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Can anyone explain to me why these tariffs exist? Isn’t free trade mutually beneficial between allies? I imagine the reason is to punish the UK to disincentivi

Can anyone explain to me why these tariffs exist? Isn’t free trade mutually beneficial between allies? I imagine the reason is to punish the UK to disincentivise others leaving the EU, but this seems too simple.

AniseAbyss 3y ago
The UK is not an economic ally of the EU. There's a reason why it takes years to hammer out trade agreements.
- brutusborn 3y ago
  What is the reason?
pjc50 3y ago
The EU applies equal car tariffs to all sources, just as the US does. The origin of this tariff appears to be a desire to keep electric car production in the EU and stop it being outsourced to China.
- stetrain 3y ago
  This article is about an exception made for cars sold between the EU and UK, which EU manufacturers are failing to meet because they are sourcing too many components from China and elsewhere.
  - pjc50 3y ago
    EU manufacturers in the EU, or "EU" manufacturers in the UK? I'm finding the direction of some of these rules hard to follow.
    - stetrain 3y ago
      The article says it is about EU manufacturers exporting cars into the UK.
stetrain 3y ago
> Top minds in London and Brussels negotiating the deal agreed to "rules of origin" dictating that a 10 percent tariff would apply to any vehicle that was less than 45 percent made in either the EU or across the Channel. > This overconfidence has failed to materialize, however, with carmakers finding themselves still hopelessly reliant on components from China and elsewhere to meet demand. So the goal was to allow free trade between EU and UK on vehicles manufactured by either, but EU manufacturers are still sourcing too large a share of components from outside the EU so their vehicles don't fit the tariff exemption.
- brutusborn 3y ago
  I understand that, but why is it conditional on anything? Why should the proportion of non-EU components matter?
  - stetrain 3y ago
    Because if your goal is to allow free trade between allies (EU and UK, but not China) and a manufacturer sets up a shed in the EU, brings in a car 99% built in China and adds one bolt to it and tries to sell it in the UK as EU-made, then it is circumventing the goal of the free trade agreement.
    - brutusborn 3y ago
      But in that case, wouldn’t you just focus the tariffs on the 99% Chinese import? Once it is in your trading/ally bloc, wouldn’t it be better for the transactions to be tariff free?
      - stetrain 3y ago
        Ideally, probably. But this was a negotiation between the EU and UK and presumably didn't touch rules on other EU imports. There are other political discussions happening about tariffs on EV imports from China to the EU which might address that as well.
bloak 3y ago
Free trade can lead to a "race to the bottom" in which industry moves to the country with the lowest taxation, lowest environmental standards, worst treatment of employees, worst data protection, etc. and so other countries are encouraged to similarly drop their standards and everything gets worse for almost everyone, arguably, at least in some cases (probably no one would claim that free trade is a bad thing in all cases). In the case of environmental standards free trade between countries that do not have the same rules and standards makes it harder to prevent a "tragedy of the commons": I think that's another way of looking at it. Probably an economist could give a better answer.
- hedora 3y ago
  That's often used to justify tariffs, but the argument does not stand up to scrutiny. I've never heard of a tariff that is based on embodied carbon, percentage of slave labor that went into production of the good, or so on. Such tariffs would address the issues you are talking about (and also eliminate a significant percentage of global political corruption), but I think they're actually in violation of international law.
  - MagnumOpus 3y ago
    The EU’s new CBAM is a tariff that is based on embodied carbon. All other tariffs aren’t - they are protectionist measures aimed at increasing domestic employment.
  - Hermitian909 3y ago
    > I've never heard of a tariff that is based on embodied carbon, percentage of slave labor that went into production of the good, or so on. The inherent assumption here is that a trusted body can be established for a reasonable price that will accurately report these numbers so that the tariff can be enforced. This is a bad assumption both because of practical difficulties in many countries (try this in the DRC) and because one must often assume that the trading government is willing to subvert these tariffs. In practice, the only practical solution is usually a flat tariff paired with diplomacy stating that the condition to revisit the tariff is building trust that these standards will be enforced on both sides.
hedora 3y ago
Traditionally, it's because some rich groups are trying to rig markets in their favor. Read up on the sugar cartels, and the US corn lobby for the canonical example. The sugar cartels were (are?) the world's most powerful cartel, but the corn lobby in the US is similarly large. Even after the cartels take their profit cut from artificially inflating the price of imported sugar, it's still cheaper than domestic sugar or high fructose corn syrup. So, the corn (and probably sugar) lobby paid congress to create massive import tariffs on sugar. Later Coke and Pepsi switched to domestic HFCS in the US in response. These days, we know that HFCS is one of the root causes of the obesity epidemic, but it would be political suicide to let a 5-10 year reduction in population-wide life expectancy get in the way of the corn lobby's profits. Similar stories exist for pretty much all tariffs. For instance, when the Trump admimnistration increased tariffs on China, they also snuck in tariffs on wood from Canada. A very small group of people (that backed Trump in the election) control most of the wood production in the US. The tariffs created a supply crash of lumber in the middle of the covid construction boom. At some point, the price of a plywood board was above $100 (up from ~$20 or less). Most of that translated directly into profits for the timber companies. Of course, it also contributed to the housing shortage, but homeless people don't fund political campaigns, so that didn't really enter into the decision making process. (edit: I realized that was unnecessarily partisan. Biden renewed/expanded the tariffs I'm complaining about.)
- deleted 3y ago
  [deleted]

