Richard North, 07/02/2020  

In her alter ego as a remainer, Liz Truss was in full flood a month before the referendum, telling The Sun that Brexit-backing bosses were "living in cloud cuckoo land" if they thought leaving EU would help business.

A vote to leave, she declared, "would be a triple tragedy – more rules, more forms and more delays when selling to the EU". Our firms, she said, "would drown in forms, which would hit profits and then pockets as jobs are cut and prices go up".

Now, in her born-again role as a Johnson groupie, she occupies the lofty position of secretary of state for the Department for International Trade, and is now launching a public consultation "to inform the UK's new independent global tariff policy".

With the UK having left the EU, her department's press release burbles that the government "is free to make its mark as a champion of free trade, safeguard against the forces of protectionism on the rise across the world, and crucially ensure that our tariff strategy is best for businesses and consumers across the UK".

The consultation seems to be based on the assumption that goods coming into the UK will no longer be subject to the EU's Common External Tariff. Her department thus believes that the UK's "new Global Tariff Policy" will coming into effect on 1 January 2021 for imports from any country with which the UK does not have a free trade agreement.

That itself is something of an assumption which could very well depend on the outcome of the trade talks with the EU. If we are to avoid complex and costly rules of origin applying to our exports to the EU, we would be best off aligning our tariffs with those of the EU – at least in those areas where our trade is concentrated.

But, without taking this into account, the government would have you believe that it is intent on "simplifying and tailoring the tariff" to suit UK businesses and households.

Truss has in mind removing tariffs of less than 2.5 percent and rounding tariffs down to the nearest 2.5, five or ten percent band; removing tariffs on key inputs to production which could reduce costs for UK manufacturers; and removing tariffs where the UK has zero or limited domestic production "which could help to lower prices for consumers".

Gone is any idea of "more rules, more forms and more delays when selling to the EU". High tariffs, Truss gaily informs us, "impinge on businesses and raise costs for consumers". This is our opportunity, her press release says, "to set our own tariff strategy that is right for UK consumers and businesses across our country".

Needless to say, the fanboy gazette is on the case, delivering a trilling headline that claims: "Households could save £8.3bn a year from post-Brexit plan to slash tariffs".

This, apparently, is based on "research" from the Institute of Economic Affairs (IEA), which – we are told – has estimated that the proposed new regime would "save Britain's 27.8 million households £300 a year, a total of £8.3 billion, based on the tariff cuts reducing bills by about one percent".

Strangely, Julian Jessop, an economics fellow at the IEA, is prepared to put his name to this figure, saying that: "This would be the immediate impact based on existing spending patterns", although he adds that: "The impact could increase over time as competition grows and consumers switch to cheaper suppliers".

However, if we turn to the European Commission, a reasonable respectable source of data on the income generated from customs duties (which includes the sugar levy), the total revenue from the UK in 2018, was a mere £2.9 billion (less the 20 percent paid to HMRC for collecting the tax).

Given that Liz Truss is not proposing to eliminate all tariffs, and is only reducing them in some areas, it is a little bit difficult to see how this activity will save £8.3 billion, when the total income at the moment is only just over a third of that.

Oddly enough, though, we've seen this game played out before, with exactly the same claim of saving £300 per household. This came in February 2017 – nearly three years ago – via The Sun, with Owen Paterson in the Sunday Telegraph putting his name to the absurd £300 figure.

Not least of the errors in the Sun's survey – which was widely trashed at the time - was that it applied the percentage savings to the retail prices, whereas in the real world tariffs are applied to the landed price (including shipping and insurance), which is a fraction of the price charged to the final consumer.

In any case, as I pointed out at the time the factors influencing retail prices are far too complex to apply such simplistic calculations.

But never let it be said that the fanboy gazette is incapable of making a complete arse of itself as it too applies notional savings to retail prices – the product of three of the Telegraph's finest minds, Lizzy Burden, an economics reporter, Tim Wallace, the deputy economics editor and Gordon Rayner, the political editor.

In another piece, stuffed with comfort quotes, Burden has Ruth Lea backing Truss's proposals as "eminently sensible". Not anywhere, of course, is there any mention of the increased costs that will be imposed on both imports and exports through the explosion of non-tariff barriers, which are variously estimated to add as much as 20 percent to trade costs.

Interestingly, as I reported in a piece on non-tariff barriers written in 2015, the IEA had three years earlier stressed that: "Non-tariff barriers need to be brought to the forefront of the trade debate".

Eight years down the line, it is far too much to expect the IEA to remember its own nostrums – or even to get its facts right. But one cannot help but feel that it is supporting Truss's little venture in an attempt to keep attention away from the more unwelcome effects of Brexit.

Throughout the Brexit debate, most of the pundits seems unable to drag their thinking past tariffs and this initiative is very much playing to the gallery. By talking up savings from reduced tariffs, and ignoring (for the moment) the increased costs of trade friction, the public can be kept vaguely "on-side" until reality hits.

From the look of it though, the government is going to be struggling on this. Apart from the fanboy gazette, there had been very little media coverage of Truss's initiative. Only latterly has The Sun picked up the story, telling us that "Brits could enjoy cheaper coffee, trainers and wine as ministers plan to cut import tariffs from next year". But, those "savings" could include 42 euro cents per kg off sugar. Never mind the sugar tax.

One cannot tell whether this is a reflection of general disbelief or the boredom factor that blights Brexit, but it does not augur well for the government's propaganda machine if it can only enthuse the Telegraph. But if we were to ask in whom we Truss, the answer coming back would probably not be a happy one.

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