lördag 2 december 2017

EU self-punishment

People talk as if the post-Brexit lock-out of exports from the UK will do no harm inside the EU. Import substitution, they say, will quickly solve any problems.

Matters are not so simple. There are many firms in EU countries whose major or sole business is as agents or importers from the UK. Many manufacturers produce items which include UK-made components which are not easily substituted, if at all. Simple things like the positions of holes for mounting bolts may not be in the correct positions. Substantial redesign and re-tooling may be necessary. Then there is the matter of spares and consumables; equipment may need to be scrapped prematurely due to non-availability.

At the consumer level this also affects, for example, the availability of matching items, such as replacements or additions to tableware, a popular import from the UK to Scandinavia, or paints, wallpapers.

There are also popular UK foods and confectionery; import substitution does nor work if you like some particular type of English cheese, such as Blue Stilton. Loss of all of these will lead to costs and frustration within the EU.

More importantly, the EU's approach to Brexit is illustrative of a wider issue relating to its entire philosophy of trade. Trade takes place when something is of more value to one of the parties than to another. An exchange takes place which leaves both parties to the transaction better off and results in a net increase in wealth. It is not an act of charity. Anything which gets in the way of the free exchange of goods and services results in a diminution of wealth. The agent of obstruction is in most situations government.

In constructing a single market inside a tariff wall, the EEC/EU has stymied the production of astronomical amounts of wealth which would otherwise have been enjoyed by the half billion people inside it. Any economist of the classical school, from the Physiocrats, via Smith, Ricardo, J S Mill and Henry George, would have been able to set out a long list of reasons why a tariff wall was a bad idea. The reason why their insights have been ignored is not because they were refuted but because politicians have been in thrall to powerful and vociferous sectional producer interests.

The loss of wealth does not stop inside the EU, but has spread all round the world. I can give a personal example. I cannot trade with my cousin in Australia because of the tariffs costs and paperwork involved; we concluded it would be too much trouble to set up a system to deal with it. Both of us have lost out due to the EU barrier to free trade. That is not the end of the loss. My potential customers lose because they cannot obtain a product they might have wanted. My cousin's suppliers, who are poor indigenous people, are deprived of a market for their produce, which would have given them useful cash income to lift them above their subsistence. So the EU trade rules create a chain of losses stretching from the Australian outback to the affluent connoisseurs in Europe. It is not just bad economics. It is stupid, and indeed wicked.

Thus, the uniting of the peoples of Europe, a noble objective in itself, was long ago highjacked by foolish or corrupt politicians at the behest of the aforesaid sectional producer interests. But then it is we who elect these foolish or corrupt politicians every time.

2 kommentarer:

Robin Smith sa...

Agreed on all except the final allegation which is too limited. That is, who elects these foolish or corrupt politicians every time?

Physiocrat sa...

Thanks, I changed the final sentence. The public ie we, are as much to blame as anyone.

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