Government announces new tariff regime

 

Today (19 May 2020) the Government  announced the UK’s new MFN tariff regime, the UK Global Tariff (UKGT), which will replace the EU’s Common External Tariff on 1 January 2021 at the end of the Transition Period.

The intention of the tailored new UK tariff is to support the UK economy by making it easier and cheaper for businesses to import goods from overseas. The Government says this is a common-sense approach as it streamlines and simplifies nearly 6,000 tariff lines, lowering costs for businesses by reducing administrative burdens and removing some high tariffs.

BExA welcomes this potentially good news for those UK manufacturers and exporters who currently import raw materials and components from outside and within the EU as, without this lower tariff schedule, customs duty costs would have been incurred on purchases made from the Member States of the EU from 1 January 2021. This should strengthen the UK economy by encouraging existing companies to remain, and new ones to set up, in the UK. However, we remain cautious about the potential that a low Global Tariff could result in the UK importing more finished items from overseas.  

The UK Government’s move to get rid of the EU's complex Meursing table (that currently applies higher tariffs on certain products, including over 13,000 tariff variations on products such as biscuits, waffles, pizzas, quiches, confectionery and spreads, according to fat, milk content) is an interesting one.  Whilst appearing to remove complexity and bureaucracy, this may have an unintended consequence on producers of these products in the UK as complex tariffs help keep this market stable in times of global trade flux by reducing exposure to trade fluctuations, which, in turn, can produce a negative economic effect.

The report that accompanies the UKGT states its aim is not to set out UK trade policy, however we are concerned about the impact an almost zero tariff will have on the UK’s ability to be an equal partner when negotiating Free Trade deals. If there is duty free access to the UK market, what leverage will the UK use to get a reciprocal preferential rate of customs duty in its key markets, which include the EU27, Japan, USA and China?   

BExA welcomes this move by the UK Government to put trade first and we hope that the potential negative impacts highlighted above will be mitigated by the reduction of administration time and the advantage of having a simpler system than other global markets.