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UK trade with the EU plummets but surges with non EU countries watch

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    (Original post by Jammy Duel)
    As opposed to Germany making the conditions most favourable to them wait what's that they want low steel prices?

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    Thats how power works.
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    (Original post by Maker)
    The powerful always screw the less powerful, the EU keeps commodities like sugar from African and South American countries out of the EU because they are too weak to oppose the EU. China will do the same to the UK because they can and they will. Thats not to say its not beneficial to both countries but the more of the benefit go to the more powerful country.
    The powerful don't always screw the less powerful. Grown up negotiations are two way mutually beneficial deals.

    Switzerland for example is a tiny country compared to most. But it successfully negotiated trade deals.

    Read up on comparative and competitive advantages.
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    (Original post by MatureStudent36)
    The powerful don't always screw the less powerful. Grown up negotiations are two way mutually beneficial deals.

    Switzerland for example is a tiny country compared to most. But it successfully negotiated trade deals.

    Read up on comparative and competitive advantages.
    Do you know what sorts of deals the Swiss got?

    The Swiss are trying to limit EU immigration but the EU is not playing ball, I don't think the Swiss has much of a choice so its easy to see who has the power in this case.

    http://www.theguardian.com/commentis...k-eurosceptics
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    (Original post by Maker)
    The powerful always screw the less powerful, the EU keeps commodities like sugar from African and South American countries out of the EU because they are too weak to oppose the EU. China will do the same to the UK because they can and they will. Thats not to say its not beneficial to both countries but the more of the benefit go to the more powerful country.
    I think this is a misdiagnosis of both cause and effect of tariffs.

    No country ever benefits economically from refusing to import from anyone, for precisely the same reason I don't benefit from refusing to import from Tesco. At worst, Tesco is not offering anything I want, in which case I don't trade with them anyway. At best, they are offering the best price on something, and so I would be throwing my money away by buying it somewhere else.

    Tariffs are not about improving the economy of the country imposing the tariffs. They are about benefiting certain protected industries and their owners against other people within the same country. EU sugar tariffs don't transfer money from Africa to the EU; they transfer money from EU citizens who don't produce sugar to EU citizens who do produce sugar.

    There is a good argument that we should never do this. It unfairly benefits certain people, who usually do not need the money, and it reduces the quality of life for society as a whole, who have to support these parasites. One advantage of leaving the EU would be the ability to unilaterally drop all import tariffs on everyone.

    As for Chinese banning UK imports, they actually can't do that because they don't have the power to do it. The reason is that trade need not be direct. Chinese will sell the UK things, because the UK wants to buy and because pounds are freely exchageable; they have value to the Chinese seller even if that Chinese seller can't himself buy anything at all from the UK. The Chinese seller will convert their pounds to (for instance) euros, use the euros to buy something from Germany. The German recipient will use the pounds to buy a house in London. The Chinese do not have the power to stop what is in effect a Chinese import from the UK, short of banning all trade with all countries and imposing currency controls. All the Chinese have the power to do is to refuse to buy things directly from the UK which only hurts China, not the UK. Only we have the power to stop this trade by (for instance) imposing tariffs or controls on German investment and trade with the UK.

    In fact almost all harm due to trade manipulations is self-inflicted. Nazi Germany, for instance, had essentially imposed a total worldwide embargo on itself in 1939 by inflating the price of the Reichsmark, meaning that no one wanted to buy anything from Germany and they ran out of foreign exchange. They were therefore unable to import things they needed, including oil and food (note again how imports, not exports, are the goal of trade - exports are just a means to that end). This was a major consideration in their decision to launch WWII and a major contributor to their belief in a global conspiracy against them. In fact they were a victim of their own mistaken protectionist thinking.

    Unfortunately these sorts of ideas, which were never very popular in Britain, still hold a lot of sway on the continent and this is a big part of the reason why the EU exists at all. If you look at things from a more accurate perspective, you see that the EU in or out question is not about which arrangement would get Britain better "deals" but rather that the whole notion of "deals" - of which the EU is one - being very important and beneficial is fundamentally mistaken. If we removed the trade component from the EU entirely, as being harmful or at least unimportant, how many people in Britain would vote to stay for the rest? My educated guess is less than 20%.
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    (Original post by Observatory)
    I think this is a misdiagnosis of both cause and effect of tariffs.

