ESOCommunity

It's good only for exporters. It tends to make imported goods more expensive, though. And since about 44% of the UK's trade is with EU countries, you'll have to add some extra pounds for tariffs.

So overall it is to be expected that some imported goods will get more expensive, post-Brexit. And conversely, some UK goods will become more expensive in the EU.

In theory imported goods being more expensive is actually good, as you increase aggregate demand in the economy which should stimulate it. I think overall it's still going to be worse for europe seeing as the UK has a negative balance of trade with Europe, we'll just have to wait and see.

Well yeah, if you can replace those goods with products made in the UK, but in some cases, the UK imports some goods because it cannot produce enough to cover internal demand. Like, for example, some kinds of vegetables and fruits. Or some types of meat.

But also cars, UK consumers like German cars quite a lot, I think.

Cars are an interesting one, the EU definitely won't want tariffs for cars in particular due to Germany's stranglehold on both the automotive market and the EU itself. Also it's useful to note that the UK does still produce a large quantity of vehicles.

The irony is that this will hit the working class that voted for Brexit the hardest. It will increase prices on some staple goods like vegetables, meat, fruits, dairy products (imported from Ireland).

The least affected will be well-off Londoners, like people working in financial services, who voted to stay in the EU. Textbook definition irony, right there.

Riotcoke wrote:In theory imported goods being more expensive is actually good, as you increase aggregate demand in the economy which should stimulate it.

Economics theories do not give normative answers such as an event being "good" or "bad". In this example, expensive imports can (!) spur local economic growth. But proper economic theory can neither give you a good approximation on how big that growth is nor over how long this additional output is going to be accumulated. Further, it means that in the moment of Brexit the UK will be much worse off since the increase in import prices did just manifest itself while the local economic reaction still has to take place.

This is a dynamic problem and the (neo)classical view from economic theory (long-term equilibria) is not going to help your argument. It is not enough that "in the long run, the economy will be ok", since people lose billions of wealth in mean time. And it is not the rich kids in parliament who will carry that burden, but the ordinary English people everywhere else but in London. To quote some famous dude: "In the long run we are all dead."

To give a further example of economic fallacies: Greece has expensive imports and low wages. Hence, its internal exchange rate is low. Anyway, its growth after the crisis is negligible.

Riotcoke wrote:I think overall it's still going to be worse for europe seeing as the UK has a negative balance of trade with Europe, we'll just have to wait and see.

I am really curious to find this out to be honest (and not just because of Schadenfreude!). One often hears this argument coming from the British isles, but I just can't see how Europe is going to be worse off. Maybe I am blind, but I just can't find a justification for this.

Let's look at data from the British parliament (long URL). In the overview, one finds that UK exported goods worth 289 billion pounds to other countries in the EU, which is 46% of total UK exports. Goods and services imports from the EU were worth 345 billion pounds (54% of all British imports). The total of EU exports is roughly 1,778 billion pounds (see here). Of course exports to UK are not included there, so you could argue that given a Brexit, the actual EU exports are 1,778 + 345 = 2.123 billion pounds. That means, exports to UK are ~16% of total EU exports while UK exports to the EU are 46% of total UK exports.

If I interpret this correctly, UK is a far smaller trade partner for the European Union than the EU is for UK. That sounds comparatively worse for UK, doesn't it?

I think it's better to look at it from both a short and long run perspective, the UK, as well as the EU it'self, will both be hit with harsh backlashes from the UK's trade changes. In the long run however it's possible that the UK will fare better, with the withdrawal of the UK having the possibility of setting off Brexit-Style referendums in countries like France and Italy if the UK does well after Brexit in regards to trade deals. It's all matter of waiting and seeing really as it's basically impossible to correctly predict.

@duckzilla
I think what they typically mean when they use this argument (which is somewhat similar to Trump's argument vs China) is that since the UK imports more from the EU than the EU imports from the UK, any tariffs applied after Brexit will make EU products more expensive in the UK. Now, if we assume all other conditions to be equal (purchasing power in both the EU and UK, demand elasticity in both, GDP growth in both areas), then any shrinkage in demand due to rising prices would lead to a bigger net loss in the EU area, compared to the UK. Let's assume the maximal, albeit completely unrealistic scenario, in which all UK and EU consumers stopped buying goods imported from the other side. Then, the total net loss from demand shrinkage would be bigger in the EU than in the UK.

