It's very frustrating
reading all the opinions about what kind of Brexit we will have in relation to trade
effects, and whether being outside the EU's customs union will incur the
penalty of this or that tariff. For those that don't know, a customs union is a
politically constructed trade bloc within which member states trade without tariffs,
and outside of which other nations have tariffs imposed upon them. A free-trade
area is a politically constructed trade bloc whose nations have signed a
free-trade agreement that has very few or sometimes no trade barriers.
The existence of tariffs
is infuriating to anyone who understands economics, because they do harm in
virtually every area of society. Governments impose them because it gives them
a bit of extra revenue, and because there are enough uninformed people in the
country who think that by making imports harder the government makes exports and
domestic business easier, leading to the domestic economy being better off (an
asinine misapprehension that I blogged about here)
The reality is, by increasing
the cost of imports, tariffs hurt all domestic economies, as they lead to a
decline in consumer surpluses. A really obvious case is seen with the EU's
tariffs on agricultural products, which make agricultural products more
expensive for EU consumers by putting up barriers to competition. Restricting
competition doesn't just inflate prices, it also diminishes quality for the consumer, because if
your industry is protected from competitors it is shielded from the need to
increase efficiency. And that's to say nothing of the wider costs of tariffs to
developing nations trying to compete in a global economy, and all the
additional costs to consumers when trade partners retaliate with their own tariffs.
Tariffs are a horrid
political interference in free trade, and the harm they impose is hugely
frustrating, as seemingly few people ever really stop to question their existence
and challenge politicians to put a stop to them. Such are the benefits of free
trade that even if every country is imposing tariffs on us, we'd still be
better off domestically by not imposing tariffs on foreign exporters. Hearing
our political elite spitting and spluttering about negotiating their way out of
numerous political interferences is one of the saddest reminders of how frivolously
politicians impede and retard all the prodigious benefits of free trade.
