Tuesday, 17 January 2017

LILLEY WRONG ON TRADE

Peter Lilley has a piece in Brexit Central (HERE) where he argues we will be better off even if we revert to WTO rules. Because we import more from the EU that we export to it he claims:

"the Treasury would collect £12.3 billion in tariffs on imports from the EU whereas our exporters would pay only £6.5 billion tariffs to continental governments"

This is in my opinion, to misunderstand the way tariffs work. Exporters in the EU may well pay £12.3 billion to our treasury but they will collect it (or a lot of it) from the UK buyer. In other words the money is akin to a tax that we will pay ourselves. Mr Lilley seems to believe that European exporters will all bear the tariffs themselves - without increasing prices - which seems a bit naive. They may have to absorb some of the cost but my guess is most of it will be passed on and they will probably lose a little market share.

Depending on which market is affected this may be good news for home based manufacturers but in other areas there may be no home based supplier and so all prices will increase by the amount of the tariff. We will certainly be the loser.

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