On Tuesday, May 19, 2020, the United Kingdom (UK) announced a new post-Brexit tariff regime that aimed to exert leverage in trade talks keeping an eye for negotiating deals with the European Union (EU) as well as the United States (US). Under the new tariff regime, Britain brought some changes in the existing taxes on imports which included removing taxes levied against tens of billions of dollars of supply chain imports.
UK’s New Trade Tariffs Regime
Britain’s new tariff regime, which would come into effect from January 2021, aimed to ease, what some UK officials called, an overly complex EU system and help Britain to negotiate trade deals with the US, the Brussels-based bloc, and others. Under the new regime, Britain said it would be applied to countries with which it has no agreement and removes all tariffs below 2%.
As per the new tariffs policy, Britain will retain tariffs on imported products such as agriculture, automotive, ceramics, and fishing, which has strict competition with UK industries but will remove levies on 30 billion pounds ($37 billion) worth of imports entering to provide UK supply chains. As International Trade Secretary Liz Truss said, “Our new Global Tariff will benefit UK consumers and households by cutting red tape and reducing the cost of thousands of everyday products.”
On top of that, Britain also included concerns related to its environmental commitments and containing for the coronavirus pandemic in the new regime. Focusing on environmental commitments, the UK will cut tariffs on products that support energy efficiency and introduce a temporary zero tariff on goods being used to fight COVID-19 such as personal protective equipment.
Britain’s Aim at EU
The EU’s chief negotiator, Michel Barnier welcomed the UK’s new move on trade tariffs but added that “We must make tangible progress” in the June talks. Although it seemed a positive response from the EU’s leader, the UK has to go through a series of long talks to make the trade deals happened with the Brussels-based supranational organization.
It means that if Britain and the EU fail to reach a free trade deal by the end of the year, the price of some commodities including food, cars, and some chemical inputs which are to be imported from the bloc would rise sharply.
Meanwhile, the British Chambers of Commerce (BCC) welcomed the new trade policy and said it expected a possibility of a trade deal with EU by year-end since it was vital “to avoid substantial increases in costs for businesses on both sides of the Channel”.
However, talks on a future relationship between London and Brussels have been stuck in trouble since both sides were trading barbs before a crunch meeting next month. Meanwhile, a spokesman for Prime Minister Boris Johnson described Britain’s publication of its draft legal text on Tuesday as “a constructive contribution”.
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