At least, that's the logic of the argument. Of course, such a scenario is not realistic, because demand elasticity is different for different types of products, for different countries that have different levels of purchasing power so they can afford some wiggle room in terms of prices going up, etc. For example, demand elasticity might be pretty low for staple products imported from the EU, like fruits and vegetables from Spain, dairy and meat products from Ireland, medicines from various EU countries, and moderately elastic for German cars (some consumers might start buying Japanese cars, because they voted for Brexit so they would want to punish German companies). On the other hand, I think demand elasticity doesn't play a substantial role in the EU's trade with the UK, because it's a bigger market, so every product can be easily swapped for another without much difficulty. There aren't that many UK products that dominate their markets to such an extent that EU consumers couldn't do without them. For example, UK-made blenders like Kenwood could be easily swapped for Philips-made ones, UK-made audio equipment like Bowers and Wilkins could be swapped for Focal hi-fi audio equipment made in France, etc. I'm not aware of any products made in the UK that could not be sourced in the EU, maybe some very specific medicines that only some UK companies produce and for which they still hold patents in their names.

But in terms of staple goods like food stuffs, vegetables, dairy products, wines etc etc, the only product specifically made in the UK that is irreplaceable in the EU is Scottish whiskey. But, if I'm not mistaken, the EU doesn't have tariffs on imported whiskey from third-party countries (in 2018 the EU agreed on a zero-tariff deal for whiskey with the USA, so they will have to reciprocate with other third-party countries too). So, one of the most popular products made in the UK will be tariff-free after Brexit, which won't affect EU consumers much.

Dolan wrote:I think what they typically mean when they use this argument (which is somewhat similar to Trump's argument vs China) is that since the UK imports more from the EU than the EU imports from the UK, any tariffs applied after Brexit will make EU products more expensive in the UK. Now, if we assume all other conditions to be equal (purchasing power in both the EU and UK, demand elasticity in both, GDP growth in both areas), then any shrinkage in demand due to rising prices would lead to a bigger net loss in the EU area, compared to the UK. Let's assume the maximal, albeit completely unrealistic scenario, in which all UK and EU consumers stopped buying goods imported from the other side. Then, the total net loss from demand shrinkage would be bigger in the EU than in the UK.

At least, that's the logic of the argument. Of course, such a scenario is not realistic, because demand elasticity is different for different types of products, for different countries that have different levels of purchasing power so they can afford some wiggle room in terms of price increases, etc. For example, demand elasticity might be pretty high for staple products imported from the EU, like fruits and vegetables from Spain, dairy and meat products from Ireland, medicines from various EU countries, and moderately elastic for German cars (some consumers might start buying Japanese cars, because they voted for Brexit so they would want to punish German companies). On the other hand, I think demand elasticity is much lower in the EU, because it's a bigger market, so every product can be easily swapped for another without much difficulty. There aren't that many UK products that dominate their markets to such an extent that EU consumers couldn't do without them. For example, UK-made blenders like Kenwood could be easily swapped with Philips, UK-made audio equipment like Bowers and Wilkins could be swapped with Focal hi-fi audio equipment made in France, etc. I'm not aware of any products made in the UK that could not be sourced in the EU, maybe some very specific medicines that only some UK companies produce and which still hold patents in their names.

But in terms of staple goods like food stuffs, vegetables, dairy products, wines etc etc, the only product specifically made in the UK that is irreplaceable in the EU is Scottish whiskey. But, if I'm not mistaken, the EU doesn't have tariffs on imported whiskey from third-party countries (in 2018 the EU agreed on a zero tariff deal on whiskey with the USA, so they have to reciprocate with other third-party countries too). So one of the most popular products made in the UK will be tariff-free after Brexit, which won't affect EU consumers much.

If I am not mistaken, the main economic point of Brexiteers and Trumpists is to "bring back our jobs" as well as becoming more wealthy. This is not going to happen if the British start to buy Japanese instead of German cars. Is there even a British car company left outside of the luxury market?

The same is true for most industrial production. If UK wanted to get industries back, they would need to implement high tariffs to give incentives and protect the local market (Korea style). That is contrary to what BoJo wants to do and would take decades anyway.

