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Did you know the EU has a tariff wall?

February 12, 2017

I suppose I am being bated by LIQ’s reference to J.-B. Say but the world is as it is. The point really about free trade is that the country that does not enter into it is depriving itself of the possibilities of a higher standard of living. So it is nice to see such concern for the future economic prosperity of the US but since Keynes at least, the issue has not been wealth creation as such but jobs. As Say so rightly pointed out:

A country, in one way or other, direct or indirect, always consumes the values it produces, and can consume nothing more. If it cannot exchange its products with its neighbors, it is compelled to produce values of such kinds only as it can consume at home. This is the utmost effect of prohibitions; both parties are worse provided, and neither is at all the richer.

But it’s not a jobs thing in and of itself. And the US is a very large country so that the division of labour is widely extended. If they want to make their own fridges and cars, well that’s their own business. The EU, for example, I might note has tariffs, just not between its member states. This refers to the EU: What is the Common Customs Tariff?:

Since the completion of the internal market, goods can circulate freely between Member States. The ‘Common Customs Tariff’ (CCT) therefore applies to the import of goods across the external borders of the EU.

The tariff is common to all EU members, but the rates of duty differ from one kind of import to another depending on what they are and where they come from. The rates depend on the economic sensitivity of products.

The tariff is therefore the name given to the combination of the nomenclature (or classification of goods) and the duty rates which apply to each class of goods. In addition the tariff contains all other Community legislation that has an effect on the level of customs duty payable on a particular import, for example country of origin.

The tariff is a concept, a collection of laws as opposed to a single codified law in itself. There is however a kind of working tariff, called TARIC, which is not actually a piece of legislation.

Through the tariff, the Community applies the principle that domestic producers should be able to compete fairly and equally on the internal market with manufacturers exporting from other countries.

If you want to worry about economic policies under Trump, I have a number of my own but these are hardly the central reason he ended up president. The 1930s were defaced by the Smoot-Hawley Tariff and the retaliations to the largest American increase in history. Whatever else Trump may be about to do, this is not it:

The Tariff Act of 1930 (codified at 19 U.S.C. ch. 4), otherwise known as the Smoot–Hawley Tariff or Hawley–Smoot Tariff, was an act sponsored by Senator Reed Smoot and Representative Willis C. Hawley and signed into law on June 17, 1930. The act raised U.S. tariffs on over 20,000 imported goods.

Meanwhile, the question is whether the US should let its trade partners do anything they like to manipulate their trade to the disadvantage of America or should there be some rules in place? Even Hillary ended up campaigning against the TPP.

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