    No country ever benefits economically from refusing to import from anyone, for precisely the same reason I don't benefit from refusing to import from Tesco. At worst, Tesco is not offering anything I want, in which case I don't trade with them anyway. At best, they are offering the best price on something, and so I would be throwing my money away by buying it somewhere else.

    Tariffs are not about improving the economy of the country imposing the tariffs. They are about benefiting certain protected industries and their owners against other people within the same country. EU sugar tariffs don't transfer money from Africa to the EU; they transfer money from EU citizens who don't produce sugar to EU citizens who do produce sugar.

    There is a good argument that we should never do this. It unfairly benefits certain people, who usually do not need the money, and it reduces the quality of life for society as a whole, who have to support these parasites. One advantage of leaving the EU would be the ability to unilaterally drop all import tariffs on everyone.

    As for Chinese banning UK imports, they actually can't do that because they don't have the power to do it. The reason is that trade need not be direct. Chinese will sell the UK things, because the UK wants to buy and because pounds are freely exchageable; they have value to the Chinese seller even if that Chinese seller can't himself buy anything at all from the UK. The Chinese seller will convert their pounds to (for instance) euros, use the euros to buy something from Germany. The German recipient will use the pounds to buy a house in London. The Chinese do not have the power to stop what is in effect a Chinese import from the UK, short of banning all trade with all countries and imposing currency controls. All the Chinese have the power to do is to refuse to buy things directly from the UK which only hurts China, not the UK. Only we have the power to stop this trade by (for instance) imposing tariffs or controls on German investment and trade with the UK.

    In fact almost all harm due to trade manipulations is self-inflicted. Nazi Germany, for instance, had essentially imposed a total worldwide embargo on itself in 1939 by inflating the price of the Reichsmark, meaning that no one wanted to buy anything from Germany and they ran out of foreign exchange. They were therefore unable to import things they needed, including oil and food (note again how imports, not exports, are the goal of trade - exports are just a means to that end). This was a major consideration in their decision to launch WWII and a major contributor to their belief in a global conspiracy against them. In fact they were a victim of their own mistaken protectionist thinking.

    Unfortunately these sorts of ideas, which were never very popular in Britain, still hold a lot of sway on the continent and this is a big part of the reason why the EU exists at all. If you look at things from a more accurate perspective, you see that the EU in or out question is not about which arrangement would get Britain better "deals" but rather that the whole notion of "deals" - of which the EU is one - being very important and beneficial is fundamentally mistaken. If we removed the trade component from the EU entirely, as being harmful or at least unimportant, how many people in Britain would vote to stay for the rest? My educated guess is less than 20%.
    Tariffs are political, not economic.
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    (Original post by Maker)
    Tariffs are political, not economic.
    (Original post by Observatory)

    Tariffs are not about improving the economy of the country imposing the tariffs. They are about benefiting certain protected industries and their owners against other people within the same country. EU sugar tariffs don't transfer money from Africa to the EU; they transfer money from EU citizens who don't produce sugar to EU citizens who do produce sugar.
    Those who impose tariffs believe that they are improving the economy of their country. It is a widely held fallacy.
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    (Original post by Maker)
    Tariffs are political, not economic.
    You made claims about the economic effects of tariffs:

    The powerful always screw the less powerful... [t]hats not to say [free trade? is] not beneficial to both countries but the more of the benefit go to the more powerful country.
    If your position is that no important harm to the British economy would result from leaving the EU because of changes in trade terms, then we are in agreement.
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    (Original post by nulli tertius)
    Those who impose tariffs believe that they are improving the economy of their country. It is a widely held fallacy.
    That is probably widely believed by casual supporters of tariffs. But look at what Maker has said:

    (Original post by Maker)
    China will be more than happy to screw Britain by making us accept cheap steel that cost UK jobs.
    The Chinese are going to make us pay less for an incredibly common staple material but this is bad because it will reduce the supply of an already tiny source of employment in this country.

    I cannot parse this otherwise than that the interests of those handful of people are supremely important and that the interests of the general population are irrelevant. He has made no attempt to disguise, even to himself, that the Chinese are benefiting the vast majority of British people, who buy but do not make steel. Including of course export industries like Rolls Royce that use steel as a raw material.

