EU protectionist nonsense

iPringle

Ireland has recently sentenced Paul Beagley, a fruit and vegetable importer, to six years in prison for failing to pay the "appropriate" duty on garlic.

http://www.independent.ie/national-news/courts/garlic-man-to-wait-on-sentence-fate-after-appeal-3315238.html

This has raised a number of questions including the harshness of the sentence and the incentives created by giving him a full sentence in spite of his co-operation and guilty plea.

To me though, this raises a much more fundamental question: just what the hell are we doing taxing garlic imports?

This kind of protectionist policy just protects a few French jobs at the expense of everyone else. It is essentially corruption.

I would like to see if anyone actually sees any sense in this kind of policy or like me, if we should rethink our outlook on international trade and embrace the benefits of free trade. The EU was founded largely on the principle that a common market which takes down barriers to trade benefits everyone involved. Import duties are a gross violation of this principle.

Scofflaw

iPringle wrote: »

Ireland has recently sentenced Paul Beagley, a fruit and vegetable importer, to six years in prison for failing to pay the "appropriate" duty on garlic.

http://www.independent.ie/national-news/courts/garlic-man-to-wait-on-sentence-fate-after-appeal-3315238.html

This has raised a number of questions including the harshness of the sentence and the incentives created by giving him a full sentence in spite of his co-operation and guilty plea.

To me though, this raises a much more fundamental question: just what the hell are we doing taxing garlic imports?

This kind of protectionist policy just protects a few French jobs at the expense of everyone else. It is essentially corruption.

I would like to see if anyone actually sees any sense in this kind of policy or like me, if we should rethink our outlook on international trade and embrace the benefits of free trade. The EU was founded largely on the principle that a common market which takes down barriers to trade benefits everyone involved. Import duties are a gross violation of this principle.

Agricultural protectionism exists partly through the pressure of the farming lobbies (obviously), but also through a deliberate policy of maintaining Europe's agricultural capacity. Were it not for that policy of agricultural protectionism, the argument quite reasonably goes, it would be cheaper to outsource food production to lower-wage less developed economies - which is the argument both for and against it.

It's obviously a large part of the EU's makeup, when you consider that CAP is still the largest item in the EU's budget, so the combination of food security and maintaining Europe's rural population is obviously a compelling argument. Import tariffs on garlic imported from China (as in this case) is a part of that, and the import walls protecting European agriculture would be the last to fall to free trade arguments for that reason. It's not particularly about "protecting a few French jobs" (aside from the fact that it's Spain which produces half the EU's garlic, which in turn supports 280,000 jobs), as a particular result of, say, garlic farmers lobbying Brussels (although I don't doubt they do, just as Irish beef farmers do), but part of a general system and philosophy of defending rural production.

Whether one thinks that's a good thing or not is a rather more complex argument, I would have said, than can simply be decided by pointing out that free trade is a good thing in itself.

cordially,
Scofflaw

HellFireClub

iPringle wrote: »

Ireland has recently sentenced Paul Beagley, a fruit and vegetable importer, to six years in prison for failing to pay the "appropriate" duty on garlic.

http://www.independent.ie/national-news/courts/garlic-man-to-wait-on-sentence-fate-after-appeal-3315238.html

This has raised a number of questions including the harshness of the sentence and the incentives created by giving him a full sentence in spite of his co-operation and guilty plea.

To me though, this raises a much more fundamental question: just what the hell are we doing taxing garlic imports?

This kind of protectionist policy just protects a few French jobs at the expense of everyone else. It is essentially corruption.

I would like to see if anyone actually sees any sense in this kind of policy or like me, if we should rethink our outlook on international trade and embrace the benefits of free trade. The EU was founded largely on the principle that a common market which takes down barriers to trade benefits everyone involved. Import duties are a gross violation of this principle.

The same is going on with VRT on UK imports and you get major black market activity going there that undermines legitimate businesses trying to operate above board while competing with these blaggards. I agree with you though, the problem is the government policy that applies these taxes.

