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Saturday, 7 October 2017

Providential Penalties: A Salutary Case of Point Protectionism

This blog has often referred to point protectionism, my term for the myriad instances where governments override [or ignore] trade agreements - including those which are supposedly universal under the World Trade Organisation [WTO] - in order to give advantage to their native producers or to disadvantage alien producers who can outsell their native producers in some markets some of the time.

The recent cause celebre in this category is the action that the US government has taken against the Canadian aircraft firm Bombardier at the instance of Boeing, a US-Based competitor. Britain has a particular interest in this case as the wings of the aircraft under challenge are made in Northern Ireland. In the first instance, last week, the US slapped a 220% tariff on the import of the 'planes on the grounds that the Canadian and British governments had given grants to Bombardier. Yesterday the US took a second bite of the cherry, and added another 80% tariff. This 300% imposition is extremely high: in most cases where the US has accused another country of 'dumping' produce at lower prices than US firms can match, the levy has usually been below 100% of the sale price: as has happened in recent years with imports of basic classes of steel from China.

Britain and Canada have pointed out that Boeing is one of the most heavily state-supported companies in the world; which, of course, cuts no ice with the US Administration.

This is a crude and simple case where a competitor to the US market leader has introduced a product [to which no US firm currently provides a direct competitor] which is obviously highly desirable to US airlines. So the new product is to be priced-out of the American market.

This can happen in any sector of the economy, where a foreign firm attracts American customers to a new or redesigned product: and it probably will, as the world becomes ever more highly competitive. This is a timely and salutary lesson for the bonkers Brexiteers: those who say that Britain can thrive on its own in the world, under WTO Rules. Whenever it suits the USA, Australia, Brazil, Russia or any other country - however comprehensive a trade agreement Liam Fox can dream up with them - they can say "We have imposed this tariff! The WTO can whistle for their rules to apply; and the UK can put its trade deal where the monkey put the nuts." At such times - and there would be an infinite number of them - a solitary post-Brexit Britain would suffer immense disadvantage. To imagine otherwise requires a high degree of intoxication in a very small mind.

In the 2016 Referendum I voted for exit from the political absurdity of the European Union. I did not vote for this nation to die slowly, of starvation. We must stay within the European Economic Area, on the best terms that can be obtained. As Mrs May's moribund government fails to say what it wants to achieve, with any precision, the Torygraph today has a banner headline to the effect that the EU has opened up stronger channels of communication with Mr Corbyn and his associates. Mr Corbyn has learned a lot in the past year - more than I had previously thought possible - but whether he can absorb this particular lesson in Political Economy before he comes to power remains to be seen.

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