A Silver Lining to the Brexit Cloud

Liam Fox has been busy telling everyone that leaving the EU will lead to more open trade relations with other countries. His recent Trade White Paper contains important clues about. It is potentially good news for retailers and importers.

So much attention has been paid to the future trade agreement with the EU that it is easy to forget that Britain must get the rest of its trade house in order as it leaves the warm embrace of the Customs Union. Britain will have to make its own way on the international trade stage. That means putting in place a set of national rules to govern imports from around the world. It is going to be an enormous exercise and one to which firms that source significant amounts from overseas should pay attention.

The government’s main task will be to prepare the UK’s “tariff schedules” – a comprehensive list of products and the duty rates that will apply to them when they are imported into the UK. In WTO parlance these duty rates are known as “MFN” (Most Favoured Nation) rates. As with many things in trade policy, MFN actually means the opposite – they are the rates that apply to WTO members who won’t have a special deal with the UK (and therefore the rates that will apply to imports from the EU in the event that Britain leaves with no deal). MFN rates are the equivalent to room rates advertised in a hotel lobby as opposed to the more attractive rates you might find on a late booking site, through offers in the newspapers or through loyalty programmes. In drawing up its MFN schedules the government has already said that it will follow as closely as possible the existing EU schedules.

The government has said that it will seek to replicate the EU’s existing bilateral free trade agreements. These cover some important trading partners like South Korea and Canada, with new agreements with Japan and Vietnam due to come on stream soon.

However, even if the government copies out line for line the EU’s existing MFN schedules and bilateral free trade agreements, there is still scope for some significant changes to the tariff treatment of some imports post-Brexit. The government’s Trade White Paper issued in October contains clues as to where these changes may lie.

The most likely area for change is in trade defence (generally known as Anti-dumping) where the White Paper signalled that the government will consult business about which of the 100-odd existing EU Anti-dumping measures the UK should carry over when it leaves the EU.

These measures apply to very specific products from individual countries. Some of the measures are almost laughably trivial, for example extra duties on imports of ironing boards and ring binder mechanisms. Others are rather more significant, including bicycles, ceramic tableware and bio diesel. These measures are significant because they apply additional duties on top of any MFN rate. The rates vary from supplier to supplier (based on an assessment of the degree to which an individual company is “dumping” its product), but typical rates on imports of Chinese ceramic tableware (for example) are around 35%. The Commission is currently investigating whether new measures should be applied to other products ranging from electric bicycles, tyres for buses and lorries and certain fertilizers.

The exciting thing for importers and retailers is that they will soon have the chance to make the case to drop these measures when the UK leaves the EU. If you want to know if this will impact your business, check out this link to the EU’s latest report on Anti-dumping. Annex O contains a full list of affected products.