Broad Coalition calls on Congress to reclaim its authority on tariffs

Arlington, VA – A coalition of 30 organizations, including the Consumer Choice Center, led by Americans for Prosperity (AFP) and Freedom Partners Chamber of Commerce released a letter today encouraging lawmakers to reclaim their tariff authority, which has been delegated to the executive branch.
Read the letter HERE
In the letter, the groups write:
“As the Senate Finance Committee begins its important work of considering legislation related to tariffs, we write to urge you to include important priorities in any proposal put forth by the Committee.
“Article I, Section 8 of the Constitution provides Congress with ‘the power to lay and collect taxes, duties, imposts and excises.’ Over the years, however, some authority related to tariffs has been delegated to the executive branch. As a result, the president has unilaterally imposed tariffs – which are taxes on Americans – on more than $300 billion in imports last year without the explicit approval of the peoples’ elected representatives in Congress.
“Congress now has an opportunity to reclaim some of this tariff authority, with the Senate Finance Committee leading the way. … As the committee continues to review and craft legislative proposals, we stand ready to assist and support you in this endeavor.”


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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What will Brexit mean for British consumers?

The UK’s decision to leave the European Union in 2016 has arguably triggered one of the most laborious and frustrating times to be alive in Western European history. It has since hijacked all political debate and media headlines, which in turn have divided an entire nation – including our trusted servants – who’ve admittedly proven to be ill-equipped to negotiate and deliver what the British electorate had voted for. As we are edging closer towards an official exit from the European Union, trade negotiations with nations outside the EU have been the utmost priority among diplomats.  

What impact will the UK’s departure from the customs union and single market have on British consumers? Here we will try to analyse such implications in an unbiased fashion by simply diverting our attention away from the incessant Project Fear policy undertaken by most media outlets and economic forecasters

Customs Union and Single Market

It would be fair to suggest that both the Customs Union and the Single Market have been the European Union’s greatest achievements. Thanks to these great innovations, there is now a single market of over 500 million people, far larger than the US, which also includes a free-trade area larger than the NAFTA (North American Free Trade Agreement). While the customs union allows internal free-trade within the EU, it would also be fair to suggest that the EU is rather protectionist towards the rest of the world, especially when we account for food and drink products. To understand how the EU is regarded as being ‘protectionist’, Matt Ridley provides an easy representation of the dissimilarity between free trade and the Customs Union.

He writes: “Free trade says to the poorest: we will enable you to get access to the cheapest and best products and services from wherever in the world they come. We will not, in the economist Joan Robinson’s arresting image, put rocks in our own harbours to obstruct arriving cargo ships just because other people put rocks in theirs. The customs union, however, says: if Italy wants rocks in its harbours to protect its rice growers against Asian competition, then Britain must have them too, even though it grows no rice.’’

These rocks protecting domestic rice growers from foreign producers is literally known as the Common External Tariff (CET). The CET is administered at EU level, meaning all EU members need to abide by the rule – and as a result – EU consumers pay elevated sums for products which should in theory cost very little. The consequence of such a policy is that individual states no longer have any direct control over international trade policy and have no administrative staff to negotiate or regulate trade. We must remind ourselves that the educated brexiteer felt that Britain lacked the power to strike free trade deals with its trading partners outside of Europe. Being in the EU means that Brussels has full control of their trade policy. It is thus logical to understand why many felt that the UK lacked sovereignty and control, and as a result wanted to leave an organisation who arguably seeks to protect the interests of neighbouring countries over their own.

As we can see, the EU imposes high tariffs on commodities which are central to the lives of the average citizen. The prices of food, clothing and textiles imported from third-world countries are bumped up by >6%. And while UK tariff revenue from these items totals about £1bn per year, gains to consumers from the abolition of tariffs on these items could be much larger than that as domestic prices for clothing and textile products generally (not just the imported items) would likely fall. With textile and clothing spending at £82bn per year even a 3% price fall would boost consumer incomes (and potentially spending) by £2.5bn (b4b). According to in Institute for Fiscal Studies (IFS), the abolition of all EU tariffs would cut consumer prices by up to 1.2%. With UK consumer spending at £1.3tn in 2017, this implies gains for consumers of up to £15bn.

Objectively speaking, EU tariffs are not very high; they are, however, often steep on agricultural products. This represents a heavy effective ‘tax’ on UK consumers, especially given the UK’s status as a large net food importer. Subsequently, UK consumers are denied the choice of cheap food from outside the EU and pushed towards consuming expensive products from within it. This cost is high at 0.5-1% of GDP – almost certainly higher than possible rules of origin costs for manufacturers under an FTA.

In view of this, it would make little sense for the UK to remain in what is unquestionably a highly protectionist agricultural system. Moreover, although continued membership of the Customs Union would facilitate cross-border trade administration, it would also involve the UK to accept the EU’s Common External Tariff, hence preventing it from negotiating separate trade agreements with non-EU nations. Cross-border trade is already becoming lightly administered through the Union Customs Code, and most pro-Brexit supporters want the freedom to negotiate new trade agreements, for instance with the USA, India and China.

