BREXIT PART 1: Trade deal basics in 2 minutes
So I'm going to try and explain trade deals in 2minutes
So what is trade?
Countries don't make everything they need or have the all the basic resources available to them - for example some countries are rich in certain metals whereas others not. So countries buy and sell products from each other, this is trade. Trade is good.
What is protectionism?
Britain and France start to trade, and the UK starts selling jam to France. The French don't like this, they want French people buying French products not British products.
What's a tariff?
The French's first move is to apply a tariff to UK jam which is a tax on it being imported - let's say 10%, this makes British jam still available but less attractive to the French, so the French sell more jam. Win.
What's a trade war?
The British are not happy at our jam being snubbed so we apply a tariff to French cars, let's say 20%. This is the tedious process of a trade war.
What's a quota?
OK say the French we'll reduce the tariff on jam... but we'll set a quota (the maximum number of jars of jam sent to France) of 10,000 jam jars a year.
What's a free trade deal?
Before long the UK and France a bit tired of putting various tariffs on jam and cars, and agree to scrap all tariffs and quotas so we can make and sell as much as we like, whoever makes the best products sells more and makes more money.
What's a customs union?
The UK wants to buy Humvees from the USA and charge 20% tariff, the French do a behind the scenes deal with the USA for 10% and pocket the cash, then sell the Humvees to the UK with the UK getting no tariffs. This is obviously bad for the UK so you draw a line around the countries in the free trade agreement and agree a tax for everything coming into the free trade area so it's fair, and the UK doesn't get dicked over by other countries.
What's barrier free trade?
Trade is now fast, but the sneaky French are trying to sell cheap imitation jam to the UK, undercutting our better, proper jam, so the UK and France agree rules that says what jam is.
Must be at least 80% fruit
Must be at least 10% sugar
Must be tasty
Once you're all working to the same rules you don't have to tediously check every jam shipment, because you know it meets the same rules.
What's the single market?
The single market is a free trade deal, a customs union and rules to make frictionless trade and more.
What's the WTO?
Without your trade deals remember the big list of tariffs and quotas, the WTO is effectively a big list of those tariffs and quotas and the organisation that listens to complaints that countries have breaches their tariffs or quotas.
What are goods and what are services?
When you make a trade deal you normally specify goods (physical things like cars) as separate from services (things banking services).
So what is trade?
Countries don't make everything they need or have the all the basic resources available to them - for example some countries are rich in certain metals whereas others not. So countries buy and sell products from each other, this is trade. Trade is good.
What is protectionism?
Britain and France start to trade, and the UK starts selling jam to France. The French don't like this, they want French people buying French products not British products.
What's a tariff?
The French's first move is to apply a tariff to UK jam which is a tax on it being imported - let's say 10%, this makes British jam still available but less attractive to the French, so the French sell more jam. Win.
What's a trade war?
The British are not happy at our jam being snubbed so we apply a tariff to French cars, let's say 20%. This is the tedious process of a trade war.
What's a quota?
OK say the French we'll reduce the tariff on jam... but we'll set a quota (the maximum number of jars of jam sent to France) of 10,000 jam jars a year.
What's a free trade deal?
Before long the UK and France a bit tired of putting various tariffs on jam and cars, and agree to scrap all tariffs and quotas so we can make and sell as much as we like, whoever makes the best products sells more and makes more money.
What's a customs union?
The UK wants to buy Humvees from the USA and charge 20% tariff, the French do a behind the scenes deal with the USA for 10% and pocket the cash, then sell the Humvees to the UK with the UK getting no tariffs. This is obviously bad for the UK so you draw a line around the countries in the free trade agreement and agree a tax for everything coming into the free trade area so it's fair, and the UK doesn't get dicked over by other countries.
What's barrier free trade?
Trade is now fast, but the sneaky French are trying to sell cheap imitation jam to the UK, undercutting our better, proper jam, so the UK and France agree rules that says what jam is.
Must be at least 80% fruit
Must be at least 10% sugar
Must be tasty
Once you're all working to the same rules you don't have to tediously check every jam shipment, because you know it meets the same rules.
What's the single market?
The single market is a free trade deal, a customs union and rules to make frictionless trade and more.
What's the WTO?
Without your trade deals remember the big list of tariffs and quotas, the WTO is effectively a big list of those tariffs and quotas and the organisation that listens to complaints that countries have breaches their tariffs or quotas.
What are goods and what are services?
When you make a trade deal you normally specify goods (physical things like cars) as separate from services (things banking services).
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