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To Shout About Tariff Free Trade, Again

We’ve had one sensible decision made about trade post-Brexit. Bangladeshi goods will continue to enter the UK tariff free. Now, if only people got to grips with the more general application of this point:

The underlying argument comes from Adam Smith himself — you can understand why someone at an institute named after him might like this — and is about the division and specialization of labour. None of us is good at everything, some of us at least are good at doing some things. It makes sense for things to be done by people who are good at them.

That way, we get better things and also we get more of them. So, that’s the division of labour, we each do different things and make different things. As we do so we are “specializing” and as we do more of the one thing then we will get better at them. So far, this is just obvious from any observation of the human beings around us.

It applies to who cooks and who puts up the bookshelves in a household just as much as it does to who makes clothes and who does the accounting in the economy as a whole.

If we are to have this division though, we clearly need to have trade following it. It’s no good the cook having nowhere to put her books, nor the shelf-maker not being able to eat. Or, of course in the country as a whole, only the clothes-makers having anything to wear and the accountants being entirely naked. So, that increased and specialized production must be traded.

The thing about this argument is that there is no obvious difference between the few people within a household, those in a village, a town, a country or the entire world. We are all made better off by more division, more specialization, and more trade in the resultant higher production.

So, stop taxing people for buying from the specialists. That is, have no tariffs on anything.

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jgh
jgh
5 months ago

It’s post-Brexit trade, not trade post-Brexit. Post-X is a *pre*positional adjective, if you want a postpositional adjective the correct one is “after”.

John Galt
5 months ago
Reply to  jgh

You’re being a pendant.

Wheels
Wheels
5 months ago
Reply to  jgh

I just learned something. Thanks

Bloke in Kent
Bloke in Kent
5 months ago
Reply to  jgh

I understood Tim’s sentence, however I don’t really understand yours and I can’t be bothered to go and look it up. Language is about conferring knowledge; so long as it’s understood, who cares?

Jasper
Jasper
5 months ago

Generally I agree with the sentiment. However, you should always add the qualifier ‘fair’ as in we want tariff free trade as long as it is fair and not subsidised etc. I expect Bangladeshi goods meets that requirement but we should also require those workers involved to be fairly treated.

Spike
Spike
5 months ago
Reply to  Jasper

Sure, free trade provided I can examine money flows in a foreign country. Free provided we are allowed to assert mistreatment of foreign workers. Free provided no foreigner works in conditions in which I would not work. Free provided the foreign country screws up its labor laws just as badly as my country has done. Sorry; I’ll take my free trade free.

Jasper
Jasper
5 months ago
Reply to  Spike

Ah, the extreme approach. That is not what I am saying. I am certainly not wanting their laws to be as screwed up as ours or to follow ours down a rabbit hole. I just mean they should meet certain minimum standards e.g. avoid child and slave labour. I also don’t want countries undermining our economy by subsidising their trade (e.g. China). That should not be too much to ask surely?

Jasper
Jasper
5 months ago
Reply to  Tim Worstall

Yes I take your point and I would agree with you. That would obviously cover most trade. I was really considering countries like China (probably only China really) who would use trade as kind of warfare where they are prepared to keep trading trading at a loss (and can afford to). Yes its great in the short term because you obviously get their ‘money’ but maybe not so good in the long run when it destroys your industry.

Nila24
Nila24
5 months ago
Reply to  Jasper

So you are against their kids having a meal for having a work? Or you intend to feed them yourself as it is your actions (refusing to buy on moral grounds) that left them out of work and without any income.

Bloke on M4
Bloke on M4
5 months ago
Reply to  Jasper

What’s wrong with it being subsidised? If Russia wants to subsidise tours by ballet companies, great. Cheaper ballet. Please come again.

Bongo
Bongo
5 months ago

Quotas do more harm than tariffs. Don’t be a member of any organisation that likes quotas.

Charles
Charles
5 months ago

No mention of David Ricardo? Trade is stil advantageous even if you’re the best at everything – you profit by only doing what you are best at and paying others for everything else – even if you are much better at doing those things too. And tariffs and other trade barriers are why Brexit will be a disaster. In theory, it might work if it meant much freer trade globally, but WTO terms are not free of such trade barriers and progress on agreements has been extremely slow (as was predicted by many, but dismised by Brexiteers). A far more… Read more »

Bloke in Kent
Bloke in Kent
5 months ago
Reply to  Charles

As Tim has articulated many times, WTO rules set only the maximum, not minimum tarrif rate, which can include 0%. The only stipulation is that you must apply the same rate to all other WTO members unless there is a separate agreement between countries which overrides WTO rules.

Charles
Charles
5 months ago
Reply to  Bloke in Kent

Indeed. So to get the rate to 0% requires negotiation, but we;re doing rather badly at that. Perhaps unsurprisingly as the negotiation is in the hands of the deluded Brexiteers who never took it seriously in the first place despite lots of warnings.

Quentin Vole
Quentin Vole
5 months ago
Reply to  Charles

to get the rate to 0% requires negotiation
No it does not, only if we want to apply it to some countries and not to others. And I thought we were doing rather well at trade deals, unlike the glacial progress of the EU.

Charles
Charles
5 months ago
Reply to  Quentin Vole

We can apply 0% to out imports – the negotiation is to get otehr countries to apply 0% to our exports.

Spike
Spike
5 months ago
Reply to  Charles

That would be a good thing for domestic producers. But there’s no reason these rates must be symmetric, and it’s often argued on these pages that Bangladesh screwing its citizens who elect to buy British is no argument for Britain to screw its own citizens “to get even.”

Charles
Charles
5 months ago
Reply to  Spike

Unfortunately, I believe our politicians would be too timid to drop our tariffs to 0% so we’re left with them needing to get some face-saving concessions (and, indeed, there are some rare cases when tariffs are justified)

Spike
Spike
5 months ago
Reply to  Charles

Trade is indeed always advantageous, as efficiencies gained by partnering with foreigners are ruined by drawing arbitrary lines and imposing taxes. But trade is most advantageous when these partnerships exploit differences, such as moving labor-intensive activities to a low-wage country.

Bloke rebuts Charles’ 2nd paragraph entirely. Free Britain could make decisions more stupidly than the EU has, but is not required to.

Quentin Vole
Quentin Vole
5 months ago
Reply to  Spike

TBF as a Brexiteer I have every confidence that British fonctionnaires are at least as idle, useless and stupid as those in Brussels. But Brexit gives us the chance to vote the idiots/rascals in charge out every few years.

Charles
Charles
5 months ago
Reply to  Quentin Vole

We always had that power – just never used it. That fact does not bode well for our future.

Quentin Vole
Quentin Vole
5 months ago
Reply to  Charles

Rilly? I must have missed the election of Barroso, Druncker, von der Leyen etc etc.

Charles
Charles
5 months ago
Reply to  Quentin Vole

They were elected in the same election that gave us Dominic Cummings.

Or, more seriously, we didn’t need to care about them as the only power they had over us was that which we gave them. At any time we were free to ignore them and let the EU try to enforce its rules. What was it going to do? Expel us?

Quentin Vole
Quentin Vole
5 months ago
Reply to  Charles

Yes, indeed, we could adopt the German (or French, or Spanish, or Italian or …) approach and simply ignore EU rules that don’t suit us. But we’re Britain and we don’t behave like that. Look at the outcry from the usual suspects about the Internal Market Bill.

And (as I’m sure you well know) Cummings is an advisor to elected politicians; nothing like members of “the European Commission, the only institution empowered to initiate legislation”, to quote the EU’s own words.

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