    One thing to bear in mind is that this country has been historically opposed to tariffs, to a far greater extent than most others. The belief that tariffs are good for the general welfare is therefore perhaps not as widespread here as in other places. One benefit of Brexit would be the ability to dump tariffs that are imposed on us for the sake of the protectionist continental states.
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    (Original post by Observatory)
    The Chinese are going to make us pay less for an incredibly common staple material but this is bad because it will reduce the supply of an already tiny source of employment in this country.

    I cannot parse this otherwise than that the interests of those handful of people are supremely important and that the interests of the general population are irrelevant.

    You've overlooked part of what Maker said.

    He said that putting steel workers out of a job would "screw Britain". This is isn't about protecting steel workers as special.

    This is a belief that the only consequence of an action is the consequence at which the observer is looking. That is the fallacy. The only consequence so far as Maker is concerned is that steel men will lose their jobs and that, virtually everyone would agree is a bad thing. Cheap steel doesn't mean more aero-engines in Maker's world because Maker isn't looking at aero-engines, If Maker was looking at aero-engines,nothing would happen to employment in the steel industry if the price of steel was increased by prohibiting imports. The only consequence of dear steel would be that we would sell fewer aero-engines.

    The classic example of this fallacy was the reaction to the last Foot and Mouth outbreak.
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    (Original post by Observatory)
    You made claims about the economic effects of tariffs:


    If your position is that no important harm to the British economy would result from leaving the EU because of changes in trade terms, then we are in agreement.
    (Original post by Observatory)
    That is probably widely believed by casual supporters of tariffs. But look at what Maker has said:


    The Chinese are going to make us pay less for an incredibly common staple material but this is bad because it will reduce the supply of an already tiny source of employment in this country.

    I cannot parse this otherwise than that the interests of those handful of people are supremely important and that the interests of the general population are irrelevant. He has made no attempt to disguise, even to himself, that the Chinese are benefiting the vast majority of British people, who buy but do not make steel. Including of course export industries like Rolls Royce that use steel as a raw material.

    One thing to bear in mind is that this country has been historically opposed to tariffs, to a far greater extent than most others. The belief that tariffs are good for the general welfare is therefore perhaps not as widespread here as in other places. One benefit of Brexit would be the ability to dump tariffs that are imposed on us for the sake of the protectionist continental states.
    It depends on why steel from China or any other country should be significantly lower than steel made in another country. If China is giving government subsidies to its own steel industry to lower prices, than that is unfair because the price is not the true cost.

    The effect would be to reduce the amount of steel made by other countries as their own steel producers would not be able to compete and go out of business. This then gives Chinese steel producers a window to increase prices substantially before new capacity in other countries can be built.

    I think making commodities in high cost countries like Britain is uneconomical and likely to fail. Britain needs to leverage its resources better rather than try to compete with low cost countries like China and India making generic products.
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    (Original post by nulli tertius)
    You've overlooked part of what Maker said.

    He said that putting steel workers out of a job would "screw Britain". This is isn't about protecting steel workers as special.

    This is a belief that the only consequence of an action is the consequence at which the observer is looking. That is the fallacy. The only consequence so far as Maker is concerned is that steel men will lose their jobs and that, virtually everyone would agree is a bad thing. Cheap steel doesn't mean more aero-engines in Maker's world because Maker isn't looking at aero-engines, If Maker was looking at aero-engines,nothing would happen to the employment in the steel industry if the price of steel was increased by prohibiting imports. The only consequence of dear steel would be that we would sell fewer aero-engines.

