Macron Threatens to Veto EU – South American Trade Deal

Macron has threatened to veto a trade deal with the Mercusur bloc of South American countries, if Brazil’s new President-elect Jair Bolsonaro follows through with his pledge to withdraw from the Paris Climate Agreement.

The deal is still not complete, even after 17 years of negotiations. When the EU negotiates trade deals with other countries, any one of the 28 EU member states can veto the signing of it, making the process painfully sclerotic. When the UK leaves the EU’s Customs Union, we will be able to sign a deal with Brazil if we want to – without having to seek Macron’s permission…

Bananas to Central Planners

More digestible than an IEA free trade pamphlet…

The Economist: Celebrates 175 Years – with Steve Bannon

The Economist is celebrating it’s 175th year of publication with a paen to liberalism in the form of an essay. It is a bit of navel gazing combined with dollops of self-justification. Editor Zanny Minton Beddoes admits in her essay that The Economist has become the in-house journal of the liberal elite, what Steve Bannon calls “the party of Davos”. No institution is immune to intellectual fashions, the newspaper has in Guido’s lifetime championed Keynesianism, then neo-liberalism, and now the ‘Washington Consensus’. It has of late become overly preoccupied with climate change and whatever else concerns the faddish Davos crowd. The irony of The Economist, which was founded in 1843 to champion free trade, free markets and limited government, being on the wrong side of the argument on Brexit, in thrall to the EU and the thousands of tariffs that protectionist bloc enforces, is striking. Never mind the ambitions of those in Brussels for a pan-European super-state rigidly regulated from the Black Sea to the Atlantic.

On immigration Zanny admits for liberals “it is not too wide of the mark to caricature their views on migration as more influenced by the ease of employing a cleaner than by a fear of losing out.” Not a single democracy has escaped pain from uncontrolled mass migration, no politician can ignore the votes of those who have to compete with newcomers, the so-called “deplorables” in America and working-class Brexit voters in Britain. Almost all Western democracies have tired of fast migration. On this Zanny recognises reluctantly that “in the short run, liberals risk undermining the cause of free movement if they push beyond the bounds of pragmatism.” She proposes reform of the rules for refugees, despite accepting that in reality most immigration is driven by economics.

How adrift the current editor of The Economist is from the founding principles can be seen with her support for Universal Basic Income – putting everyone on the dole, disincentivising work. She cites a modest proposal for America to introduce a “UBI of $10,000 a year” which she admits “would require a tax take of at least 33% of GDP”, to be paid for by more disincentivising wealth taxes. So much for limited government.

One could go on, Steve Bannon did at their recent shindig. Judge for yourself how Zanny fared:

Happy birthday to The Economist…

Japan’s EU Free Trade Deal

Good news yesterday that the EU and Japan signed a huge free trade deal on Tuesday that cuts or eliminates tariffs on nearly all goods. A major boost for the global trading system that is under increasing threat from Trumpian protectionism. Trade between the EU and Japan currently stands at €86 billion…

The deal does allow for some regulatory alignment in so much that, for example, car safety and environmental standards will be aligned, Japan will also adopt international labelling standards for textiles and medical products. Something rational brexiteers can live with so long as the regulatory alignment is not restrictive of non-export goods. What the agreement does not require is for Japan to join the customs union or the single market. It does not require the ECJ’s ultimate jurisdiction, instead a mediation panel and the Dispute Settlement Body of the WTO will be the arbitration method. This is normal for free trade agreements.

Remainers can’t explain why the UK can’t have a similar deal with the EU. Anyone might think that the EU is just trying to frustrate Brexit…

Germany Seeks “Comprehensive Free Trade Accord” With UK

Bloomberg has the scoop: Germany’s foreign ministry is working on a “balanced, ambitious and far-reaching” free trade deal with Brexit Britain – apparently they want a deal on security, agriculture, trade, energy, air travel and research. Sounds sensible…

Iceland: Everyone Wants a Free Trade Deal With Britain

Interesting insights from Icelandic foreign minister Gudlaugur Thor Thordarson on the Today programme this morning. He says “everyone” wants a free trade deal with Britain and urged the EU to sort a deal “as soon as possible”.

Thordarson: “It’s clear that when Britain starts to negotiate their own free trade deals then everyone wants to make a free trade deal with Britain.”

Humphrys: “Is that right? Everyone wants to make a free trade deal with Britain?”

Thordarson: “You’re the fifth largest economy in the world. I mean, everyone wants to sell you good and services. It’s just as simple as that. Then is the arrangement between the EU and UK, and honestly I think it’s just very important that a solution is found as soon as possible, because it’s very important that we will not see, and I say the same thing to both sides, it’s very important that we will not see any technical or trade restrictions now in Europe. That would be a step backwards and everyone would lose from that. You can debate if the EU would lose more than the UK, that’s the not the thing, everyone would lose.”

