Patrick Barron has been a consultant to the banking industry since 1985. He teaches Bank Management Simulation at the Graduate School of Banking, University of Wisconsin, Madison and Austrian Economics at the University of Iowa. He has contributed a weekly essay in the Austrian vein to The Bulletin, Philadelphia since 2006. As president of the Right Approach Group, which offers free market solutions to current economic problem, he has spoken at economic conferences at the EU Parliament offices in Brussels, Belgium and Strasbourg, France.
Removing tariffs post-Brexit could see prices fall up to 1.2%, suggests new study
According to a report by the Institute of Fiscal Studies, UK households could see prices fall by around 0.7-1.2% if the UK were to eliminate tariffs on all goods after Brexit. The report noted, “This compares with the estimated 2% increase in prices that followed the depreciation in Sterling in the wake of the referendum result. This suggests that the scale of ‘quick wins’ from running an independent trade policy is relatively small.” The report also argued that removing tariffs could “be very damaging for some UK industries in the short run.” The director of the IFS, Paul Johnson, said, “If we leave the customs union, we can come to our own trade deals with other countries, we can reduce tariffs. But even if we reduce that as much as possible, the effect on prices will be really quite small relative to what is still a big cost of leaving the customs union because it would make trade with the rest of Europe so much more expensive.”
Separately, UK inflation rate fell to 2.7% in February, down from 3% in January. This is also closer to the annual UK wage growth, which was estimated at 2.8% in December.
Despite the negative tone of this report, it illustrates that tariffs are harmful to the nation and merely transfer wealth from one's own citizens to a few politically connected companies. By declaring unilateral free trade all UK citizens would get the equivalence of a 0.7 to 1.2% tax free pay increase. Sounds pretty good to me!
From Open Europe news summary of 14 March 2018 (my highlight):
Commenting on Prime Minister Theresa May’s Mansion House speech earlier this month, the EU’s chief Brexit negotiator Michel Barnier called it a “surprising idea” that the UK would be allowed to benefit from convergence with EU rules in some areas while “open[ing] up the possibility of divergence when there is the comparative advantage for it.” He stressed the importance of social and environmental standards to the EU’s regulatory framework, asking, “Does the UK also want to distance itself from this model which they have constructed gradually with us and engage in dumping against us?”
To answer Barnier's question--emphatically YES! The UK should seek to benefit where it has a comparative advantage. In fact every person on earth should seek to so benefit. A comparative advantage means that people engage in the division of labor/specialization, and allow others to do the same, in order to produce more goods and services for the market. Note that no one needs to possess an absolute advantage, meaning that he can produce a good or service better or more cheaply than all others in the market. For example, a brilliant lawyer may be able to perform secretarial services better than anyone on the planet; nevertheless, it is to his and everyone else's advantage for him to hire these services in order than he may perform his more highly rewarding legal services. Therefore, everyone is able to participate and succeed in the market economy. In short, Michel Barnier, and I'm sure others in the EU elite, are completely ignorant of economic science.