The real price of a new EU-US trade war

Last month, trade commissioner Cecilia Malmström told European trade ministers that if President Trump hits the EU with 25 per cent tariffs on cars, Brussels is prepared to hit back with tariffs on some $20 billion worth of American exports.

Trade wars don’t involve the outright destruction of military action, but both kinds of conflict put political ambitions and vested interests ahead of human welfare. And though the damaging effects of trade wars are not always immediately apparent, make no mistake, they are numerous, deep and extensive.

In March, President Trump reiterated his intention to impose tariffs on cars and car parts from the EU should the two parties fail to arrive at a comprehensive deal. The US Commerce Department had previously submitted a report to the White House in mid-February, concluding that Trump could justify the tariffs on national security grounds.

As with military intervention, what matters is an outcome, not a justification. If the US imposes a 25 per cent tariff on imported EU cars and parts, it would mean higher prices for US consumers and, ironically, damage the American car industry, which depends on imported parts. By the same token, if the EU retaliates, it will end up hurting not only US exporters, but European consumers too.

Protectionists, however, haven’t been very creative in their reasoning. One of their key motivations is rooted in the idea that tariffs protect  domestic industries. The EU has been extremely successful in employing this argument. Export subsidies pushed through the Common Agricultural Policy (CAP) were initially developed to guarantee high prices for European farmers, offset by import levies. Protecting farmers was the ostensible aim of the CAP.

What policymakers didn’t see, however, was that the CAP resulted in excess supply from national producers, coupled with a lack of demand from domestic consumers. What’s more, once the CAP was fully implemented in 1967, imports from the US covered by new tariffs declined by 40 per cent.

Did the policy achieve its goal of protecting European farmers? Certainly. Did the policy’s gains outweigh the costs? Absolutely not.

The cost of protectionism is consumer choice, or what economists call ‘welfare loss’. That basic insight seems lost on most policymakers, perhaps unsurprisingly when they face well-organised industry lobbyists with deep pockets and political influence. The prospect of possible job losses in a particular region or industry is always likely to weigh more heavily on a politician’s mind than the more widely dispersed benefits of free trade.

The agricultural industry is a case in point. European farmers know what they stand to lose if the EU opens its market to agricultural imports from across the pond. In much the same way, the US car industry knows it would suffer from proper competition with European car giants.

But do we as consumers know what we would lose and what we could potentially win with a more liberal trade policy? When was the last time we truly noticed an imported cheap good in the store?

Should the US impose a tariff and the EU retaliate, it’s likely most of us won’t even notice that we’re in a trade war. However, the US-China dispute demonstrates amply that, just as with real wars, those fought with tariffs do not have winners.

The latest data suggests that the trade war with China has cost American consumers $20 billion and US exporters $16 billion. Both the US and Chinese economies each lose about $2.9 billion annually because of Chinese tariffs on soybeans, corn, wheat and sorghum alone. It’s a stark reminder that trade wars not only hurt the side that starts it, but also the one that retaliates.

As with every war, it is often assumed that threats and acts of aggression, in this case, tariffs, will bring about victory – certainly that seems to be Trump’s view. Ultimately, however, they always end up causing destruction. Simply put, there is no argument for protectionism that justifies its impact on all of our welfare.

As in the Prisoner’s Dilemma, both parties are better off if each chooses to cooperate. In this case, the EU and the US will both win if instead of seeking to sucker their opponent, they work together on a mutually beneficial trade deal.

Maria Chaplia is a media associate for the Consumer Choice Center.

Originally published at https://capx.co/the-real-price-of-a-new-eu-us-trade-war/?fbclid=IwAR3gyZAHqvPflQK1D9TseLZjE8-_O4WqM9BH_PUoff_z0gzvAd8l116t_Qg

Увеличение “куриных” квот позволит европейцам питаться дешевле.

От позитивного решения ЕП выиграет европейский потребитель, который получит большой выбор продукта по низкой цене. Об этом заявила представитель “Центра выбора потребителя” (Consumer Choice Centre) Мария Чапля, передает Food and Drink International.

Согласно предварительному соглашению, Еврокомиссия планирует увеличить импортную квоту на украинскую курятину – с 20 тыс. тонн до 70 тыс. тонн в год, напомнила Чапля.

