5 minute read
International Trade
international trade UK and the EU: deal or no deal?
The COVID-19 pandemic is dominating the news agenda, with families and businesses rightly concerned about the impact of a second wave of the virus. All of this overshadows another vitally important issue: the end of the Brexit transition period on January 1 and Britain’s long-protracted exit from the EU.
We should look for a balanced view of UK exports, between the EU and Rest of the World. While the UK proportion of exports to the EU has been reducing for many years, the UK has just overtaken France to become the worlds 6th largest exporter on the back of ROW exports. The other side of the coin is trade with the EU, where for months, UK and EU leaders have been in intense discussions in an attempt to thrash out a deal, but with the transition period deadline fast approaching, these attempts have been frustrated by a few key issues. At the time of writing, there remains a very real prospect that the UK will leave the EU without a trade deal, which is a frightening thought for the thousands of companies that export their products and services to the EU each year.
There are several sticking points over a new deal, from state aid to data protection and the Irish border. The extent to which EU fishermen can access UK waters, which they had been able to do under the Common Fisheries Policy (CFP), is also a bone of contention but this only relates to 0.2% of UK / EU trade.
The difference between the impact of deal and a no-deal is stark. A free trade agreement would open up tariff-free trade of most goods, allow continuity of existing agreements and perhaps create an environment in which new deals could be done. A no-deal, on the other hand, would see tariffs imposed on most goods, with World Trade Organisation (WTO) rules applied to UK-EU trade. It would also result in increased administration and the inevitable shelving of some existing trade deals.
In this most uncertain of climates, however, there are still things that businesses can do now to get their house in order before January 1, https://www.
westlondonlocalchambers.org.
uk/eu-exit-hub when the UK Global Tariff (UKGT) replaces the EU Common External Tariff (CET). Exporters will need to secure for their goods a tariff number, or commodity code, which determines the customs duties and other charges levied on the goods. They must also check to see how the goods are classified under the Harmonised Tariff Schedule (HTS), which is in place to ensure that the goods are shipped safely and in compliance with customs, tax and duties regulations.
The UKGT will apply to all goods that are imported from January 1, 2021 unless an exemption applies. Exemptions include:
goods imported from a developing country that pays less or no duty because it’s part of the Generalised Scheme of Preferences, which was established to help developing countries alleviate poverty and create jobs based on international values such as labour and human rights
goods imported from a country that has an existing trade agreement with the UK imported goods that have a relief or tariff suspension operated by the UK
Companies can visit https://
www.gov.uk/check-tariffs-1-
january-2021 to check the UKGT that will apply to goods that they import from January 1. Advice on finding the relevant commodity code can be found at https://
www.gov.uk/guidance/findingcommodity-codes-for-imports-
or-exports and https://www.
gov.uk/guidance/ask-hmrc-for-
advice-on-classifying-your-goods.
In the event of a no-deal Brexit, the UK government has been frantically trying to secure trade agreements with other countries (or groups of countries) to remove or reduce tariffs and other restrictions on exports/imports between them. In under two years, the UK has struck agreements with 51 countries including an historic one with Japan – widely regarded as the UK’s first major post-Brexit deal. Unveiled by UK trade secretary Liz Truss, the deal means that almost all of the UK’s exports to Japan will be tarifffree and British tariffs on Japanese cars will be removed by 2026. It is expected to boost trade between these countries by about £15bn.
Several other trade agreements are currently under discussion, and the UK government is currently pursuing an ambitious strategy of securing deals with countries that cover 80% of UK international trade within three years.
All of this is relevant to exporters and importers seeking to prepare for life after January 1, 2021. These companies should:
find out if the UK has signed a trade agreement with the country with which they intend to trade
use UK government guidance to understand changes to trading with non-EU countries from January 2021: https://
www.gov.uk/guidance/uktrade-agreements-with-noneu-countries
If a trade agreement with the destination country is in place, exporters will still need to ensure they have an origin certificate for their goods to qualify for the preferential (lower) tariff rates. EU content and processing will still count towards meeting the origin threshold under “continuity” trade agreements as it does now.
Alan Rides, MD of the Chamber of Commerce and an expert in international trade, says: “We’re in a fast-evolving landscape and this is particularly true for exporters, with the Brexit transition period set to end shortly. While COVID-19 naturally dominates the headlines, Britain’s exit from the EU is just as important from an economic point of view. Indeed, there’s a school of thought which suggests that Brexit could have an even more damaging impact on UK GDP than the coronavirus.
“Having said that, it’s encouraging that the UK has secured some trade deals and the one with Japan could be particularly significant. It’s vital that businesses are given the right support to navigate this new landscape and at the Chamber we’re doing our bit to help. We’ve organised various webinars that provide information on the latest Brexit developments and we’re signposting businesses to experts who can help them tackle key specific issues, such as how to get the correct documentation in place.
