The IEA discussion paper (HERE) setting out a possible trade policy post Brexit says free trade should be at its heart. That is to trade without tariffs or non tariff barriers and the paper says these barriers include, "tariffs (or taxes on imports), import quotas and discriminatory product standards, government procurement policies or intellectual property (IP) rules".
As far as tariffs are concerned, other economists would say what the paper itself says, "But tariffs have come down over the years and non-tariff barriers are now much more important". So, what the author Kevin Dowd seems to be arguing is that we are on a gentle downward path to zero tariffs along with most other countries, let's leap off and plummet to zero overnight unilaterally! It does not make sense. Mr Dowd is an Economist for Brexit along with Patrick Minford, who is quoted extensively in the article:
"The work of Patrick Minford suggests that consumer prices would fall by about 8 per cent, food prices would fall about 20 per cent and GDP would rise by about 4 per cent".
Farmers would I am sure be grateful for a cut of 20% in food prices.
And product standards are usually to protect the consumer. Why do governments introduce them? Because when something goes wrong, I am thinking here about the horse meat scandal or the Grenfell tower disaster, people look to the government and demand to know why these things are "allowed" to happen. Without product standards and inspection regimes how can they be controlled?
As for intellectual property rights, who would bother inventing anything if the results could be copied by anyone with impunity?
No one could object to free trade but we have to be mindful of the consequences. The IEA paper says, "Think of the UK textile industry of 40 years ago facing competition from lower cost imports from India. Over time, the industry shrinks and eventually disappears. The old jobs go and are replaced by others that are better paid. We see the same process at work in manufacturing: faced with low-cost competition, UK workers move into jobs that are more capital and skill-intensive. In cars or steel, they move out of the cheaper end of the market and focus on cars and steel of higher quality. Yes, low-skilled jobs are lost to poorer countries, but the economy gains more than it loses because workers move up the value chain into higher-paying jobs"
No one could object to free trade but we have to be mindful of the consequences. The IEA paper says, "Think of the UK textile industry of 40 years ago facing competition from lower cost imports from India. Over time, the industry shrinks and eventually disappears. The old jobs go and are replaced by others that are better paid. We see the same process at work in manufacturing: faced with low-cost competition, UK workers move into jobs that are more capital and skill-intensive. In cars or steel, they move out of the cheaper end of the market and focus on cars and steel of higher quality. Yes, low-skilled jobs are lost to poorer countries, but the economy gains more than it loses because workers move up the value chain into higher-paying jobs"
This is all fine, except of course if you have one of the "old jobs" that go. The bizarre thing is the people in areas where these sort of manufacturing jobs are located were more likely to vote for Brexit.
And Mr Dowd seems to be suffering even more delusions than other Brexiteers when he claims this:
"An implication of this principle [of continuity] is that the UK does not have to agree to any post-Brexit trade treaty with the EU. If there is no agreement, the default is not that trade will stop until the EU deigns to give its approval. Instead, the default is that trading arrangements will remain substantially the same. I say substantially, not formally. Formally, post-Brexit, the UK would not be trading with the EU as a member state of the EU; instead, it would be trading with the EU as an independent state under the umbrella of WTO rules. But if there is no trade agreement with the EU, then, unless the EU explicitly imposes tariffs, the UK would continue to trade with the EU on tariff-free terms".
I daresay Mr Dowd is in a minority of one in believing we can continue to trade with the EU on exactly the same zero tariff terms. The principle of continuity also must apply to the EU treaties which say third countries imports will be subject to tariffs and the UK will be a third country after we leave.
