Why does "boomerang trade" exist?
What is the benefit to the UK of importing 22000 tonnes of potatoes from Egypt and then selling Egypt 27000 tonnes of potatoes? Or of importing 5000 tonnes of toilet paper from Germany and exporting 4000 to Germany?
Could someone explain why this happens? If it is just a way to artificially create shortage and ratchet up prices, why it is allowed to happen?
Many thanks in advance.
Comments
Well, not all potatoes are created equal. There's many varieties and qualities. It's easily possible you're exporting one kind and importing another.
Potatoes are homogeneous products to an extent, it is free trade. Consumers choose what potato 'brand' they wish and buy it. Supply chains, low transport costs.A system where the UK just sent over 5000 potatoes would limit free trade and choice, and probably cost more in the end anyway.