Nody

It's not only about protecting local interests either but also a way to raise indirect money (instead of deducting it at source as income tax or directly on the product as VAT which are both very visible to the voting population); for example raw coffee beans brought to EU be roasted are also taxed and I can't recall any major coffee bean producers in EU (if any).

iPringle

Nody wrote: »

It's not only about protecting local interests either but also a way to raise indirect money (instead of deducting it at source as income tax or directly on the product as VAT which are both very visible to the voting population); for example raw coffee beans brought to EU be roasted are also taxed and I can't recall any major coffee bean producers in EU (if any).

But it "protects" local interests at the expense of everyone else. It might save jobs which are visible (and therefore it can be politically expedient) but it costs other jobs.

If the natural price in a free market for garlic is €1, but because of import tariffs we pay €2, then all we are doing is sacrificing jobs in what that extra €1 would have been spent on. It might save a few jobs in the garlic industry but no doubt costs jobs elsewhere which is corrupt and illogical.

Scofflaw

iPringle wrote: »

But it "protects" local interests at the expense of everyone else. It might save jobs which are visible (and therefore it can be politically expedient) but it costs other jobs.

If the natural price in a free market for garlic is €1, but because of import tariffs we pay €2, then all we are doing is sacrificing jobs in what that extra €1 would have been spent on. It might save a few jobs in the garlic industry but no doubt costs jobs elsewhere which is corrupt and illogical.

It's a choice between a free-market economy and a social market economy, which is a matter of individual preference rather than any abstract truth. There only seems to be an open and shut argument in favour of one or other if you've already made up your mind which one's right.

cordially,
Scofflaw

iPringle

Scofflaw wrote: »

It's a choice between a free-market economy and a social market economy, which is a matter of individual preference rather than any abstract truth. There only seems to be an open and shut argument in favour of one or other if you've already made up your mind which one's right.

cordially,
Scofflaw

Well in that sense you are correct. I have made my mind up on the issue, but based on years of study.

It irritates me a great deal when people only see the intended consequence of a policy (more jobs for garlic producers) and don't see the opportunity costs involved.

thebman

I'd be in favor of an ethics tax on products like iPhones and electronics in general where workers are paid poorly and in poor conditions and the companies are making billions to the point that paying the workers fair wages wouldn't even harm their profits that much.

Nody

thebman wrote: »

I'd be in favor of an ethics tax on products like iPhones and electronics in general where workers are paid poorly and in poor conditions and the companies are making billions to the point that paying the workers fair wages wouldn't even harm their profits that much.

And what ever makes you think that the cost would not be passed on to consumers? This is of course beyond defining what's fair; is it fair if chickens are kept in small cages to feed you eggs? Should we then have a ethics tax on chicken eggs as well? How about pigs? Or clothes? Those nikes are not exactly done in a western country style factory you know...

Icepick

thebman wrote: »

I'd be in favor of an ethics tax on products like iPhones and electronics in general where workers are paid poorly and in poor conditions and the companies are making billions to the point that paying the workers fair wages wouldn't even harm their profits that much.

And this ethics would lead to more expensive products AND workers in 3rd countries being laid off.

If the EU and the US lifted their trade barriers on agricultural products, it would be the biggest 'aid' project ever.

Developing countries don't need bleeding-heart policies, and it does not matter whether they arise from good intentions or lobbying by vested interests.
They need an opportunity to compete.

Scofflaw

iPringle wrote: »

Well in that sense you are correct. I have made my mind up on the issue, but based on years of study.

It irritates me a great deal when people only see the intended consequence of a policy (more jobs for garlic producers) and don't see the opportunity costs involved.

On the other hand, it's also common to put forward the intended benefits of the free-trade alternative - more money in your pocket - without really spelling out the opportunity costs of that - job losses in the previously protected industries.

