Tariffs and Tennis Racquets; The Irish back stop is like King Canute facing down global trade.

The European Union wisely chose near frictionless trade internally, the Single Market, but high barriers to global goods coming in, the Customs Union. Some argue that the United States grew its economy behind a similar barrier of tariffs in the 19th century. Indeed, most developed economies use tariffs and quotas to protect their domestic industries.

They dress up the quotas and tariffs with virtuous excuses such as environmental husbandry and safety, but the motive is protectionism. The Spanish lobbied to keep South Africa oranges out, so there is an EU tariff on oranges despite South African oranges being succulent and safe. This tariff varies seasonally so that Spanish orange sellers are most protected when they most need it. Such a mechanism is understandable, popular but certainly complex to implement.

However, despite the short term wisdom of such measures, historically protectionism has always failed. Furthermore, the EU has taken protectionism to a particularly high level with over 10,000 goods having quotas or tariffs. These include, absurd items like tennis racquets (4.7% tarrif and I quote “whether or not strung”) and but also common items like food, steel, clothing and wine. Prime Minister Johnson has, apparently, just undertaken to produce a regime to ensure these tariffs are efficiently enforced by UK at the Northern Ireland border.

Suppose, Japanese whalers in the 14th century had developed better but less humane harpoons. There would be little need to put a tariff on them to discourage their entry to UK because no one in UK had heard of Japan or their hypothetical harpoons. Whereas, if the French ban Google and seek to develop their own version, they had better build a better one because French citizens will instantly know if they are condemned to some crummy technical back water.

The globalisation of trade may incentivise tariffs; the globalisation of knowledge makes them harder to sustain.

So this is what the Irish back stop is all about. It is the wall between the EU economy and the rest of the world. Much European production is inefficient in relation to the rest of the world and as labour and environmental standards rise, getting worse. Thus the EU’s incentive for tariffs is increasing. Technology at the Irish border might make actual customs operations easier but the demands on those customs operations are getting greater. If the EU changes the tariff on tennis racquets, as it does on oranges, PM Johnson is, apparently, going to suggest a system to implement the change.

The history of such protectionism is clear. It works for a while but eventually the power of the market overwhelms it. Corn laws are a case in point. Citizens demand better, cheaper goods from abroad. This is a challenge the EU has denied.

Thus, the UK is apparently offering to ‘solve the back stop’ with technology. Even if it works now, the demands placed on the system will increase as the EU seeks to protect its declining productive base. UK should avoid being responsible, King Canute like for holding back the power of market preference at the Irish border. The root cause of the back stop problem is the EU’s denial of economic history and the resultant scale of it protectionism not the UKs troubled relationship with Ireland. UK is being asked to enforce the unenforceable and Prime Minister Johnson has unwisely agreed.

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