an EU trade deal is not struck in the two-year period, the UK will have had time to build an efficient border system for trade with the EU and put in place a new and independent regulatory system, allowing future trade frictions to be minimised.
Again a comprehensive deal in two years from scratch is simply not going to happen. Moreover the assertion that we will have had the time to build an efficient border system for trade ignores just about everything we know about government procurement of software - which at its most efficient would not be ready to prototype any time inside seven year much less roll it out and train customs officials and exporters. 

One could do a more thorough debunking of this piece but as notes, we are dealing with enemies of reason. Any number of experts could tell him he is wrong. We could quote chapter and verse from numerous official sources, all of them showing why controls will apply to UK produce from day one. But there is hardly any point. These individuals are anti-knowledge, making up their own narratives to support their case, without the slightest resort to fact.

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