1/ Several people have asked for a non-technical explanation of why this S*n article about EU trade policy that Mogg is promoting is false. Here goes.
2 First of all, no tariffs are charged on goods coming from the EU (obviously) or from countries with which the EU has a free trade deal. That includes South Korea (TVs).
That means that the majority of these products sold in shops haven't been subject to a tariff. So no saving
That means that the majority of these products sold in shops haven't been subject to a tariff. So no saving
3 The EU has FTAs with some developing countries and reduced or zero tariffs with many others.
So for bananas, most African and Caribbean bananas don't face a tariff; Latin American bananas do. A bit more on that (I wrote an article on it years back: kluwerlawonline.com/abstract.php?a… )
So for bananas, most African and Caribbean bananas don't face a tariff; Latin American bananas do. A bit more on that (I wrote an article on it years back: kluwerlawonline.com/abstract.php?a… )
4 Bananas were the last area of EU trade policy to be harmonised in 1993-4, because EU countries tended to favour bananas from former colonies (if they had them) or Latin American bananas (if they didn't). Also there are a few EU bananas grown in the Canaries etc.
5 After a bitter argument the EU decided to favour the African/Caribbean bananas from some Member States' ex-colonies - although the extent of that preference has since been reduced after much EU and WTO litigation.
"Wicked EU!" the Moggies cry. But wait...
"Wicked EU!" the Moggies cry. But wait...
6 Favouring African/Caribbean bananas was *UK policy* due to Commonwealth links and because *UK companies* made money on the trade. Ditto France for the equivalent reasons. *Germany* was outvoted and annoyed - due to consumer reaction and losses for German companies.
7 The US complained in the WTO - despite not growing bananas - because *US companies* made money from the Latin American trade. So the free trade advocates weren't being altruistic (*gasp*). "Follow the money" covers everyone's motives here.
8 Bottom line: the UK supported the EU's banana trade policy, because it benefited UK companies and retained some Commonwealth links (nb regular "banana boats" carry other exports). Why would the policy change after Brexit?
But wait! There are other flaws with the S*n article.
But wait! There are other flaws with the S*n article.
9 (Trigger warning for mathsphobes)
The S*n calculates its "savings" based on the *retail price* of the goods. But tariffs (if charged at all) apply to the value of the product when it's *imported*. That's obviously less than the final retail price, due to VAT, shop markup etc
The S*n calculates its "savings" based on the *retail price* of the goods. But tariffs (if charged at all) apply to the value of the product when it's *imported*. That's obviously less than the final retail price, due to VAT, shop markup etc
10 This is especially true for cigarettes, where, as we all know, the retail price includes a huge excise tax.
Bottom line: even where tariffs *are* charged, the amount of savings (50p or whatever) per product would be much less than the S*n claims.
Bottom line: even where tariffs *are* charged, the amount of savings (50p or whatever) per product would be much less than the S*n claims.
11 Next: *all* the S*n numbers include a basic maths error
You know how, if a product costs £100, and the VAT rate is 20%, the *amount* of VAT is *not* £20/item, but about £19 (since the VAT is charged on the *pre-VAT* cost)?
The S*n made that error with its tariff calculations
You know how, if a product costs £100, and the VAT rate is 20%, the *amount* of VAT is *not* £20/item, but about £19 (since the VAT is charged on the *pre-VAT* cost)?
The S*n made that error with its tariff calculations
12 Next: on butter in particular, the S*n doesn't understand the tariffs. This is an area where tariffs are based on the volume, not the import price. See this thread.
Bottom line: the tariff adds 15p, not £1, to the cost of non-EU butter
Bottom line: the tariff adds 15p, not £1, to the cost of non-EU butter
13 Overall bottom line: EU tariffs have some impact on consumer prices, but vastly less than the S*n suggests. (They ignore products where the tariff is zero or low).
14 Tariffs aren't unique to the EU - and the S*n itself published Prof Minford saying abolition of tariffs would "mostly eliminate manufacturing" in the UK: chroniclelive.co.uk/news/north-eas…
Shorter bottom line: the S*n is lying to you /ends
Shorter bottom line: the S*n is lying to you /ends