The reason EU tariffs are so bad for the UK is because it had joined the EEC (European Economic Community) in 1973, when the EEC’s customs Union had already been designed, built and implemented. The tariffs were originally set in order to protect Continental producer interests, notably French farmers, German car makers, and Italian clothing and footwear manufacturers. Those were – and still are – the areas where the EU’s external tariffs are very high.

Alternatives to the Customs Union?

The government’s real intentions had been made clear ever since the infamous ‘Chequers’ proposal was published in mid-2018. It essentially made leaving the EU customs union dependent on the Facilitated Customs Arrangement (FCA), an arrangement which aims to deliver frictionless trade in goods between the UK and the EU after Brexit. Despite its theoretical ingenuity, the FCA is a highly complex and unworkable dual-tariff scheme. As Peter F. Allgeier, the former US Ambassador to the WTO argued, the proposal would prevent the UK regaining an independent trade policy as the proposal “places the UK in a straitjacket that prevents it from pursuing an independent regulatory regime in manufactures and agricultural goods, which will prevent it from securing the major concessions on services and other regulatory barriers it faces in complex trade negotiations with the larger parties”. He goes on to claim that “those who argue that the UK can obtain its pre-EU freedom to conduct an independent trade policy while locking in to the EU’s regulatory rule-book are suffering from, and propagating, a serious delusion.”

Following the failure of Chequers, the government agreed a Withdrawal Agreement (WA) with the EU, preceded by a political declaration which sets out the broad shape of a future UK-EU relationship. The WA and political declaration are so drafted as to make it almost impossible for the UK to avoid ending up in an indefinite customs union with the EU if they come into force:

The WA creates a ‘backstop’ that will kick in if no ‘final deal’ is agreed. This creates a bare bones customs union between the EU and Great Britain, with Northern Ireland effectively staying in the EU customs union and so becoming part of a separate customs (and regulatory) territory to the rest of the UK.  There would be no route for the UK to leave this backstop customs union without the EU’s agreement.

As a result, the government proposals were rightfully rejected, and a no-deal has since been the preferred option in Parliament. A no-deal means leaving the EU before having negotiated a Free Trade Agreement, and hence trading under World Trade Organization rules. The no-deal proposal was welcomed by hyperbolic headlines and dubious counter-arguments; for instance, a Sunday Times headline (12.08.18) read “No deal will hike food bills by 12%” after it reported that ‘senior executives from the big four supermarkets’ claimed that a ‘no deal’ Brexit ‘would force up the price of the average weekly food basket by as much as 12%.’ According to such people, leaving the EU under WTO rules will require the UK to take the current tariffs which the EU at present forces us to impose on imports from the rest of the world, and impose them on imports from the EU as well. This, however, is simply not true. In reality, what the UK has been doing is amending its tariff schedules at the WTO; it is doing so by copying the EU’s current schedules, but such schedules do not specify the tariffs which they will have to charge on imports. What they specify is the maximum level of tariffs which they are permitted to charge. The UK will subsequently have the freedom to charge lower levels of tariffs, or zero tariffs.

The Most Favoured Nation (MFN) principle is a rule which the WTO requires. According to the WTO’s official website, the MFN “treats other people equally Under the WTO agreements, countries cannot normally discriminate between their trading partners”. In other words, whatever tariffs the UK decides to set must be charged equally to everyone, apart from countries with which they have customs union or free trade agreements.

Despite what the doomsayers might be saying, there has been substantial progress since a ‘no deal’ was voted in parliament. In Skanker Singham’s well-researched article, he writes that:

The agreements that we have through the EU (excluding the recently-signed Japan agreement where tariff cuts only commence in January 2020) account for 11% of our total trade. Looking at how much trade is duty free around the world (or duty free under a GSP programme), it would not be surprising if the trade actually affected – in case the agreements are not rolled over – would be approximately half of that. Of these, the Swiss agreement alone – which has been rolled over – is worth 20% of our trade. Other significant agreements here include CETA, covering a further 12% of the trade under these agreements (almost rolled over), and the EU’s agreements with South Korea and Singapore, each covering around 10% of this trade.” https://brexitcentral.com/department-international-trades-no-deal-planning-advanced-doomsayers-believe/

He also adds that “trade is also more than just about trade agreements”. Proof of this is the UK’s ability to strike many mutual recognition agreements (MRAs) that are very important to facilitate trade. “MRAs make it easier for people to trade and easier to prove that their products satisfy the standards and regulatory requirements of the other party. The UK has already signed MRAs with the US, Australia, Israel and New Zealand. There are sectoral agreements on insurance with the US and Switzerland, on wine with Australia, and the US. A range of air services agreements have been signed with the US, Canada, Switzerland, and Israel to name a few. The UK and New Zealand have rolled over the UK-NZ veterinary agreement. A distilled spirits mutual recognition agreement with the US (with whom there is a rapidly growing whisky trade) has been signed and a similar agreement is due to be signed shortly with Mexico.”

