What does trading goods under a WTO Brexit look like?
In the event of a WTO Brexit (a.k.a. No Deal Brexit) we would have to decide if we implemented import tariffs on goods and services. These are taxes that are applied to goods and services being imported into our country. They are paid by UK based importers, businesses and consumers to the UK Government.
We are not allowed to cherry pick, it is a choice of applying all tariffs or none of them, to all external countries or none of them.
We only get to decide what happens to imports into the UK, the decision on what tariffs are applied to our exports is decided by the importing country / trade bloc, and members of trade blocs will not be able to choose unilaterally. EU members will have to apply tariffs, USMCA/NAFTA members will have to apply tariffs, CPTPP members will have to apply tariffs, Mercosur members will have to apply tariffs. All of the talk of trading with Brazil is great, but overlooks the conditions and obligations Brazil's existing trade bloc deals will place upon it that will restrict the deal that can be negotiated between the UK and Brazil in much the same way that the UK's membership of the EU prevents deals now.
So, we are faced with a stark choice of giving a unilateral trade deal to everyone with no guarantee of any benefit in return or applying heavy taxes to a wide range of imported goods. If we choose not to apply tariffs we will not get any other trade deals as there is no additional benefit we can provide to other countries.
Which Tariffs Apply?
Every country can supply their own schedule of tariffs - these are then agreed at the WTO. Our draft was based on the schedule from the EU and was submitted as part of our no deal contingency plans in July 2018. This is our schedule [pdf], it is a long and thorough list but I’ve produced some illustrative examples.
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The UK currently only produces half of its' own food with the rest being imported. 60% of imported food is from the EU and 22% is from countries the EU has a trade deal with
But these examples work both ways as well, Welsh lamb being sold in France or Germany will be 25% more expensive, this will make it less attractive to consumers which will lead to reduced demand.
Overall we are looking at half of our food being up to 25% more expensive.
[Coming Soon] Part 2 - Non Tariff Trade Barriers