Thordarson also explained the trade benefits to Iceland of not being a member of the EU. Humphrys didn’t sound convinced…

IEA: Brexit Britain Should Commit to Unilateral Free Trade

Guido hears today’s new Institute of Economics Affairs report on trade policy has been well-received by ministers. It argues that no deal with the EU on trade would not be a disaster for the UK, recommending Britain commits to a policy of unilateral free trade with the rest of the world, eliminating all barriers to imports regardless of whether other countries impose tariffs on their imports from the UK. It would then be up to the EU if it wanted to impose tariffs, which would hurt EU consumers by raising prices. In such a scenario, the IEA report concludes the UK would likely be given tariff free access to the single market:

“There are many myths being perpetuated about trade policy – and more specifically about the UK’s relationship with the EU – that must be debunked. Many people believe that disaster will befall us if we do not forge a deal with the EU. In fact, we could unilaterally eliminate all import tariffs, which would give us most of the benefits of trade, and export to the EU under the umbrella of the WTO rules. Then we can seek free trade deals with all major trading partners, including the EU.”

If a bad deal is offered by the EU, the UK should say thanks but no thanks, walk away and unilaterally set tariffs at zero…

Cable Dreams Brexit May Never Happen

Fringe party leader, who got the job because no one else wants it, indulges in senile fantasy. Meanwhile on planet earth the US president promises comprehensive free trade deal “very, very quickly” with the world’s most dynamic economy. Before the EU…

The Great Fairtrade Scandal: Only 23% Goes to Producers

Yesterday human tea bags protested outside Sainsbury’s AGM over the supermarket’s decision to replace “Fairtrade tea”. The stunt by Oxfam and CAFOD was – they claimed – to highlight that farmers and workers who produce ‘Fairly Traded’ tea for Sainsbury’s will no longer have direct control over how they spend the premium – the additional cost on the basic price meant to benefit them. Instead, they will have to apply to a board set up by Sainsbury’s. Is that really true?

The truth is that just 23.3% of the £11,350,000 of revenue captured by the Fairtrade Foundation – mainly from supermarkets paying for their endorsement – actually goes to producers. More money, over 35%, is spent on “education and awareness”. Which means the Jolyons and Taras spend more money on themselves ‘campaigning’ than they give to the actual farmers who produce the products. It is a scandalous rip-off.

The Jolyons and Taras who dressed up as teabags yesterday should be ashamed of their self-interest. Sainsbury’s are withdrawing from the scheme because they intend to give more money to third-world producers than the Fairtrade Foundation currently gives them…

Britain’s £40 Billion-a-Year Untapped Trade Potential

Britain’s untapped trade potential will comfortably offset any effects of Brexit on exports to the EU, new research by the think tank Open Europe has found. Their new report in conjunction with Prosperity UK has located £41 billion-a-year of under-performing non-EU export markets. Remarkably, Britain is currently on track to under trade with India, Canada and Israel by £10 billion-a-year…

Membership of the EU has stopped the UK trading freely with faster-growing non-EU countries, though the report argues we should not focus solely on Free Trade Agreements, instead seeking bilateral investment treaties and targeted agreements to address particular trade issues. It argues for greater engagement with India, Canada, Israel and China prioritising UK service exports. These are practical, sensible solutions to make Brexit work from Open Europe’s director Henry Newman, who says:

“With the right trade policy, the UK can seize the opportunities that Brexit will create, while compensating for its impact on exports to the EU… whatever Government is formed after 9 June, it should prioritise trade with India, Canada, and Israel, and – in the case of services – China. The UK needs a trade policy to fit the future and by 2030, our model indicates, the UK will have £41 billion of untapped trade potential with the top ten countries for goods and services.”

The parlous state of Britain’s exports was immediately identified by Theresa May’s government when they took office. Liam Fox, far from twiddling his thumbs as some tiresome Remainers would have you believe, has spent most of his time at DIT trying to get exports up to shape. There is a lot of work to be done but this will be key post-Brexit…

Leaving the Protectionist Union’s 12,651 Barriers to World Trade

The EU’s Common External Tariff comprises 12,651 different taxes and quotas imposed on goods from the rest of the world. This is what the Customs Union amounts to, a protectionist barrier to free trade with the 162 countries outside the EU. Don’t fall for the hype that it reduces trade barriers.

Garlic has a 200% external tariff to protect French farmers, tariffs double the price of sugar cane imported by Tate & Lyle from outside Europe. The policy was designed by the EU to boost beet sugar producers in 19 EU countries – at the expense of companies like Tate & Lyle who use cane sugar instead. Some US jeans face a 26% tariff, shoes face 17% tariffs to protect Italian cobblers. Some agricultural products, e.g. beef and dairy, have very substantial tariff rates, 54 dairy products alone have tariff rates of more than 75%. Just a few examples out of thousands showing how British consumers’ best interests are sacrificed to protect European producers from global competition…

Regional deals tend to divert trade rather than create it. Although they do lower some barriers, most do nothing to tackle the highest tariffs and each deal tends to enshrine the preferences of its largest members, making it harder to bring regional blocks together within a cohesive set of globally liberalised rules. The EU’s Customs Union only liberalises internal trade within the EU. Free trade will allow us to import raw materials from outside the EU at lower cost and without the tariffs designed to prop up inefficient European industries and high cost agriculture. The single market is really an internal market for 10% of the world’s population, the global market is a much bigger opportunity to be seized…

New Zealand PM Talks Up “High Quality” Trade Deal

Britain’s global trading partners are eager to get cracking…

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Quote of the Day

Ruth Davidson on working with PM Boris

“I have worked with him when he was Foreign Secretary. I will work with whoever the Prime Minister is. I haven’t had a phone call yet to ask me to run his campaign in Scotland. I am not expecting the call. But I will genuinely judge him on the same criteria as I judge any of the candidates.”

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