And there's a tendency on the free trade side to treat "employment" as fungible, as if quarter of a million Spanish garlic growers can simply be redeployed to the hi-tech sector over the course of a year or so, along with their attendant services. It doesn't really happen like that, though.

cordially,
Scofflaw

iPringle

Scofflaw wrote: »

On the other hand, it's also common to put forward the intended benefits of the free-trade alternative - more money in your pocket - without really spelling out the opportunity costs of that - job losses in the previously protected industries.

And there's a tendency on the free trade side to treat "employment" as fungible, as if quarter of a million Spanish garlic growers can simply be redeployed to the hi-tech sector over the course of a year or so, along with their attendant services. It doesn't really happen like that, though.

cordially,
Scofflaw

Of course there would be consequences of taking industries off welfare. Of course those people will find it hard to re-skill.

What this means is that we will keep subsidising them no matter how unproductive or unprofitable they would be in a free market because of the obvious costs of taking away their subsidy. The argument goes that if we take away farmers subsidies tomorrow, they will be unable to compete with the rest of the world and become unemployed. So when, if ever, do they come off their subsidy? Never. What incentive do they have to innovate, make capital improvements etc. so they can compete? None.

In the mean time, we pay higher taxes and direct a disproportionate amount of our income towards the subsidised industries, having a direct negative effect elsewhere.

Victor

iPringle wrote: »

The EU was founded largely on the principle that a common market which takes down barriers to trade benefits everyone involved. Import duties are a gross violation of this principle.

But the EU doesn't exist in isolation. Other states and trading groups also impose their own taxes.

Some tariffs will be politically motivated to discourage certain behaviours, e.g. in 2002-2003, the USA introduced supports to it's steel inductry that were in breach of international agreements. In turn the EU targeted American orange juice. Why? Because orange juice is an important export from Florida, which was a potential swing state in the 2004 presidential election.

iPringle wrote: »

In the mean time, we pay higher taxes .

Is this true? Surely if we charge import duties, there are other taxes that we don't need to charge or don't need to charge at the same rate.

iPringle

Victor wrote: »

Is this true? Surely if we charge import duties, there are other taxes that we don't need to charge or don't need to charge at the same rate.

The conversation expanded to include subsidies. i.e. EU agriculture subsidies.

Scofflaw

The cost of agricultural tariffs to the EU citizen has been estimated here: http://www.reformthecap.eu/issues/policy-instruments/tariffs

Given they're arguing the free trade side of the argument, I'm going to assume their estimate of tariff costs to EU consumers is a hostile one:

EU agricultural policies have increased agricultural prices by 12% in 2008, transferring € 36 billion from consumers to producers.

That's a cost of €72 per EU consumer....which really isn't a lot. And the producers in question are also within the EU, so there's a circularity to the argument. The money in question doesn't simply disappear from the EU economy.

On the jobs side, here's a summary of the position:

Farming, the agri-food sector and related inputs and services support 300,000 jobs across the economy, creating output of €24 billion in value annually. Across Europe, farming and the food sector support 40 million jobs.

Of course, not all those jobs are dependent on agricultural subsidies and/or protective import tariffs. If we reckoned, say, a quarter of them as marginal jobs that would be lost in a free-market situation, the support costs per job are €3600/year. Obviously, the smaller the proportion of agri-jobs that are marginal and tariff-supported, the more we're paying per job, until at some point we reach the point you describe as "corrupt and illogical".

On the subjects of alternative employment on the one hand, and of innovation and investment on the other - the gains from agricultural innovation are usually marginal. If they were not the low-wage and low-tech farming countries couldn't out-compete EU farmers anyway. And alternative employment in manufacturing and services, while easy to wave as a magic wand, requires different skillsets, often different educational basics, and on top of that is not dispersed in rural areas but clustered in urban ones - all of which suggests that the upheaval resulting from a move to a free market would be both profound and persistent.

That's quite a lot of disruption and loss for the sake of €72.

cordially,
Scofflaw

View

iPringle wrote: »

To me though, this raises a much more fundamental question: just what the hell are we doing taxing garlic imports?