AniseAbyss 3y ago

The UK is not an economic ally of the EU. There's a reason why it takes years to hammer out trade agreements.

brutusborn 3y ago
What is the reason?

pjc50 3y ago

The EU applies equal car tariffs to all sources, just as the US does. The origin of this tariff appears to be a desire to keep electric car production in the EU and stop it being outsourced to China.

stetrain 3y ago
This article is about an exception made for cars sold between the EU and UK, which EU manufacturers are failing to meet because they are sourcing too many components from China and elsewhere.
- pjc50 3y ago
  EU manufacturers in the EU, or "EU" manufacturers in the UK? I'm finding the direction of some of these rules hard to follow.
  - stetrain 3y ago
    The article says it is about EU manufacturers exporting cars into the UK.

stetrain 3y ago

> Top minds in London and Brussels negotiating the deal agreed to "rules of origin" dictating that a 10 percent tariff would apply to any vehicle that was less than 45 percent made in either the EU or across the Channel. > This overconfidence has failed to materialize, however, with carmakers finding themselves still hopelessly reliant on components from China and elsewhere to meet demand. So the goal was to allow free trade between EU and UK on vehicles manufactured by either, but EU manufacturers are still sourcing too large a share of components from outside the EU so their vehicles don't fit the tariff exemption.

brutusborn 3y ago
I understand that, but why is it conditional on anything? Why should the proportion of non-EU components matter?
- stetrain 3y ago
  Because if your goal is to allow free trade between allies (EU and UK, but not China) and a manufacturer sets up a shed in the EU, brings in a car 99% built in China and adds one bolt to it and tries to sell it in the UK as EU-made, then it is circumventing the goal of the free trade agreement.
  - brutusborn 3y ago
    But in that case, wouldn’t you just focus the tariffs on the 99% Chinese import? Once it is in your trading/ally bloc, wouldn’t it be better for the transactions to be tariff free?
    - stetrain 3y ago
      Ideally, probably. But this was a negotiation between the EU and UK and presumably didn't touch rules on other EU imports. There are other political discussions happening about tariffs on EV imports from China to the EU which might address that as well.

bloak 3y ago

Free trade can lead to a "race to the bottom" in which industry moves to the country with the lowest taxation, lowest environmental standards, worst treatment of employees, worst data protection, etc. and so other countries are encouraged to similarly drop their standards and everything gets worse for almost everyone, arguably, at least in some cases (probably no one would claim that free trade is a bad thing in all cases). In the case of environmental standards free trade between countries that do not have the same rules and standards makes it harder to prevent a "tragedy of the commons": I think that's another way of looking at it. Probably an economist could give a better answer.

hedora 3y ago
That's often used to justify tariffs, but the argument does not stand up to scrutiny. I've never heard of a tariff that is based on embodied carbon, percentage of slave labor that went into production of the good, or so on. Such tariffs would address the issues you are talking about (and also eliminate a significant percentage of global political corruption), but I think they're actually in violation of international law.
- MagnumOpus 3y ago
  The EU’s new CBAM is a tariff that is based on embodied carbon. All other tariffs aren’t - they are protectionist measures aimed at increasing domestic employment.
- Hermitian909 3y ago
  > I've never heard of a tariff that is based on embodied carbon, percentage of slave labor that went into production of the good, or so on. The inherent assumption here is that a trusted body can be established for a reasonable price that will accurately report these numbers so that the tariff can be enforced. This is a bad assumption both because of practical difficulties in many countries (try this in the DRC) and because one must often assume that the trading government is willing to subvert these tariffs. In practice, the only practical solution is usually a flat tariff paired with diplomacy stating that the condition to revisit the tariff is building trust that these standards will be enforced on both sides.

hedora 3y ago

Traditionally, it's because some rich groups are trying to rig markets in their favor. Read up on the sugar cartels, and the US corn lobby for the canonical example. The sugar cartels were (are?) the world's most powerful cartel, but the corn lobby in the US is similarly large. Even after the cartels take their profit cut from artificially inflating the price of imported sugar, it's still cheaper than domestic sugar or high fructose corn syrup. So, the corn (and probably sugar) lobby paid congress to create massive import tariffs on sugar. Later Coke and Pepsi switched to domestic HFCS in the US in response. These days, we know that HFCS is one of the root causes of the obesity epidemic, but it would be political suicide to let a 5-10 year reduction in population-wide life expectancy get in the way of the corn lobby's profits. Similar stories exist for pretty much all tariffs. For instance, when the Trump admimnistration increased tariffs on China, they also snuck in tariffs on wood from Canada. A very small group of people (that backed Trump in the election) control most of the wood production in the US. The tariffs created a supply crash of lumber in the middle of the covid construction boom. At some point, the price of a plywood board was above $100 (up from ~$20 or less). Most of that translated directly into profits for the timber companies. Of course, it also contributed to the housing shortage, but homeless people don't fund political campaigns, so that didn't really enter into the decision making process. (edit: I realized that was unnecessarily partisan. Biden renewed/expanded the tariffs I'm complaining about.)

deleted 3y ago
[deleted]