Thursday, 13 October 2016

Trade asymmetry

I wrote this yesterday in a comment on a Guardian article. I've tidied it up a bit to improve the flow, but it's as it was otherwise. Rob Telford told me I should put some of my comments and Facebook posts in a blog, so all of this is entirely his fault. Thanks, Rob, by the way. Some may be horrified, but I feel invigorated and purged and that's the main thing.

It’s about trade asymmetry. The relaxed tone of it is because yesterday we were only facing economic collapse, whereas today we are facing economic collapse without Marmite.

The trade asymmetry problem goes like this.

Let's use cheese as an example, and let's say for ease of calculation that half the cheese sold in every country is domestic, and half is imported. Let’s say further that ten per cent of the foreign cheese sold in a Dutch supermarket is British. These are all assumptions to illustrate the principle, I have no actual clue how the Dutch feel about our cheese.

So a Dutch shopper goes into a Utrecht Asda (I have no idea if there are Asdas in Utrecht), and notices that the British cheddar that’s good in a souffle is ten per cent more expensive. Fortunately there's a similar hard cheese from Belgium that does the same job, and that's the same price as it was before, so that problem is solved.

Meanwhile in Uttoxeter (I can confirm that Smithfield Road, Uttoxeter has an Asda on it) a similar scene is being played out, except that here it's half the cheese that's ten per cent more expensive. Suppose the shopper is particularly fond of brie. There are British cheeses that are a bit like brie (or Jarlsberg, or manchego), but given a choice between limiting themselves to those cheeses or paying a bit extra the British consumer is far more likely to go for the extra cost because the consumer sacrifice that's being called for to save a few pence is that much more dramatic.

It isn't just cheese. For any product, a Dutch person can avoid the tariffs on non-EU European produce by reducing their choice of country of origin from 28 to 27. For the British in a similar position, they have to reduce it from 28 to 1. This is a greater sacrifice for the British, so they are correspondingly less likely to make it. As a result the trade balance between Britain and Europe, already dire, will become worse. The EU will happily pocket the tariff income, which is likely to amount to rather more than the British EU budget deficit that was supposed to go for doctors and nurses.

Meanwhile British producers, whoever owns them, will move their production across the channel if they can. This means a lot more unemployment here, slightly less over there.

The Marmite problem is different, as it’s caused by the weak pound, which makes Unilever’s receipts from UK sales worth less in Europe. 

It might seem like there's a simple solution to this self-inflicted economic crisis, which is for the Tories to get back to fucking pigs and pretending to cycle to work rather than carrying on like Donald Trump all the time. Amazing to think you can actually miss David Cameron. Actually that’s an exaggeration, it’s like saying salmonella makes you miss indigestion, but at least back then you could eat a salty yeasty toasty snack while you were throwing things at the news.

Unfortunately there's no way back now. The more intelligent ones must think of 2015 as some kind of lost paradise. They made this mess, and they and we are stuck with it. 

POSTSCRIPT: A few days later Tesco and Unilever made some kind of a peace deal, but then Morrison's put the price of Marmite up because of the weak pound (or so they said). Fortunately my personal Marmite stockpile will last a little while. Vegemite? Never.

No comments:

Post a Comment