Trade tariff question

New Topic
This topic has been archived, and won't accept reply postings.
 skog 05 Feb 2019

I don't know much about this so I thought I'd ask.

The money raised from trade tariffs goes to the treasury, along with tax revenues and the like (or at least, I think it does).

What are the likely effects on money available for public spending from

(a) Dropping all tariffs, as sometimes proposed on here

(b) Going to WTO terms and so introducting lots of tariffs we don't currently impose?

I appreciate that these won't be simple, as if cutting tariffs increases trade, there will be revenue raised from that indirectly - and it seems likely that there will be areas where that's true, and others where it isn't, and I've no idea at all how it would balance up anyway!

 timjones 05 Feb 2019
In reply to skog:

The tariffs on our imports are the least of our problems, at least we have some control on them.  It's the tariffs on exports that are going to hurt businesses in the UK.

As a sheep farmer I'm likely to see at least a 30% fall in the price of my lamb if we leave without a deal.

1
 stevieb 05 Feb 2019
In reply to skog:

> What are the likely effects on money available for public spending from

> (a) Dropping all tariffs, as sometimes proposed on here

According to Patrick Minford / JRM, if we dropped all tariffs this would be good for the British economy as a whole. The increased trade in finance and high end goods and services would more than compensate for the complete destruction of British farming and British volume manufacturing. I don't know if this is based on the assumption that all other countries drop tariffs and restrictions to the UK, from a sense of old fashioned fair play, after we have unilaterally dropped ours.

Most other people see the end of farming and manufacturing as too high a price, rather than one of those things.

 

 

OP skog 05 Feb 2019
In reply to timjones:

Yep, I suspect you're right.

I'm wondering about the contribution of the tariffs we impose to the national budget, though, and whether changing tariffs is likely to have much knock-on effect on public spending, servicing the national debt, or other taxes.

 timjones 05 Feb 2019
In reply to stevieb:

I can't see how it can be based on anything other than a naive assumption that other nations will reciprocate.

OP skog 05 Feb 2019
In reply to stevieb:

I think it pretty much goes without saying that the extreme free-marketeers are every bit as batshit crazy as the extreme protectionists.

I'm just wondering whether some of the proposed changes to trade tariffs are likely to have significant direct effects on the country's cash flow.

 timjones 05 Feb 2019
In reply to skog:

> I'm just wondering whether some of the proposed changes to trade tariffs are likely to have significant direct effects on the country's cash flow.

Well it's certainly likely to exempt me from any need to pay income tax

 

1
 tlouth7 05 Feb 2019
In reply to skog:

Tariffs on imports (the ones we have control over) make those imports more expensive. This is good for producers (e.g. sheep farmers) because it makes foreign goods more expensive, so timjones' lamb is worth more on the UK market. It is also directly good for the Treasury because they raise some cash which they do seem to like doing for some reason...

OTOH cutting import tariffs is good for consumers because it makes buying goods cheaper (see: lamb). Therefore our buying power goes up. It is possible that this leads to an increase in spending and therefore government tax receipts (e.g. from VAT). Whether that increase offsets the lost direct revenue is unclear.

This is all compounded by the fluctuations in relative value of the various currencies, which are almost certainly linked in non-trivial ways to the tariffs themselves. At the moment the pound is down which makes imports more expensive but exports cheaper. That would be good if we were a net exporter...

 Jack B 05 Feb 2019
In reply to skog:

To put some very rough figures on:

We import about £340bn of good from the EU each year.  Trade tariffs would raise some fraction of that, depending on what tariff was set, and how much the imports reduce as a result. It might add up to some tens of billions per year.

We export about £270bn/yr to the EU. Those exports will attract tariffs.  The government might decide to use some of it's income from tariffs to subsidise exporters who are being hit by EU tariffs.  If so, they spend some of the new receipts to mitigate some of the economic damage.

To put those numbers in context, total government spending is about £800bn/yr, corporation tax receipts are about 56bn/yr, income tax & NI about £320bn/yr. So £20bn not game changing but not to be sniffed at. It's pretty hard to judge how those tax receipts would be affected by trade tariffs, my guess is that it will be a net loss, and I think the majority of economists agree with me, but it's not an exact science.

 Andy Hardy 05 Feb 2019
In reply to stevieb:

 

> Most other people see the end of farming and manufacturing as too high a price, rather than one of those things.

I find this particularly odd: quitters are always ready to call on the Dunkirk / Blitz Spirit, but they never mention the security flaw in being an island nation without a farming industry.

Funny that

1
OP skog 05 Feb 2019
In reply to Jack B:

Thanks.

