Don't Overrate EU Brexit Negotiating Power

12/08/2020 | Brian Griffin

[Brian Griffin]

Many people in the UK are fearful of the imposition of WTO-allowed tariffs on future UK exports to the EU. As an American, this is somewhat of a mystery as American exports to the EU are already subject to EU-imposed WTO-level tariffs. There is no audible bellyaching whatsoever in the USA about EU-imposed WTO-level tariffs on American exports to the EU.

To allay UK fears, I wish to point out that the effect of EU tariffs on the incomes of UK citizens could be offset by UK Treasury compensatory payments to impacted UK citizens paid out when they retire, financially similar to the Social Security system of the USA.

Imagine a UK exporter with 500 workers that would have to pay £800,000 in EU tariffs on UK added value annually. It would amount to £1600 annually for each worker on average (the exact distribution of EU tariff impacts on its workers might be specified by the UK exporter in conjunction with UK labour unions in annual Internet-based declarations to HMRC).

If a worker at a UK export firm is 45 years of age now, by the time the worker is at the retirement age of 65, £32000 in EU tariff payment credits might be accrued in the name of the worker in UK government computer ledgers. The UK government could then cut the former UK export firm worker a £32000 cheque, £3200 cheques annually for 10 years or say monthly ~£200 EU tariff compensation pension payments for the remainder of the worker's (and his/her spouse's) life.

Some might say this would cost the UK government great sums of money, but HMRC would be collecting WTO-level tariffs on EU exports to the UK in significantly greater total annual amounts since the UK habitually runs trade deficits with the EU.

The EU might claim the UK is subsidizing its exports, but in fact for as many years as necessary the UK government would simply be investing HMRC tariff revenue and keeping electronic records of EU tariffs paid by UK exporters and their presumed financial impacts on UK-related individuals. Moreover, payouts under the possible scheme would initially only be made to retired former workers (or job seekers no longer with their former employer).

Keep in mind too that French workers brook no nonsense when it comes to financial compensation. French workers would insist by manifestations[street demonstrations] and grèves[labour strikes] that a similar compensatory scheme be set up in France. Michael Barnier knows his countrymen well, as they are very fond of making their displeasures known. The Italian and Spanish workers will noisily want a matching scheme as well.

This all may seem unnecessarily complicated, and it would be - continued friction-free UK<->EU trade requires no substantial effort by either EU or UK governments. There is no valid health or safety reason whatsoever why long lorry queues near Dover and Calais would be necessary on 4 January 2021 when they are not necessary on 8 December 2020. And should any valid health or safety reason ever arise for long lorry queues, any level of UK capitulation to EU demands would not avoid them.

To come to their senses, the EU Brexit negotiators simply need to realize that:
1. the UK can for the indefinite future financially circumvent EU-imposed tariffs on UK exports to the EU by running a new tariff-funded state pension scheme
2. the vast majority of UK workers have no desire or substantive ability (given the high cost of living in the UK) to be compensated at a lower overall cost than Eastern European workers
3. the EU trying to rule over the UK in 2021 is as inappropriate as Great Britain trying to rule over African colonies in the early 1960s was.

Political domination by the EU over the UK is not 'free' trade.