    The classic example of this fallacy was the reaction to the last Foot and Mouth outbreak.
    Well it's being fairly widely reported that the Chinese government is dumping steel into the market at below cost price. If true that's a long term strategic move aimed at screwing everyone. I'm surprised everyone seems to cheerfully assume that we're looking at the effect of an unmanipulated market that's functioning the way GCSE economics textbooks say it should.
    ---
    I'd think RR would be one of the steel using companies to suffer least from high steel prices, the majority of the cost of the jet engine is surely the hi-tech manufacturing processes & know how. Just because coca-cola is made of 99% water doesn't mean the company's particularly worried about the cost of water supplied to the bottling plant doubling.
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    (Original post by Joinedup)
    Well it's being fairly widely reported that the Chinese government is dumping steel into the market at below cost price. If true that's a long term strategic move aimed at screwing everyone. I'm surprised everyone seems to cheerfully assume that we're looking at the effect of an unmanipulated market that's functioning the way GCSE economics textbooks say it should.
    I don't think the Chinese have any greater vision than that unhappy steelworkers in Scunthorpe are unlikely to result in a change in the leadership of the Communist Party. Unhappy steelworkers in Nanjing might.
    ---
    I'd think RR would be one of the steel using companies to suffer least from high steel prices, the majority of the cost of the jet engine is surely the hi-tech manufacturing processes & know how. Just because coca-cola is made of 99% water doesn't mean the company's particularly worried about the cost of water supplied to the bottling plant doubling.
    That point is perfectly fair. The RR analogy was just being pursued because it was raised.
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    (Original post by Maker)
    It depends on why steel from China or any other country should be significantly lower than steel made in another country. If China is giving government subsidies to its own steel industry to lower prices, than that is unfair because the price is not the true cost.
    I don't think it does depend upon that. If Tesco offers something I want at half price clearly their goal is not to make me happy but to entice more people to buy from them rather than from other supermarkets, but I am still better off buying from them than 'tariffing' them and buying from another supermarket anyway.

    If the PRC's government is subsidising steel to for instance paper over economic problems to avert constitutional reform or civil war, it is absolutely in our interest to take the cheap steel the PRC is offering us rather than buying from Corus at a greater price. Britain is getting a free lunch here because Britain is more stable than the PRC and therefore does not need to subsidise industries to avert the collapse of our constitution or civil war. We can let Corus (which isn't a British-owned company anyway) collapse and take the improved living standards that come with lower commodity prices.

    The effect would be to reduce the amount of steel made by other countries as their own steel producers would not be able to compete and go out of business. This then gives Chinese steel producers a window to increase prices substantially before new capacity in other countries can be built.
    If you think so you should be buying shares in other steel producers or you should be buying and stockpiling steel, because the price of steel is certainly going to increase in the near future.

    Question: if you have this insight, why doesn't the market? If the market does have this insight, why is the steel price dropping at all, when increased PRC supply should be being matched exactly by increase demand from speculators? Why would we want to stop our speculators from e.g. stockpiling this below-cost steel in the UK for later use, by tariffing it?

    I think making commodities in high cost countries like Britain is uneconomical and likely to fail. Britain needs to leverage its resources better rather than try to compete with low cost countries like China and India making generic products.
    Hence Britain should not damage high value added producers and exporters like Rolls Royce and Aston Martin by making them pay more for steel in order to prop up a low value added company like Corus that is probably doomed anyway.
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    (Original post by Joinedup)
    I'd think RR would be one of the steel using companies to suffer least from high steel prices, the majority of the cost of the jet engine is surely the hi-tech manufacturing processes & know how. Just because coca-cola is made of 99% water doesn't mean the company's particularly worried about the cost of water supplied to the bottling plant doubling.
    I agree that the benefit to RR would not be large. However no one is claiming that the disemployment effect is large either. The press has been talking about 1,200 job losses. Even if there is no compensating positive effect elsewhere, that is a 0.004ppt increase in unemployment.

    Would you be willing to bet that lower steel prices don't contribute 0.004% to RR's bottom line?

    Job losses in a big lump in one place as simply more visible than distributed benefits even if they are the same size.
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    (Original post by Observatory)
    I don't think it does depend upon that. If Tesco offers something I want at half price clearly their goal is not to make me happy but to entice more people to buy from them rather than from other supermarkets, but I am still better off buying from them than 'tariffing' them and buying from another supermarket anyway.

    If the PRC's government is subsidising steel to for instance paper over economic problems to avert constitutional reform or civil war, it is absolutely in our interest to take the cheap steel the PRC is offering us rather than buying from Corus at a greater price. Britain is getting a free lunch here because Britain is more stable than the PRC and therefore does not need to subsidise industries to avert the collapse of our constitution or civil war. We can let Corus (which isn't a British-owned company anyway) collapse and take the improved living standards that come with lower commodity prices.


    If you think so you should be buying shares in other steel producers or you should be buying and stockpiling steel, because the price of steel is certainly going to increase in the near future.

