Wednesday 2 January 2019

The thing about trade is nearly everyone is wrong...


It is imports that matter and tariffs are just a tax on imports (meaning people are less well of):
When highly visible and politically influential producers believe themselves to lose sales because of some foreign-government’s trade practice, they complain to their home government, which then confronts the foreign government. The home government acts like a combined consigliere and hit-man for the complaining producers. But this hit-man’s immediate targets are home-country consumers and politically invisible home-country producers. That is, this hit-man – by raising tariffs – inflicts hurt on his and the complaining-producers’ fellow citizens. And this hit-man promises to ramp-up the hurt that he inflicts on his fellow citizens until the foreign government stops inflicting identical hurt on its citizens.
Of course it would be nice if foreign places stopped taxing their citizens for having the audacity to buy foreign products but it really is less important than us stopping taxing our citizens for buying stuff not made in the UK. Don Boudreaux's analogy above is a good one but a better one is here.

We are stuck in a world - that of David Cameron's "Global race" - where trade is seen as a zero sum game and where, if we don;t do these things to ourselves, some other country will "win". Worse still, trade is seen as something that is gifted to us by a benign government rather than a right removed from us by the powerful. This is the language of the "trade deal" where two or more governments agree not to interfere quite so much in the private arrangements of their citizens on a equal basis ("we won't make our people more poor if you agree not to make your people more poor").

Government's job isn't to manage the process of trade but rather to ensure that it is conducted fairly, that contracts are honoured and goods are safe. And the place to start (we can start doing this in the UK on 30th March) is by abolishing all the unnecessary tariffs - those taxes on the private choices of our citizens.


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1 comment:

Shiney said...

Well said....

And once we're out of the EU we can also remove the 'internal trade tariff' or VAT as it is more commonly known.