“Несмотря на то, что цифры кажутся многообещающими, малые тарифные квоты по своей сути вредны и ущемляют выбор потребителей. Ограничивая количество импорта куриной грудки, поступающей на рынок ЕС, ЕС создает искажения на рынке, что приводит к снижению благосостояния потребителей.

Проще говоря, свободная торговля – это обмен, который позволяет каждой стороне использовать свое преимущество и извлекать выгоду из преимущества другой”, – заявила она.

Выгоду от увеличения импортных квот получат европейские потребители, говорит Чапля.

“Европейские потребители могут получать значительно больший запас куриных грудок по более низкой цене”, – подчеркивает она.

В то же время результатом сделки могут быть недовольны европейские птицеводы, говорит представитель Центра.

“И здесь очень важно не позволить им помешать этим переговорам”, – отметила она.

В идеале, ЕС не должен вводить торговые ограничения в виде тарифных квот, так как это бьет по потребителям.

“Вместо этого нужно способствовать свободному обмену”, – резюмировала Чапля.

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Збільшення “курячих” квот дозволить європейцям харчуватися дешевше

КИЇВ. 19 березня. УНН. Незабаром Україна отримає шанс збільшити експорт курятини в Європу. Це станеться, якщо Європарламент схвалить домовленість сторін про зміну угоди про зону вільної торгівлі. Від позитивного рішення ЄП виграє європейський споживач, який отримає великий вибір продукту за низькою ціною. Про це заявила представник “Центру вибору споживача” (Consumer Choice Centre) Марія Чапля, передає УНН з посиланням на Food and Drink International.

Згідно з попередньою угодою, Єврокомісія планує збільшити імпортну квоту на українську курятину – з 20 тис. тонн до 70 тис. тонн в рік, нагадала Чапля.

“Не дивлячись на те, що цифри здаються багатообіцяючими, малі тарифні квоти по своїй суті шкідливі і обмежують вибір споживачів. Обмежуючи кількість імпорту курячої грудки, що надходить на ринок ЄС, ЄС створює спотворення на ринку, що призводить до зниження добробуту споживачів.

Простіше кажучи, вільна торгівля – це обмін, який дозволяє кожній стороні використовувати свою перевагу і отримувати вигоду з переваги іншої”, – заявила вона.

Вигоду від збільшення імпортних квот отримають європейські споживачі, говорить Чапля.

“Європейські споживачі можуть отримувати значно більший запас курячих грудок за нижчою ціною”, – наголошує вона.

У той же час, результатом угоди можуть бути незадоволені європейські птахівники, каже представник Центру.

“І тут дуже важливо не дозволити їм перешкодити цим переговорам”, – зазначила вона.

В ідеалі, ЄС не повинен вводити торгові обмеження у вигляді тарифних квот, так як це б’є по споживачах.

“Замість цього потрібно сприяти вільному обміну”, – резюмувала Чапля.

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Yorkshire Post letters

Social media has transformed our daily lives in a variety of ways: from business promotion to interpersonal communication. However, due to its extensive scope, it is easy to forget that it is not forced upon us in any way. Similar to the consumption of sugary products or junk food, to use or not to use social media is a choice. Where there is a choice, there is always a responsibility. 

By seeking to protect young people from the detrimental health effects of social media, the Government is also protecting them from the ability to chose. To justify the need for government intervention, Chris Elmore MP, called social media a “lawless landscape” where children work and play online. No one is questioning the importance of children’s mental health in our fast-changing world. The question to ask is why does the government believe it is its responsibility, not parents?

My 10-year old sister used to spend most of her time on social media, and the moment I found it extremely worrying, I suggested that my parents limited it to an hour per day. After a few days of consistent limited usage of social media, what the Government would call “an addiction” disappeared. 

She started going out with actual friends and felt much happier. The tax will therefore only put another burden on social media companies without solving the actual problem – which is parental responsibility.

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Ukraine agrees European poultry export agreement

Core Tip: Ukraine will be able to ramp up its chicken exports to the EU under a new poultry agreement reached with the European Commission. Ukraine will be able to ramp up its chicken exports to the EU under a new poultry agreement reached with the European Commission.

The proposed deal will now be sent to the Council of the EU and European Parliament.

“Under the provisional agreement, the original 20,000-ton quota on chicken imports will be replaced by a 70,000-metric-ton figure,” said Maria Chaplia, Media Associate at the Consumer Choice Centre.

