Debate Magazine

"Brexit Boost for Consumers Short-lived Says IFS"

Posted on the 20 March 2018 by Markwadsworth @Mark_Wadsworth

From the BBC:
Consumers could see prices fall by up to 1.2% if Britain were to abolish all tariffs once it has left the European Union, a report says.
But the study by the Institute for Fiscal Studies warns that any gains would be small and were based on "optimistic" assumptions. It also said that consumers had already seen prices rise by 2% since the referendum due to the weaker pound.
Costs linked to new EU trade barriers could also hit consumers, it said.
Those increased costs would "offset" any "rather limited" gains from becoming tariff free in the future, the report from the think tank says.

Agreed. EU tariffs (in £ or % terms) are not particularly high, ergo benefit from removing them not that great either. But that's only one aspect and not the only benefit in leaving the Customs Union.
What is relevant is that
1. The IFS has grudgingly admitted that there might be some benefits.
2. The IFS also now accepts that fall in GBP only led to a 2% increase in prices (it's probably less than that if truth be told). Observation tells us that a 10% change in GBP only leads to a 1% change in domestic prices so all the Brexit could result in high inflation and low growth, warns Mark Carney headlines were just Project Fear.
3. If removing tariffs only leads to a small fall in consumer prices, then why all the horror stories about the UK being forced to impose WTO tariffs and the impact on prices? There's no such thing as WTO tariffs - the WTO stipulates only maximum tariffs, so the UK could trade under WTO rules with zero tariffs - as the IFS now also admits. Even if the UK imposed higher tariffs, the upwards impact on prices would be just as small as the estimated downward impact of being free of EU import tariffs.
4. And so on.


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