- New report from House of Lords EU committee says it is “imperative” to avoid the introduction of tariffs between UK and EU
- Report warns of “significant” additional tariffs, disruption, and border delays on goods if the government fails to secure such a deal
LONDON — British businesses have “serious concerns” about tariffs, disruption, and border delays on goods after Brexit, according to a House of Lords report released on Tuesday.
It warned that leaving the EU customs union, which currently appears likely, carried significant risks, and said it was “imperative” that the government seeks a UK-EU trade deal which avoids the introduction of tariffs in both directions.
The report, titled “Brexit: trade in goods,” was prepared by the House of Lords EU sub-committee and considered the implications of Brexit for the UK’s trade in goods with the EU.
Among the report’s most significant findings were that:
• Britain’s manufacturing supply chains are integrated into EU-wide supply chains, meaning supplies and components may cross the Channel multiple times during production. Tariffs on UK-EU trade in goods could be imposed every time, increasing costs significantly. Many UK businesses cannot easily substitute their imports from the EU, or find alternative export destinations, the report said.
• Leaving the EU customs union would mean “significant additional administrative burden for companies and delays to consignments of goods, incurring additional costs.” The customs union refers to the group of European countries — mostly EU member states — which have a formal agreement to charge the same import duties as each other.
• Leaving the customs union could mean the imposition of “rules of origin,” a system which would drive up tariffs. Rules of origin would apply under both a free-trade agreement with the EU or under World Trade Organisation regulations. Avoiding a divergence in regulatory standards from the EU — which would likely involve retaining participation in some EU agencies — was a “pressing concern” for business.
• Manufacturing and commodities sectors are vital British employers, and trade in goods between the UK and the EU is worth almost £357 billion each year — the bulk of UK trade. Ensuring those industries do not face additional barriers to trade will be “essential” to driving growth across the UK.
“A pressing concern”
Baroness Verma, chairman of the EU sub-committee which published the report, said: “Goods dominate UK trade, and the EU is by far its largest trading partner. It is therefore imperative that a trade deal with the EU seeks to avoid the imposition of tariffs on trade in both directions.”
She added: “Non-tariff barriers can pose as significant or greater a barrier to trade as tariffs and would be more difficult to resolve in a free trade agreement. Witnesses from industry said this is a pressing concern.”
“Agreeing to a free trade agreement within two years is inherently ambitious, so the Government must try to agree a transitional arrangement with the EU. The Government will also need to increase Whitehall’s preparedness for administering UK-EU tariffs and non-tariff barriers to UK-EU trade,” she said.