Tuesday, May 19, 2020

New Government Global Tariff Announced as UK Bids Farewell to Europe

Any Brexit Extension Looks Very Unlikely as Britain Moves to No Deal
Shipping News Feature

UK – Passing through the veil of smoke and mirrors which is inherent in almost any government pronouncement is often particularly tricky, and so it is with the announcement today of its post Brexit UK Global Tariff (UKGT), the eagerly awaited 'Most Favoured Nation ' (MFN) document. One interpretation of this is that, come hell or high water, there will be no request for an extension to the negotiated transition date to exit the European Union.

If this move toward no deal is a bluff, it is certainly an elaborate one. The Tariff was arrived at after a full public consultation which elicited 1,319 responses to the website questionnaire plus 75 detailed and direct email submissions. Transport and logistics groups and associations responded as a man but were heavily outnumbered by those representing manufacturing at 6 to 1, agriculture (3.5 to 1) and even such diverse lobbies as retail hospitality, business services and broadcasting.

The announcement, also today, that Germany, France and Italy are intending to support the smaller EU nations hardest hit economically by the pandemic with a €500 billion bail-out, will surely encourage the government that it has chosen the right course, particularly as critics are already saying this amount is insufficient with President Macron allegedly originally quoting a trillion euros as realistic.

So what does the UKGT actually mean? Effectively it will be introduced immediately the transition finishes and replace the EU’s Common External Tariff on 1 January 2021. The object is to streamline almost 6,000 tariff lines, scrapping unnecessary tariff variations, rounding tariffs down to standardised percentages, and getting rid of all ‘nuisance tariffs’ (those below 2%).

The legislation also dumps the EU’s complex Meursing table, allowing the UK to scrap thousands of unnecessary tariff variations on products, including over 13,000 tariff variations on products like biscuits, waffles, pizzas, quiches, confectionery, and spreads. The UKGT ensures that 60% of trade will come into the UK tariff free on WTO terms or through existing preferential access from January 2021, and, according to the government, successful free trade agreement negotiations will increase this.

Tariffs which support UK industries such as agriculture, automotive and fishing will be maintained with zero tariffs on a range of products, from kitchen equipment to cooking ingredients with some comprehensive details viewable on the government website. Almost all pharmaceuticals and most medical devices (including ventilators) are tariff free in the UKGT. However, some products used to fight Covid-19 maintain a tariff.

To ensure those working on the frontline can access vital equipment easily, the UK has introduced a temporary zero tariff rate on these products. This relief waives the tariff and VAT for personal protective equipment (PPE), medical devices, disinfectant and medical supplies from non-EU countries. International Trade Secretary Liz Truss commented:

“For the first time in 50 years we are able to set our own tariff regime that is tailored to the UK economy. Our new Global Tariff will benefit UK consumers and households by cutting red tape and reducing the cost of thousands of everyday products. With this straightforward approach, we are backing UK industry and helping businesses overcome the unprecedented economic challenges posed by Coronavirus.

” The public consultation demonstrated the UK’s intention to simplify and tailor our tariff regime. It offered respondents the opportunity to provide views on how we create a tariff schedule that reflects the needs of UK business. Through a series of events across England and the devolved nations, we also engaged with businesses, business representatives, consumers, civil society groups, associations and other interested individuals and organisations.

”Our new tariff is tailored to the needs of the UK economy. It supports the country by making it easier and cheaper for businesses to import goods from overseas from 1 January 2021. It is a simpler, easier to use and lower tariff regime than the EU’s Common External Tariff (EU’s CET) and will be in pounds, not euros. It will scrap red tape and other unnecessary barriers to trade, reduce cost pressures and increase choice for consumers. It will also back UK industries to compete on the global stage.

”In designing the UKGT we considered the importance of protecting the climate and environment. We are committed to upholding the UK's high environmental standards and promoting a sustainable economy as part of the Government’s trade agenda. We are cutting tariffs on over 100 products to support renewable energy, energy efficiency, carbon capture, and the circular economy through recycling and reducing single use plastics. I would like to thank all those who took the time to contribute to the creation of the UK’s first independent tariff regime in nearly 50 years, the UK Global Tariff.”

One logistics group was immediately critical with the Road Haulage Association (RHA) pointing to the 10% levy on trucks which it says will make it harder for firms to invest in new, cleaner vehicles to move the goods that will drive any economic recovery. RHA chief executive, Richard Burnett, said:

“The Government says it’s confident of securing a free trade agreement with the EU but if it fails to do so this truck tariff will be a crippling blow for hauliers, putting £10,000 on the price of a new lorry. At a time when they are struggling with coronavirus, clean air zones and Direct Vision Standard during a likely recession this is another very unwelcome cost for our industry.”

Actual changes from the EU Common External Tariff are as follows:

Rigid Lorries - EU Common Tariff 22%, UKGT 10%: Tractor Units for Articulated Lorries - EU Common Tariff 16%, UKGT 10%: Trailers - EU Common Tariff 2.7%, UKGT 0%.

Photo: Courtesy of NASA / Freevector.