The Campaign for Tariff Disarmament

With all the Brexit talk of trade deals and tariffs, an idea occurred to me. Rather like the CND (the Campaign for Nuclear Disarmament) I'd like to see the CTD - the Campaign for Tariff Disarmament, where all nations unilaterally agree to abolish all tariffs globally in a 5 year timeframe (for administrative reasons) whereby tariffs are reduced at 20% a year for the next 5 years, resulting in zero tariffs worldwide, and every nation and its citizens being better off as a result!

To see why this would be a good idea, we need to remind ourselves why tariffs are a bad idea. The golden rule about all economic inefficiencies — be they minimum wage laws, rent controls, tariffs, or any regulation of that kind, is that politicians get away with selling the bad policy as popular because the benefits are quite easy for everyone in the country to see, while the costs (that far outweigh the benefits) are more difficult to see because those costs are spread more widely and thinly throughout the nation as a whole.

To illustrate this, suppose there is an ageing firm in the UK called Steve's Steel that employs 3,000 people in Yorkshire. Understanding how the gains and losses of tariffs are distributed is key to understanding the problem with tariffs. The obvious benefits of lumping a tax on foreign competitors are felt by all the workers at Steve's Steel. The cost of saving those jobs, however, is distributed more thinly through the economy, which means as far as voters go, they see a tangible benefit to 3,000 of their fellow country folk and perceive no real cost to themselves. 

Moreover, since the workers and families have every incentive to lobby the government to save their jobs, and the rest of the population have little or no incentive to lobby the government to not subsidise Steve's Steel, there is more of an incentive for the government to listen to those connected to Steve's Steel.

But, alas, while you can see the losses connected to Steve's Steel quite easily, what you don't see quite so easily are the losses that occur around the rest of the country by subsidising Steve's Steel – the numerous other workers that lose their jobs for every one job saved at Steve's Steel – you never get to see all those who lost their jobs because the tariffs were enacted. 

Equally you never see all the reduced consumer income that Brits have due to these tariffs, via the increased prices they pay, nor the lost job opportunities by not having that money to spend elsewhere. You also never see that a British import tariff against, say, Chinese imports would mean the price of the yuan measured in pounds falls, making Chinese goods more expensive to Brits and British goods more expensive to the Chinese.

The upshot is, if you stifle foreign competition directly, you stifle domestic industries too, because somewhere down the line in the complex nexus of global trade, your fellow country folk are the competition. Therefore, even if it’s highly unlikely to ever happen, the reality is, if only we and all our trading partners could sign up to a multilateral agreement to discontinue tariffs over the next five years, it would be a collective agreement that would make pretty much everyone involved better off.