Question

Please refer to the article “Brexit: Could the UK drop tariffs to zero?” From a March 10th BBC report. The proposed exit of the UK from the European Union has been debated, delayed, and fragmented by the political system that created it. This question asks you to define tariffs and discuss the impact on global business if some UK tariffs are greatly reduced or scrapped completely. Why can’t the UK maintain their existing tariffs even if the UK leaves the EU? What are the likely outcomes?

Answer 1

In simple terms, tariffs are taxes which apply on imported products whilst these pass customs. Overall, tariffs have been the most visible and effectual kinds of hurdles to trade. Like every tax, they are intended to increase revenue levels for the public purse. But they are also utilized for protectionist causes – by raising the price level of imported products, they confer a competitive advantage to locally manufactured products.

Should the UK exit the European Union without a deal, it will be required as per the WTO regulations to apply tariffs on products originating from the European Union on a non-discriminatory basis. This implies that it must treat imports from all nations in the same manner. This is rather problematic, as the European Union remains, by some distance, the United Kingdom’s biggest trading partner. It accounts for greater than half of all of England’s imports, including automobiles, pharmaceutical products, food.

Applying tariffs on essential products from the EU would have a considerable impact on the UK economy & customers. It would imply a rapid & significant rise in prices of everyday articles. The economic shock which would follow shouldn’t be underestimated.

As WTO law prohibits nations from levying tariffs on a non-discriminatory basis, the only manner in which the UK can decide not to levy tariffs on EU imports is by also not levying tariffs on imports from non-EU nations. This implies that, under England’s no-deal contingency proposals, the UK would be eliminating tariffs on imports from across the world, not only the EU.