Most, if not all, countries, apply external tariffs on products that enter their market. They also typically retain the option of "anti-dumping" measures to prevent other countries dumping products in their market.

There is no reason why garlic imports should be any more exempt from such external tariffs than any other import.

In this case though the court case wasn't about the rights or wrongs of having a garlic import tariff rather it concerned itself with the deliberate evasion of the relevant tariff.

Icepick

Scofflaw wrote: »

That's quite a lot of disruption and loss for the sake of €72.

according to you
Regardless who are you or anybody else to say where I spend my money?

View

Icepick wrote: »

according to you
Regardless who are you or anybody else to say where I spend my money?

Well, the "anybody else" in this case are the democratically elected members of the respective parliaments and governments who are there to pass legislation such as this (even if it effects where and how you spend your money).

Scofflaw, isn't claiming such a democratic mandate, I think, merely offering explanation.

walrusgumble

iPringle wrote: »

Ireland has recently sentenced Paul Beagley, a fruit and vegetable importer, to six years in prison for failing to pay the "appropriate" duty on garlic.
[
http://www.independent.ie/national-news/courts/garlic-man-to-wait-on-sentence-fate-after-appeal-3315238.html/url]

This has raised a number of questions including the harshness of the sentence and the incentives created by giving him a full sentence in spite of his co-operation and guilty plea.

To me though, this raises a much more fundamental question: just what the hell are we doing taxing garlic imports?

This kind of protectionist policy just protects a few French jobs at the expense of everyone else. It is essentially corruption.

I would like to see if anyone actually sees any sense in this kind of policy or like me, if we should rethink our outlook on international trade and embrace the benefits of free trade. The EU was founded largely on the principle that a common market which takes down barriers to trade benefits everyone involved. Import duties are a gross violation of this principle.

I thought these garlics were coming from outside the EU , if so, what has EU got to do with it? It was China, didn't realise China was part of the EU or internal market


See Articles 110-113 TFEU on levies, charges and tax
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2008:115:0047:0199:en:PDF

Did you even read the news?

Victor

walrusgumble wrote: »

I thought these garlics were coming from outside the EU , if so, what has EU got to do with it?

The EU set the import duties for goods entering the EU and retains a portion for the financing for the EU budget.

Icepick

View wrote: »

Well, the "anybody else" in this case are the democratically elected members of the respective parliaments and governments who are there to pass legislation such as this (even if it effects where and how you spend your money).

Scofflaw, isn't claiming such a democratic mandate, I think, merely offering explanation.

Scofflaw wrote: »

That's quite a lot of disruption and loss for the sake of €72.

...is clearly an opinion and not just an explanation.

Scofflaw

Icepick wrote: »

according to you
Regardless who are you or anybody else to say where I spend my money?

I'm not trying to tell you where to spend your money. If you prize €72 annually over the jobs of a few million people, that's your entitlement. I obviously don't agree, but I'm not telling you what to think.

On the other hand, it seems likely that the elected governments of the EU, who support this system, are reflecting the wishes of the majority of their electorates, something they obviously have a mandate to do, as neither you nor I have. Disagreeing with the majority in a democracy is, again, something you're entirely entitled to do, but it's not going to get you very far unless you persuade the majority.

cordially,
Scofflaw

Icepick

Scofflaw wrote: »

If you prize €72 annually over the jobs of a few million people, that's your entitlement. I obviously don't agree, but I'm not telling you what to think.

It's you who values jobs of a few million (relatively) rich people over jobs of many more people in the developing world.

Scofflaw

Icepick wrote: »

It's you who values jobs of a few million (relatively) rich people over jobs of many more people in the developing world.

Not quite - my argument is only against the "free trade for the sake of it" and the "it's my €72" lines. The fact that the developing world would benefit if the EU didn't erect trade barriers to protect its own farmers is a far stronger argument, but a separate one.

cordially,
Scofflaw