As I understand it (which I don't think is very well), in a no-deal scenario if the UK went to WTO rules and decided not to impose tariffs on EU goods to avoid disruption, it would also have to drop tariffs with everyone else.

Do you know roughly how much is involved there?

 pec 05 Feb 2019
In reply to skog:

> I don't know much about this so I thought I'd ask.

> The money raised from trade tariffs goes to the treasury, along with tax revenues and the like (or at least, I think it does).

The UK only keeps 20% of the revenue from tariffs, apparently to cover the cost of their collection, the remaining 80% goes to the EU

 

OP skog 05 Feb 2019
In reply to pec:

Interesting.

If that's the case, do you know whether and how much of the share the EU takes it uses to mitigate tariffs on EU (including UK) goods exported elsewhere, and where the rest of it goes?

 pec 05 Feb 2019
In reply to skog:

> Interesting.

> If that's the case, do you know whether and how much of the share the EU takes it uses to mitigate tariffs on EU (including UK) goods exported elsewhere, and where the rest of it goes?


I'd assume it wasn't hypothecated and all went into a big pot for whatever they want to spend it on, whether that includes tariff mitigation I don't know.

 jimtitt 05 Feb 2019
In reply to skog:

The import duty goes into the EU budget, it is about 15% of the total.

OP skog 05 Feb 2019
In reply to jimtitt:

Thanks.

Is the converse true at all - does the EU use any of its budget to mitigate tariffs on EU goods exported to countries that charge them?

 jimtitt 05 Feb 2019
In reply to skog:

I doubt it, under WTO rules that would be a subsidy and the other country could apply a yet higher penalty tariff.

 timjones 06 Feb 2019
In reply to tlouth7:

> Tariffs on imports (the ones we have control over) make those imports more expensive. This is good for producers (e.g. sheep farmers) because it makes foreign goods more expensive, so timjones' lamb is worth more on the UK market. It is also directly good for the Treasury because they raise some cash which they do seem to like doing for some reason...

I'm guessing that you don't know very much about the lamb market?

Post edited at 15:38
 tlouth7 06 Feb 2019
In reply to timjones:

I thought I did, not claiming to know as much as you though. AIUI current high prices are a result of various weather related factors coupled with the weak pound making UK lamb more valuable for export.

Edit: re-reading my original comment I may have given the impression that I believe that leaving will be good for farmers. That is absolutely not my position; rather I state that imposing import duty (as we do while in the common market) increases prices for domestic producers.

Post edited at 16:18
 Tony Jones 06 Feb 2019
In reply to skog:

> I think it pretty much goes without saying that the extreme free-marketeers are every bit as batshit crazy as the extreme protectionists.

> I'm just wondering whether some of the proposed changes to trade tariffs are likely to have significant direct effects on the country's cash flow.


 

Listening to some of those extreme free-marketers on Radio 4's Today programme on the way home from a night shift was enough to stop me getting to sleep. It seems that, if we are to leave without a deal, some of these idiots are proposing to let all imports into the country tariff-free (note: without any reciprocal agreements in place for our exports). It'll be good for the consumer apparently, however I'm guessing that it'll go pear-shaped pretty quickly when people no longer have the means to consume due to loss of livelihood. I find it hard to comprehend how we've managed to get ourselves into such a mess in just a couple of years.

I'm afraid Donald Tusk has it right although, as mentioned elsewhere, his statement will be twisted by the Facebook meme authors and tabloid headline writers to provide more outrage amongst the intellectually challenged.

I don't know about places in hell but there's a good few people who should be in prison right now for their crimes.

I'm angry. (Perhaps you can tell.)

1
 timjones 06 Feb 2019
In reply to tlouth7:

It's far from that simple.

Exports into Europe provide vital competition against the handful of processors and retailers that control our home markets. Even when the exchange rate isn't in our favour the loss of exports is crippling as we found out during the foot and mouth outbreaks in 2001 and 2007.

Then there is the issue of carcass balance with much of the fifth quarter being exported whilst we import legs from NZ for our own consumption. On top of this there appears to be a strong possibility that we will wind up retaining the lions share of NZ's quotas when we leave.

Believe me, as a sheep farmer the prospect of leaving with no deal is terrifying.

 wercat 06 Feb 2019
In reply to Tony Jones:

>I find it hard to comprehend how we've managed to get ourselves into such a mess in just a couple of years.

> I'm afraid Donald Tusk has it right although, as mentioned elsewhere, his statement will be twisted by the Facebook meme authors and tabloid headline writers to provide more outrage amongst the intellectually challenged.

> I don't know about places in hell but there's a good few people who should be in prison right now for their crimes.

Hear Hear


New Topic
This topic has been archived, and won't accept reply postings.
Loading Notifications...