“Even though these numbers seem promising, tariff quotas in their essence are harmful and infringe on consumer choice.

“While limiting the number of chicken breast imports entering the EU market, the EU is creating a market distortion, resulting in a decrease in consumer welfare.

“Simply put, free trade is an exchange that allows each party to exercise their advantage and benefit from the advantage of the other.

“In the absence of tariff quotas, European consumers could enjoy a significantly greater supply of chicken breasts at a lower price.

“Even though European poultry farmers won’t like the outcome of this deal, it is highly important not to let it get in the way of this negotiation.

“The increased quota is to be praised. However, it is not something to be very enthusiastic about.

“Ideally, the EU shouldn’t interpose trade restrictions in the form of tariff quotas at the expense of European consumers and should facilitate free exchange instead.”

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Ukraine agrees European poultry export agreement

“Under the provisional agreement, the original 20,000-ton quota on chicken imports will be replaced by a 70,000-metric-ton figure,” said Maria Chaplia, Media Associate at the Consumer Choice Centre.

“Even though these numbers seem promising, tariff quotas in their essence are harmful and infringe on consumer choice.

“While limiting the number of chicken breast imports entering the EU market, the EU is creating a market distortion, resulting in a decrease in consumer welfare.

“Simply put, free trade is an exchange that allows each party to exercise their advantage and benefit from the advantage of the other.

“In the absence of tariff quotas, European consumers could enjoy a significantly greater supply of chicken breasts at a lower price.

“Even though European poultry farmers won’t like the outcome of this deal, it is highly important not to let it get in the way of this negotiation.

“The increased quota is to be praised. However, it is not something to be very enthusiastic about.

“Ideally, the EU shouldn’t interpose trade restrictions in the form of tariff quotas at the expense of European consumers and should facilitate free exchange instead.”

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Young people choose free trade – and the government should too

As the Brexit no-deal vote and the deadline itself approach, expectations of the UK seizing this opportunity and reclaiming its trading heritage are heating up. What will a post-Brexit UK choose: being a global advocate of free trade or a protectionist ex-EU state? 

According to a poll conducted last month, UK voters would prioritise the protection of the farming industry over cheaper food prices. However, the survey results identified that views on tariffs vary with age. And the young choose free trade.

Among those between 18 and 24, 41 per cent favour lower prices while 34 per cent would protect farmers. However, 68 per cent of those surveyed who are in the over 65 category prioritise farmers compared to only 13 per cent who favour lower prices. 

In the event of a no-deal Brexit, Britain will employ a tiered approach, under which 87 per cent of import tariffs will be cut to zero. “Sensitive products” such as beef, poultry meat, sheep meat, and pig meat will be subject to higher level tariffs, defined as a proportion of “most favoured nation” (MFN) status. This is supposed to protect British farmers from losing their jobs and ensuring a swift transition. Yet, along with this, it will also present us and them from enjoying lower prices.

Contrary to popular perception, protectionism is bottom up. The proposed tariffs do not necessarily mean that the British government is protectionist. What they do mean, however, is that the British meat industry has been more successful in defending and advancing its interests than British consumers. 

Proponents of protectionism stress that free trade is a zero-sum game with winners and losers measured in jobs. But this centres around short-term costs of free trade and consequently fails to see that free trade primarily seeks to create prosperity in the long run. Since young people tend to be more future-oriented than the elderly, it is understandable why anti-protectionist tendencies are rarer among them, as the poll shows.

However, while protectionists tend to overlook the advantages of free trade, free trade supporters like me do not turn a blind eye to its drawbacks. Similar to creative destruction, free trade does leave some people jobless, which in turn escalates anti-trade sentiment all across the world. Every time free marketers ignore this fact, we play to the advantage of protectionists. Instead, we have to face and address it.

Unemployment resulting from free trade is a short-term transitional cost. It is essential to understand that since costs are a vital part of every policy – none of us has a 100 per cent guarantee against them. The key question is what policy is at stake.

Furthermore, very often it is technological progress that destroys the jobs blamed on free trade. The elderly who prioritise farmers’ jobs over lower prices are more focused on the immediate effects of trade, or on the costs.

So, let’s face it. As of 2017, around 1.4 million people were employed across all the sectors that could be affected by the abolition of tariffs on agriculture. Zero tariffs would leave some people jobless, but overall they would simply force the industry to compete.

