Thread by @DmitryOpines

1/ ** Accessible Analogy Thread ** - Why an FTA which reduces all tariffs to 0% still means customs checks.

@AnnaJerzewska and @SamuelMarcLowe have written the genius versions of this. My edition is to explain the issue to randoms at the bar, if that's how you choose to flirt.

2/ Imagine your country is a university night club, with a cover charge for entry.

Anyone seeking entry for a drink approaches the door (border), gets screened by the bouncer (regulatory checks) and then waits in line to pay a cover (tariff).

3/ The university administration (government) enters into negotiations with the club (other government) and reaches an agreement that students don't have to pay any cover (100% tariff reduction).

How does the bar make this work in practice? Two options.

4/ Option one: Customs Union.

The University is a closed campus or fee-for-entry. If you are able to reach the club's main entrance inside the university, you have already passed a gate and either proven you're a student or paid a fee.

5/ This means the club can eliminate the cover desk and queue all together (no customs checks) at its main entrance.

Note: If the university and club can also agree on a common dress code policy (regulations) the club could also do away with its main entrance bouncer.

6/ Option two: 0% Tariff FTA

The University is a more open campus, with guests and others wandering through. Just because you're walking into the club's main entrance, which is inside the university, doesn't mean you're a student.

7/ To prove you are eligible for the cover (tariff) free entry you have to present documents to prove to the bar you're a current student (a rules of origin check).

At a bar, this could be as simple as flashing a valid student ID. In trade, it's far more complex and costly.

8/ Even if it's as simple as just presenting a student ID, not everyone turning up at the club's main university side entrance will be able to comply.

Some will have forgotten their cards, some will be people living on campus but not studying etc.

9/ These people will need to pay cover, and so the club needs a cover desk (customs check) even at an entrance which only faces the university. Even if everyone complied, it'd still need a desk and queue just to check everyone's student ID's (rules of origin documents).

10/ This is not hypothetical. This study says preference utilization rates for EU FTA's average 70-75%. So 25%-30% of those who could use an FTA to import/export from the EU with lower tariffs don't.

That's a lot of people queuing to pay cover.

etsg.org/ETSG2015/Paper…

11/ Hopefully the above provides an accessible analogy you can reach for to better understand or explain this issue.

Note: Student ID's are an imperfect analogy for Rules of Origin certificates, because the latter can be so fiendishly complex (see @SamuelMarcLowe's life's work).

12/ Disclaimer: Obviously as a trade never I have never been to 'da club' and all club related information in the above is based on a music video for Chingy's remix of J-Kwon's 2004 hit, "Tipsy."

Because that's how I get down.

/Thread