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There’s A Slight Illogic From Paul Krugman Here Over Brexit And Trade

It seems that Britain shouldn’t try for customs union with the US because, and yet it should remain inside the EU customs union because the same because. There’s a certain logical tension there, no?

What about a Britain-U.S. customs union? That would be hugely problematic, among other things because given the asymmetry in size Britain would effectively be giving Washington complete control over its policy.

Well, yes, OK. The US economy is $17 trillion or so, the British £1.8 trillion maybe. But:

By contrast, the EU sets common external tariffs, which means that once you’re in, you’re in: once goods are unloaded at Rotterdam they can be shipped on to France or Germany without further customs checks.

The EU economy is some €15.3 trillion, the UK £1.8 trillion again.

That asymmetry is sufficiently different that the UK would lose from that loss of political power over trade with the US and yet gains so much from that same loss to Brussels, eh?

Hmm, what a little logical conundrum there.

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Rhoda Klapp
Rhoda Klapp
6 years ago

How about no customs union with anybody? How about free trade?

6 years ago
Reply to  Rhoda Klapp

Well, no. Customs union simply means a border with no inspection. The adjacent country needs to adopt rules compatible with yours or this becomes an easy way for your own rules to be evaded. It would be excellent if the process of joint rulemaking never extended to rules against shrimp-flavored crisps, precluded the time wasted deciding whether the brick in your back seat is subject to the tariffs for a Building Material or a Vandalism Tool, and above all prevented our current situation, where a domestic blowhard decrees ad-hoc tariffs every week for the sole purpose of getting foreign blowhards… Read more »

5 years ago

Plus, he’s not much for the Gravity Model, eh?

“The point is that while America offers a market comparable in size to that of the EU, it’s much further away, so that even if the UK could make an incredible deal with us, it wouldn’t be worth nearly as much as the customs union they have.”

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