Yet another report, yet another paper, insisting that Brexit will do bloodcurdling things to the cost of living in Britain. Based on the same flawed logic that has been abounding recently. The underlying assumption is that we'll be complete idiots and deliberately structure our trade policy so as to make us as poor as the current international rules will allow. Yes, obviously, there is politics involved here and it's not beyond possible that they really will do something that damn stupid but really, it shouldn't be a base assumption now, should it?
Households face increases of up to £930 in their annual shopping bills if Britain walks away from Brexit talks without a trade deal, according to new research that reveals a disproportionate impact on poorer families and the unemployed.
Meat, vegetables, dairy products, clothing and footwear would be subject to the largest consumer price rises under a “no-deal” scenario, according to a study published in the authoritative National Institute Economic Review, adding to inflationary pressures that have already forced the first interest rate rise in a decade this week.
That study is here.
We have discussed this both here and elsewhere. There are two things that interact here, WTO tariff levels and most favoured nation status. Those tariff levels are the maximum that may be charged to all and any imports from other members of the WTO - pretty much the rest of the world. MFN status says that if we decide to tax ourselves less on what we decide to buy from foreigners - and do not for a moment forget that import tariffs are paid by us, the consumers of the imports - then we must charge to imports from all those WTO members the same rates on the same products. So, say, a zero tariff on imports applies to all imports from everyone. A 1% rate on cars applies to all cars from anywhere.
Thus a report that Brexit will increase living costs by the thick end of a grand a family is either nonsense, for we won't do it, or a very decent warning of what we shouldn't do. For why would we want to raise living costs by a grand a household? Quite, every time this calculation is performed, and it is being done repeatedly, it is just another proof of the basic contention about trade itself, the only rational stance to have is one of unilateral free trade.
These multiple reports are being used to insist upon the terrible costs of Brexit. Instead we should regard them as warnings about the terrible costs of stupid trade policy. Don't impose import tariffs precisely because, as is being pointed out, they make us poorer.