Vast majority of UK imports could be tariff-free next year under new Government plans
More than four-fifths of UK’s imports from countries facing Most Favoured Nation (MFN) tariffs could have zero tariffs under Government proposals, according to UK Trade Policy Observatory (UKTPO) estimates.
Under plans to sweep away nuisance tariffs and eliminate tariffs on inputs and products with no UK production, the vast majority of UK imports from countries facing MFN tariffs could be without tariffs from next year under proposals outlined in a recently-closed UK Government consultation.
Julia Magntorn Garrett told the latest UKTPO podcast this would be a notable increase from the current figure of around half of all imports from MFN partners while Rodney Ludema, former Chief Economist of the United States Department of State, said the impact of the changes may have been underestimated.
The UK’s MFN trading partners include countries such as China, USA and Australia and account for over a quarter of the UK’s total goods imports.
Mrs Magntorn Garrett also warned that the proposed reform of the UK tariff schedule could damage developing countries who would lose tariff advantages over richer, more developed countries under the planned reforms.
The academics were guests on the latest edition of the UKTPO podcast Trade Bites which discusses the implications of the Department for International Trade’s consultation on its Global Tariff policy which closed earlier this month.
They were joined by Allie Renison, Head of EU & Trade Policy at the Institute of Directors and Sue Davies, Head of Consumer Protection and Food Policy at Which, alongside regular host Chris Horseman of Borderlex.
Mrs Magntorn Garrett, Research Officer in Economics at the University of Sussex Business School and UKTPO member, said: “About half of what the UK imports from countries that face MFN tariffs are in products with zero tariffs. If we got rid of nuisance tariffs and round tariffs down, assuming trade flows don’t change though probably they will, under the current structure about 70% of imports from those countries would be tariff-free and if we add putting inputs to zero then we are up to about 85% of imports from MFN countries and that is probably an underestimation because those countries will shift into products that have lower tariffs.”
Prof Ludema, Professor of Economics at Georgetown University, said: “The nuisance tariff elimination is actually quite a bit more important than it is being made about to be. When you call them nuisance tariffs they are trivial and let’s get rid of them. By my calculation, about a quarter of all tariff lines would fall into this category so we’re talking about a big chunk of these tariffs going down to zero under this proposal.”
Trade Bites was launched in February and brings together UKTPO members and other experts in a weekly discussion on key trade policy areas. Previous episodes have discussed the UK’s special relationship with the US, the UK’s plans for free trade agreements and the implications for trade on the Irish border.
Upcoming episodes will focus on US-China trade tensions with the University of Sussex Business School Dean Prof Steven McGuire, The NHS and trade agreements with Laura Bannister of the Trade Justice Movement and trade in services with Sebastian Benz of OECD.
In the latest edition, released today, Mrs Magntorn Garrett said: “For products with zero UK production, like coffee, bananas and cotton, we import a lot from developing countries at the moment who trade on preferential terms so that they are able to compete with richer countries. If the UK was to eliminate these tariffs, these developing countries might not be able to compete with richer countries and that could be detrimental to those economies. This is something the UK needs to take into account when constructing its tariff schedules.”
Prof Ludema said: “The main concern should be about the least developed countries. I think it is the intention of the UK Government to sign free trade agreements with many of its’ developed country trade partners. I think what’s going to be an issue when you lower your MFN tariffs is that you favour larger developing countries like China, India and Brazil relative to least developing countries such as Bangladesh and Haiti. Those are the countries we should be most concerned about when you’re changing the comparative balance into the UK market with this reduction in MFN tariffs.”
To listen to the podcast visit here. More details of the UKTPO’s analysis of the proposed changes will be published in a Briefing Paper tomorrow.