17 October 2016

Clegg’s Brexit beef doesn’t make sense


Nick Clegg has told us all, several times in fact, that a hard or clean Brexit is going to mean rising food prices. This is because a reversion to the Word Trade Organisation (WTO) rules once we have left the European Union means that other countries will put up their tariffs against our food exports and that we must also apply the same, higher, tariffs to our own food imports.

The effect of the first will be to lower UK food prices, and the second allegation is nonsense: WTO rules insist upon no such stupidity. But this is what Clegg has been saying all over the airwaves and it even features in an official report from the Lib Dems. They state:

“In the case of such a ‘hard Brexit’, the UK will be obliged to impose tariffs on imports, while the EU and the rest of the world will be obliged to impose tariffs on our exports.”

Needless to say, Mr Clegg has got it wrong.

If other places impose tariffs upon our exports, then fewer such exports will take place. This will mean more British beef to be eaten by Britons. No one has yet ascertained a method by which such an increase in supply is going to raise the price we must pay for our own beef.

To insist, meanwhile, that we must raise tariffs on the imports we desire is to misunderstand the WTO system. As a source in Geneva explains, Britain is a WTO member in its own right and will still be so even after Brexit happens. This means that we have promised not to charge higher than the allowable ceilings in tariffs upon imports from other WTO members. The Most Favoured Nation clause also states that whatever we do decide to charge ourselves, we must apply the same rate to the same products from all different WTO countries.

But not charging higher than the allowable ceilings does not commit us to charging anything at all. We can apply a 0 per cent rate (yes, I checked) if we so wish.

That is, being outside the EU means we do not have to charge the EU external tariff rates upon anything and can insist that we pay ourselves nothing on all sources of food from everywhere. Economists are reasonably certain this is going to lead to lower food prices in Britain.

We have all long known that the CAP makes food more expensive in Europe. Being outside the CAP will therefore make food cheaper. And no one is going to insist that we do something as blitheringly idiotic as raise import tariffs to prevent this from happening, most certainly not the WTO, whatever Nick Clegg might think.

Tim Worstall is Senior Fellow at the Adam Smith Institute.