This week, Jim Cornelius has another go at fact-checking so-called tariff ‘experts’ who write about tariffs and oranges.
First published in August 2019.
Let’s examines claims made in this Brexit Central article by Kevin Dowd (professor of finance and economics at Durham University) regarding an alleged quintupling of tariffs on oranges from South Africa imported into the EU.
It is worth a full explanation.
In August 2017, Kevin Dowd published a report for the Institute of Economic Affairs (IEA) called “A Trade Policy for Brexit Britain”. It included some inaccurate commentary about EU tariffs. The Brexit Central article sought to defend his claims, stating that his source was ‘leading authority’ Dan Lewis.
Unfortunately, all he demonstrated was that his chosen expert has no more understanding of the subject than he has. Dowd points to another Brexit Central article from Lewis published in November 2016 and repeats Lewis’s fundamentally flawed analysis.
Lewis’ basic claim is that tariffs on South African oranges were lowered. Spanish producers complained and consequently tariffs were raised fivefold increasing prices for consumers. This, therefore, is symptomatic of the “protectionist EU racket”.
Except that this is utter rubbish.
One fact is true. The MFN (Most-favoured-nation) tariff went from 3.2% to 16% on the 16 Oct 2016.
But it does this every year and has done at least since the Entry Price System was introduced in 1995. There is a good reason why it does so and Spanish MEPs complaining played no part in it at all.
Produce like oranges is seasonal and with South Africa being in the southern hemisphere, they are harvesting their oranges about 6 month earlier/later than we harvest ours in the northern hemisphere.
To be precise, the season for oranges produced in the EU runs from late October to early June. The export season for oranges produced in South Africa runs from early May to late November, so they overlap only in May/June and October/November.
Most of the year they are not in direct competition but when oranges are being exported from the southern hemisphere outside of the season it is likely that they have been in cold storage or are late season and a lower quality. That’s not good for consumers.
So, the rate of tariff changes with the seasons and has done so since at least 1995.
The chart below shows that virtually no oranges are exported from South Africa between November and April.
And this is the MFN/WTO tariff (Page 43) when there is no FTA in place:
- January-March = 16% + €7.1/100kg
- April = 10.4% + €7.1/100kg
- 1-15 May = 4.8% + €7.1/100kg
- 16-31 May = 3.2% + €7.1/100kg
- 1 June-15 October = 3.2%
- 16 October-30 November = 16%
- December = 16% + €7.1/100kg
So, the tariff rates are at their lowest right through the period when exports from the southern hemisphere are at their greatest, and at their highest when exports are at their lowest point. But it is important to realise that those rates only apply outside of a free trade agreement.
Remember, Dan Lewis said that Spain, has taken "very badly" to the removing of import tariffs on citrus fruits from South Africa.
What was that about, then?
Well it is very simple. South Africa, as one of the SADC nations (Southern African Development Community), had signed a FTA with the EU on 10 June 2016.
The MEPs were concerned about the extension of 0% tariffs to cover the overlap in November and, while their concerns were noted, it is absurd to think that the terms of a free trade agreement were overturned because of a single question in the EU Parliament.
The Economic Partnership Agreement between the European Union and the SADC nations came into force on 10 October 2016, granting 100% (bar guns) duty and quota elimination to Botswana, Lesotho, Mozambique, Namibia, and Swaziland and 98.7% elimination for South Africa. This is typical for an Free Trade Agreement. 100% for an Economic Partnership Agreement.
The tariff for oranges from South Africa were liberalised by making it a 0% duty during the full season from June to October, and extending that 0% period to cover all of November, within 10 years, by phased reductions.
This part of the text of trade agreement itself proves it. It clearly shows the schedule for the phased elimination of the tariff to cover mid-October to end of November, adding 6 weeks to the 0% period. We are in the normal 0% period now.
That is why if you use the UK Government’s tariff website and look up South African oranges today you will see that they come in at 0%.
So, Lewis and Dowd said South Africa was being done over by the EU because a few Spanish MEPs complained. When in reality South Africa had been given preferential access to EU markets 0% duty at the height of their export season.
Is this incompetence or deception?
Perhaps a bit of both, but being generous I would say a rabid EUphobia clouds their judgement.
But Lewis and Dowd have form here. Read again how Lewis has got his facts completely backwards. A tariff he said was being added was actually being reduced to 0%.
As for Dowd, as you will see in a moment, he does not even know how to read a tariff schedule. In this Brexit Central article in defence of Lord Ridley’s claims about African tariffs (another story), there are a number of problems with his analysis.
This is the most egregious error:
The €45.90, €56.20, €65.90 €64.40 per 100kg for various African countries are NOT tariffs.
They are standard import values (SIV) for oranges from those countries.
The SIV is used as a base to calculate the percentage part of a tariff on produce when a consignment does not have an accompanying invoice listing the price per kilo.
“These are current tariffs” he says. No, they are not!
He has clearly got absolutely no idea what he is looking at!
Let’s look at the actual tariff for one of his examples: Morocco.
Here is the link for April — when he wrote the article.
And here is the section for Morocco clearly showing two lines, one for the SIV and one for the tariff, on a preferential rate!
To find out what the tariff for Morocco is you have to click on the conditions link, to the right. This opens up the pop-up window shown here. It has got lots of zeros on it.
A tariff of 50cents is applied when the import price drops below €26.40 per 100kg, and more when lower.
As I showed in another thread, Gabon, Nigeria and the Republic of Congo don’t even export oranges, not even to their neighbours. Even if Dowd had the right numbers, it is a total red-herring.
That was in April, during the peak season. What about now, in June?
Well, here is the tariff on Morocco today. It is a flat 0%.
Brexit Central make a habit of this kind of thing. Whether through incompetence or design, people are being deceived by them.🔷
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