Certain economic ideas are so bad that both sides of the political aisle seems to like them. So it is with trade wars and reactive tariffs. Us imposing tariffs upon imports into this country makes us, in this country, poorer. This is not a useful threat to use at Johnny Foreigner. But use it people demand that we do:
Ursula von der Leyen, President of the European Union Commission, is threatening to escalate the growing vaccine war between Britain and the rest of Europe over supplies of the Oxford-AstraZeneca jab. At a meeting of ministers on Thursday she may well invoke emergency powers to block exports from the continent.
But hold on. It is surely impossible for any British government to accept that without retaliating. We shouldn’t block the shipment of vaccines or their ingredients to Europe. That will simply cost lives on the continent, and two wrongs never make a right.
Instead, the UK should borrow a trick from the United States. Smart tariffs. We should unveil, by Thursday morning, a list of immediate, emergency levies that will be applied on EU exports to the UK, such as cars, foods, wine, clothing and machinery. With luck, they won’t have to be imposed – but the threat of “smart tariffs” may well be enough to ensure vaccine supplies keep flowing.
That’s from the Telegraph of all places.
As Joan Robinson pointed out some decades back the correct reaction to someone putting rocks in their own harbours is not to place more in your own.
Or, for the hard of understanding. So, we impose a tariff on something coming into the UK. That makes that something coming in more expensive. That means that we as consumers must pay more to have that thing – we consumers are worse off.
But it gets worse than that. All our domestic producers are kept – at least partially – in line by that foreign competition. That J. Foreigner will sell us brie at a reasonable price keeps our local producers of Wensleydale, Cheddar and, yes, brie at a slightly lower price than they would be in the absence of that competition. So, even if none of that foreign muck comes in because the tariffs are too high for us to buy any of it we still suffer – all the local muck also goes up in price. We Brits are made worse off by tariffs upon imports into Britain.
So, now let’s run the threat again with our new understanding. Ursula, foul-fiend bureaucrat that she is, tells us that she is going to make us worse off by denying us access to those lovely foreign made vaccines. Har Har, suffer Roast Beefs! Our reaction is that we’ll make ourselves suffer some more by denying ourselves access to those lovely foreign made goods.
Hmm, such a threat that they’re break down and sob at the negotiating table, right?
Or, you know, we could not stab ourselves in the front and just not make ourselves worse off. Your choice, obviously, but reason only leads to one of those two solutions as being useful.