    Question: if you have this insight, why doesn't the market? If the market does have this insight, why is the steel price dropping at all, when increased PRC supply should be being matched exactly by increase demand from speculators? Why would we want to stop our speculators from e.g. stockpiling this below-cost steel in the UK for later use, by tariffing it?


    Hence Britain should not damage high value added producers and exporters like Rolls Royce and Aston Martin by making them pay more for steel in order to prop up a low value added company like Corus that is probably doomed anyway.
    If Tesco is reducing prices by half, its goal is not to make you happy but to drive its competitors out of business with the long term aim of increasing prices so the consumer loses in the long run.

    I am sure people in the know has already bought steel futures if they are available but these low prices may fall yet lower so its a gamble like most types of speculation.
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    (Original post by Maker)
    If Tesco is reducing prices by half, its goal is not to make you happy but to drive its competitors out of business with the long term aim of increasing prices so the consumer loses in the long run.
    This is true market manipulation and where it exists there is a justification for protectionist tariff barriers. However in the real world, this is incredibly rare because the dumper rarely has sufficient market power to bring this about.

    It is not enough to price our steel out of the market, one has to price the steel from other low cost countries that retain the capacity to increase production, out of the market.

    Even in an industry with high barriers to entry such as steel, when the dumping campaign ends, the price will only rise by the amount of the global production taken permanently out of circulation during the campaign. That is likely to be trivial.

    Apart from public transport (passenger and freight), which is highly susceptible to predatory pricing, I struggle to think of a case where customers have suffered significant harm from this behaviour.
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    (Original post by Maker)
    If Tesco is reducing prices by half, its goal is not to make you happy but to drive its competitors out of business with the long term aim of increasing prices so the consumer loses in the long run.

    I am sure people in the know has already bought steel futures if they are available but these low prices may fall yet lower so its a gamble like most types of speculation.
    Two points to add to what nulli has said:

    1. Our interest here is for there to be competition in the steel market, not for there to be steel production in Britain specifically. Even if all that you have said is correct, it is still in our interest to buy steel from the PRC if even one other country will retain a steel industry from which we can buy. So if there are two or three protectionist countries in the world we can safely freeride on their protectionism, while taking all the benefits of low commodity prices!

    2. Rhetorically you forcefully restate your certainty that this is market manipulation that will succeed and that we will lose out in the medium or long term. When you are asked to put your money on the line, you equivocate. Stating that you do not want to buy steel futures because the prices may fall yet further is equivalent to saying that the British government should not buy protectionism (the difference between market and tariffed asset prices being the implicit cost) because prices may fall yet further. You cannot have it both ways.
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    On the point of going lower, I recall reading an article about a week back in the FT that suggests that based on various metrics commodities have more or less bottomed out now, hardly surprising given that the likes of Britain have been priced out of the market so now it's a case of the Chinese moving to the equilibrium point to maximise profits.

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    (Original post by Jammy Duel)
    On the point of going lower, I recall reading an article about a week back in the FT that suggests that based on various metrics commodities have more or less bottomed out now, hardly surprising given that the likes of Britain have been priced out of the market so now it's a case of the Chinese moving to the equilibrium point to maximise profits.

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    So what percentage of your portfolio is invested in steel ETFs?
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    I think one of the issues overlooked here is the political aspect. Some industries have more lobbying power than others or are perceived as industries worth protecting while others are not. Not only that but people fear change.

    I for example would be quite happy to abolish almost all agricultural tariffs and see the surge of cheap African imports that would follow however that would destroy a fair few farms and it would also put tens of thousands out of work potentially. Now as much as the coffee shops would love that (even Costa and Starbucks), people would be more likely to focus on the farmers i'd just put out of work. This is where the fear of change comes in with perception because those farmers having to go find retail work would perceived as taking a lower job role even if because of our reform, we've lowered the cost of creating a few hundred coffee shops ect..

    The steel industry i think also plays into our British fetishism for manufacturing. People don't care that British Leyland made rubbish, they just care that people had what were perceived as high skilled jobs. The transition to retail and the like is seen as a step down.

    I largely agree with Nulli and Observatory then on this matter with the only real caveat being that i still think foreign control of British firms should be limited (albeit it's too late for steel) since i do think that British owners would be more likely to care about British employment even if the same decision is made.
 
 
 
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