U.K. Announces New Post-Brexit Global Tariff Regime

LONDON (Reuters) -
A model of a customs road sign is seen in Brussels, Belgium, Monday, at the border of United Kingdom and European Union during the reopening of ‘mini-Europe’ theme park, where people can wander across small- scale models of European capitals’ landmarks as Belgium began easing lockdown restrictions amid the coronavirus disease (COVID-19) outbreak. (Reuters/Francois Lenoir)

The United Kingdom announced a new post-Brexit tariff regime on Tuesday to replace the European Union’s external tariff, maintaining a 10% tariff on cars but cutting levies on tens of billions of dollars of supply chain imports.

After decades outsourcing its trade policy to the EU, Britain is seeking free trade agreements with countries around the world and aims to have deals in place covering 80% of British trade by 2022.

The new tariff regime, in place from January 2021, marks a departure from what some U.K. officials call an overly complex EU system, setting out Britain’s stall as it negotiates trade deals with both the United States and the Brussels-based bloc.

But it will mean that if Britain and the EU fail to reach a free trade deal by the end of the year, the price of some food, cars and some chemical inputs imported from the bloc would rise sharply.

Britain said the regime, known as U.K. Global Tariff, would be simpler and cheaper than the EU’s Common External Tariff. It will apply to countries with which it has no agreement and removes all tariffs below 2%.

“Our new Global Tariff will benefit U.K. consumers and households by cutting red tape and reducing the cost of thousands of everyday products,” International Trade Secretary Liz Truss said.

The government said tariffs would be eliminated on a wide range of products, with 60% of trade coming into the UK tariff-free on WTO terms or through existing preferential access.

The UK will maintain tariffs on products competing with industries such as agriculture, automotive and fishing, and remove levies on €30 billion ($37 billion) worth of imports entering U.K. supply chains.

“Keeping agricultural protection makes sense as a bargaining chip for EU & US trade negotiations. But means big cost increases for agriculture imports if no U.K.-EU FTA,” said Thomas Sampson, Associate Professor at the London School of Economics.

The U.K. will also remove tariffs on products which support energy efficiency and will introduce a temporary zero tariff on goods being used to fight COVID-19 such as personal protective equipment.

The new regime did not meet all expectations.

A representative from one chemical company who declined to be identified said the firm had been promised an elimination of tariffs on inputs for the sector. “It’s disappointing across the board,” the representative said.