Could the UK join Progressive Trans Pacific Partnership (CPTPP) which was signed last week by 11 Pacific Rim countries representing 13.5% of world GDP? If the UK accedes to the CPTPP, it also sees a possibility that the US will one day return to the TPP fold. If the UK, US and new accession countries like Indonesia and South Korea accede to the CPTPP, then it will command 45% of the world’s GDP, and include the fastest growing countries in the world (compared to the EU27’s 20% assuming static performance over time, whereas it is likely that on current trends the EU27 will decline from this 20% figure). https://brexitcentral.com/department-international-trades-no-deal-planning-advanced-doomsayers-believe/

Another possible future free-trade agreement, and perhaps the most attractive one thus far, is the Canada Plus FTA. This involves free trade in goods plus substantial regulatory alignment, but no free movement of persons. There should be no EU objection to a basic CETA-type FTA, but it may be difficult to augment this with extra agreements on financial services.

Theresa May has made it clear enough that she wants the UK to stay in the Customs Union. It has been revealed by Skanker Singham that the EU was prepared to offer an advanced free trade agreement which would work for the complex supply chains in the EU-28, involving zero tariffs and no quantitative restrictions, with regulatory co-operations and measures to facilitate customs and Irish border controls. The deal, however, was rejected because the UK wanted to keep in alignment with the EU by remaining partially tied down with the Customs Union and Single Market. I do not enjoy repeating myself, but one has to wonder why Mrs May and her cabinet has such a deeply entrenched obsession with the Customs Union? Isn’t she simply betraying a nation with her deviation tactics, masked by her poor negotiation skills?

Although the whole Brexit ordeal cannot be summarised in a few pages, we hope that we have offered enough evidence to perhaps challenge some of the views which you so vehemently adhered to. Many have (perhaps understandably) been blinded by the information put forth by the mainstream since it is widely accepted as dogma – that is – it is viewed and interpreted as unequivocally true. It is important to remind yourself that many who wish to remain in the European Union are either (a) seeking to protect their interests, or (b) mere ideologues. That is why it is so hard for certain economic forecasters (or any ‘expert’ in the financial district) to remain impartial when covering Brexit, since on a purely subjective level they fear that their income or general livelihood may take a substantial blow. They are effectively committed to membership of the EU by their careers, and as a result, fail to evaluate Brexit objectively. The ideologues are fairly simpler to evaluate since they are blinded by their own biases, hence consistently incapable of any rational reevaluation in light of any new evidence which may challenge their preconceived beliefs. They are committed to the great European Project spearheaded by Macron and Merkel! This seems to be the future for the European Union.

European Union and United States should agree on no tariffs on either food or cars

Trade representatives of the European Union and the United States are meeting today to discuss the scope of EU-US trade talks. The United States argues for an opening of trade relations on food, while the European Union wants to avoid the introduction of tariffs on automobiles.

In response, Bill Wirtz, Policy Analyst at the Consumer Choice Center (CCC), argued that there was an easy compromise to be found here:

“The essential question is: why can’t we have both? Free trade on food means more choices and better quality food for European consumers, and free trade on cars will mean more choices and better quality for American consumers. The goal should be the bring tariff and non-tariff barriers done to an absolute minimum, ideally to zero,” said Wirtz.

“Some EU leaders, including French president Emmanuel Macron, argue in favour of protectionism on food, in order to court the vote of the agricultural sector. That is short-run economic thinking, and hurts consumers. Protectionism has been intellectually bankrupt for centuries, and it’s time we admit it,” said Wirtz.

“We don’t know what the future holds. Maybe the roles will be reversed in a couple of years, and consumers will be longing for European food and American cars. In any way, it shouldn’t be the role of these trade representatives to restrict consumer choice. The European Union praises the advantages that free trade has had for this continent. It shouldn’t be any different for those across the Atlantic,” concluded Wirtz.

mm

About Bill Wirtz

Bill Wirtz is policy analyst for the Consumer Choice Center, based in Brussels, Belgium. Originally from Luxembourg, his articles have appeared across the world in English, French, German, and Luxembourgish. He is Editor-in-Chief of Speak Freely, the blog of European Students for Liberty, a contributing editor for the Freedom Today Network and a regular contributor for the Foundation for Economic Education (FEE). He blogs regularly on his website in four languages.

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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Internal trade barriers Canada

The Consumer Choice Center (CCC) is excited to announce that the CCC has been officially asked to participate in the Regulatory Reconciliation and Cooperation Table (RCT). The CCC is one of 17 stakeholders participating in the RCT.
The RCT is a federal-provincial body created under the Canadian Free Trade Agreement to oversee the regulatory reconciliation process, eliminate trade barriers, and promote regulatory cooperation across Canada.
With that, we want to hear from members of the public regarding inter-provincial trade barriers. If you have examples of internal trade barriers, or regulatory burdens that limit trade between provinces, please let us know.
To get involved, simply email examples of trade barriers or regulatory burdens to our North American Affairs Manager David Clement at [email protected]