Removing Trade Tariffs: the Impact on Industry
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Amidst the noise of Parliamentary debates on 'deal' or 'no deal' the UK government has published a list of customs duties that would apply “temporarily” in the event of a 'no deal' Brexit. Under these arrangements the government has committed to provide tariff-free access to 87% of goods imported into the UK.
The Government had previously stated that it would map across the schedule of tariffs that the UK currently applies by virtue of its EU membership. That would have seen an average of 5% tariffs on goods coming into the UK, but that belies some significant spikes in tariffs on goods such as dairy (38% average), meat (16%), clothing (around 12%) and motor vehicles (between 10% and 22%). Under WTO rules these tariffs would apply to the EU and, in the event of a 'no deal' Brexit, they would also apply to those countries where the UK has not secured a 'roll-over' of trade agreements which currently apply because of the UK's membership of the EU.
The tariff revisions reflect the reality of Brexit: aiming to provide a stimulus to the UK economy and consumers in the event of a hard Brexit; maintaining some tariffs to protect certain UK industries; and recognising that the UK doesn't yet have the infrastructure to enforce and collect tariffs across the board.
Whether this will dramatically weaken the hand of the UK when negotiating new trade agreements has yet to be seen, especially in light of UK plans to raise applied tariffs back to the maximum rates permitted under WTO rules within a year. It would, however, provide an opportunity for businesses importing into the UK to gain a market foothold where this was previously uneconomical and it will prove a challenge to those based in the UK who could see heavy competition on pricing. Understanding the scope, depth and process of imposing - and lifting - these tariffs will become essential for many businesses looking to find as much certainty in the ongoing saga of a 'deal'/'no deal' Brexit.