They don't have any significant carmaker owned by British capital anymore (unless you count McLaren as a significant carmaker), but they still have lots of carmakers owned by foreign hands (for example, Jaguar is owned by Tata motors, an Indian company, and now sells one of most popular electric vehicles on the market). Their logistics are highly dependent on importing parts from other EU countries, though.

It's unlikely that the UK will create more and more industrial jobs in the short to medium term, considering they make most of their money from exporting services, right now. But you never know, in the long term.

Horsemen wrote:

Amsel_ wrote:

Horsemen wrote:THE FINANCIAL TIMES CALLS BORIS THE 'NEW RONALD REAGAN':

https://www.ft.com/content/bb60c72e-ae2 ... df846f48f5

Do Limeys like Reagan? I figured calling someone Ronald Reagan would be an insult in Europe.

The only politican greater than Ronald Reagan is Margaret Thatcher

https://www.theatlantic.com/ideas/archi ... on/595102/

fightinfrenchman wrote:

Horsemen wrote:

Show hidden quotes

Amsel_ wrote:

Horsemen wrote:THE FINANCIAL TIMES CALLS BORIS THE 'NEW RONALD REAGAN':

https://www.ft.com/content/bb60c72e-ae2 ... df846f48f5

Do Limeys like Reagan? I figured calling someone Ronald Reagan would be an insult in Europe.

The only politican greater than Ronald Reagan is Margaret Thatcher

https://www.theatlantic.com/ideas/archi ... on/595102/

The tail wags the dog.

Man what are you guys doing?

https://twitter.com/Jacob_Rees_Mogg/sta ... 6111184897

fightinfrenchman wrote:Man what are you guys doing?

https://twitter.com/Jacob_Rees_Mogg/sta ... 6111184897

That's my mp

Is he just pandering or is he actually that dumb?

He's big brained

Perhaps his big brain is pressing against his skull then

https://youtu.be/dS8K5dCq71I Smart

Brexit seems to be a great idea

Political correctness gone mad.

https://www.theguardian.com/media/2019/ ... ping-rules

It's the EU's fault. They imposed those laws on poor Britain. Imagine how free you're going to be once you leave the EU.

Riotcoke wrote:In theory imported goods being more expensive is actually good, as you increase aggregate demand in the economy which should stimulate it. I think overall it's still going to be worse for europe seeing as the UK has a negative balance of trade with Europe, we'll just have to wait and see.

The UK has a negative trade balance overall. A weaker pound means that everything with the trade deficit means that the UK will head into austerity. The UK will follow Ireland's lead and become a big tax haven to get out of the austerity but that will take time and everyone in the UK will be worse off during this time and probably not much better off afterwards if at all.

Oh yeah, good point. 29.2% of the UK's GDP is made from trade. About half of that is with the EU. Most of it is in manufactured goods, somewhat less in services. So, about 15% of the UK's GDP is likely to get tariffed after Brexit. And on top of that, a weaker pound will make imported goods more expensive. Double whammy.

FTAs will take many years to complete, while tariffs will take effect immediately.

t. gloomster & doomster.

Does anyone else remember how poor and miserable the United Kingdom was under the old WTO rules? Thank goodness the EU was kind enough to lift them up into first world status, and now they're experiencing such incredible wealth and prosperity. I hope that Brexit is canceled, so that the UK can match the economic juggernauts of Portugal, Spain, Italy, France, and Greece! It's incredible how much better Europe has gotten in the past twenty or so years, and it's all thanks to the EU.

Brexit would be such a disaster. It's a nonsensical suicide-pact. The same reactionaries who voted for Brexit are the ones who repealed Net Neutrality here in the U.S. And all the nightmares came true. I have to buy access to websites like YouTube individually or in packages. (ESOC was strangely was in the porn package) Together we need to vote Labor and Democrat to oust the racist old white males who are scared that they aren't going to be as important as they were in the past. Don't feel bad for them, they built their privilege on the sweat and suffering of workers, women, and minorities. Let's give 'em a taste of real democracy, folks. Together we can take to the polls and bring about an amazing Post-National, Libertarian-Socialist paradise!

https://www.youtube.com/watch?v=3sh4kz_zhyo