Compared to Brazil and the US, the UK is struggling with beef finishing. In terms of mutton, Australia and New Zealand will be UK’s main competitors on the global market. It’s not difficult to see why the industry has been determined to avoid dealing with the potential repercussions of unilateral liberalisation. However, it is fair to expect that the application of tariffs is merely a transitional measure. In this case, we should pioneer it.

It’s easy to talk about costs if you’re not the one to bear them. For some reason, however, it’s far more complicated to see the benefits even if you are the one who gets them. If the UK eliminates tariffs on agricultural imports, low-income households would be the first to reap the benefits. 

The price of meat would decrease by more than three per cent as a consequence of a higher supply, according to a report issued by UK Trade Policy Observatory at the University of Sussex in October 2017. The report also stated: “households right at the bottom would benefit the most, those in the middle 20 per cent of the distribution would be no better off than those at the top.”

Even though the number of winners from free trade significantly exceeds the number of losers, the latter are drastically more vocal and much better organised. Whether it’s Italy, the US, or the UK, industries that are threatened by free trade shout the loudest – loud enough for the government to hear and give them what they want. 

Choosing protectionism over free trade would be a step back. Not long ago, the EU applied the safeguard clause to rice imports from Cambodia and Myanmar under the very same justification used by the proponents of tariffs on meat: to protect farmers. Such protectionist measures limit the number of products available to consumers and result in an increase in prices. The world expects the UK to champion free trade after Brexit, not use the same restrictive tools as the EU.

While unilateral liberalisation on all agricultural imports would have a short-term cost, the wave of prosperity brought about by free trade would lift everyone up. Protectionism goes from the bottom up. The sooner we become aware of this and learn to speak up for the benefits of free trade, the faster protectionism will lose its power.

Trade body counters calls for import tariff cut

A spokeswoman for the Consumer Choice Center said: “Imposing any tariffs on food will not only put another burden on British consumers and increase the costs of Brexit, but will also send a signal to the rest of the world that post-Brexit Britain will pursue protectionism ahead of consumer interests.

“Free trade is vital for consumer choice as it allows consumers to enjoy a greater variety of products at a lower cost. Interventions in the form of tariffs, non-tariff barriers or quotas hit consumers the hardest and, therefore, should be avoided or decreased at all costs.

‘Consumer will lose’

“Leaving the EU without a deal would cost the UK 2.2% of GDP ​[gross domestic product] by 2030. However, unilateral liberalisation would help compensate up to 80% of that reduction in real GDP. Therefore, it is key that, after Brexit, the UK either fully abolishes its tariffs on food, or keeps them low. If Brexit comes with tariffs on food, a small group of people – British farmers – will win, while every British consumer will lose.”

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Higher tariffs, subsidies promised

The prospect of tariffs drew stinging criticism from consumer group Consumer Choice Centre.

“Imposing tariffs on meat imports will not only put another burden on British consumers but will also increase the costs of Brexit and send a signal to the rest of the world that post-Brexit Britain will pursue protectionism ahead of consumer interests,” spokeswoman Maria Chaplia said.

Abolishing tariffs would help lower the price of meat by more than 3% and encourage the meat industry to compete with the rest of the world, she said.

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Proposed tariffs on meat could put burden on British consumers, lobby group argues

Lobby group Consumer Choice Center (CCC) has warned the UK Government that applying tariffs on meat in case of a no-deal Brexit will increase the costs of Brexit and put another burden on British consumers.

Instead, it argued that unilateral tariff liberalisation on agricultural products is “vital” for making consumers better off.

Maria Chaplia, media associate at CCC, said: “”Along with fish, oil, and fats, meat is one of the few agricultural products exported by the UK. The abolishment of tariffs would have a significant positive impact on low-income households.

“More specifically, if the UK removes tariffs on meat, the price will decrease by 3.2 per cent as a consequence of a higher supply.”

She added: “The UK is a net importer of beef and unilateral liberalisation would have a considerable impact on the domestic market.

“Opening up the UK market will challenge the meat industry to compete with the rest of the world, which is what the government seeks to protect it from.”

Chaplia also stated that a no-deal Brexit would cost the UK 2.2% of GDP by 2030, adding that unilateral liberalisation would help compensate up to 80% of that reduction in real GDP.

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