Liam Fox is considering a plan to slash tariffs on most imports to zero if there is a no-deal Brexit in a move that would keep prices low for consumers at the expense of British industries. The UK trade secretary revealed his idea at a meeting with representatives of the ceramics industry on Monday, prompting anger from people in the room. Laura Cohen, chief executive of the British Ceramic Confederation, said the idea was “foolhardy” because it could ruin the industry by “wrecking” the home market. Mr Fox’s idea, which would involve the use of executive powers to tweak the trade bill, was also condemned by the GMB union as “the ultimate Brexit betrayal”.
A spokesman for the Department for International Trade denied that cutting tariffs to zero was official government policy: “He [Mr Fox] said these are the options on the table and the government is looking at each one,” he said. “The prime minister wants to exhaust each option.” However, the spokesman was unable to say what the other proposals were. Cutting tariffs to zero if the UK crashes out of the EU without a deal on March 29 would help to keep trade flowing between Dover and Calais. The complication, however, is that under World Trade Organization rules the UK would not be able to limit its zero-tariff stance to the EU and would have to apply the policy across the world.
But those countries would not be obliged to cut their tariffs in return.
“If you just reduce tariffs to zero then you have to do that on imports on everywhere but they don’t have to reciprocate,” said Sam Lowe, a trade expert at the Centre for European Reform. The opposition Labour party said that unilaterally switching all tariffs to zero would be an act of “sheer lunacy” because Brussels would have no motive to negotiate a trade deal with Britain. Barry Gardiner, shadow trade secretary, said the move would risk serious job losses in various industries.
“That is bad enough. But the secretary of state appears not to understand the basic logic of trade negotiations: your side wants the other to liberalise their markets and reduce tariffs on the goods you export to them. If you have already reduced all your tariffs to zero, you have nothing to negotiate with,” he said. Recommended Brexit Six-day queues into Dover feared under no-deal Brexit scenario A DIT spokesperson said no decision had been taken on applied tariffs after leaving the European Union and the government was considering all options in the event of no-deal.
“We will need to balance a number of considerations to avoid potential price rises for consumers and manage the impact on producers that rely heavily on supply chains as well as those who are currently protected from global competition by import tariffs.” The news, first reported in the Huffington Post, comes as fear grows among manufacturers about the impact of Britain leaving the EU without a deal.
On Tuesday Jude Brimble, national secretary for manufacturing with GMB, said Mr Fox’s plan risked “smashing the UK ceramics sector into pieces”.
“The Tories are so desperate to slash tariffs and sign trade deals with China and the USA that they will sell out our ceramics workers in the process,” she said. “Ministers want to slash tariffs left, right and centre but instead they will be ripping the heart out of our industry and communities. We need parliament to halt this ideologically driven industrial sabotage.”
The Institute for Fiscal Studies reported last year that the complete abolition of tariffs would reduce consumer prices by at most 1.2 per cent. Prices have increased 2 per cent due to sterling depreciation since the 2016 EU referendum. “This is because tariff rates are not particularly high on average, especially when one accounts for the EU’s various trade agreements,” said Peter Levell, a senior research economist at the IFS. “In addition, the costs of goods imported from outside the EU make up only a relatively small fraction of UK household spending.”
Duties on goods entering Britain could be slashed to zero to offset a slide in sterling if the UK crashes out of the European Union without a deal.
International Trade Secretary Liam Fox has raised the issue of cutting levies on imports in the event of a no deal Brexit at meetings with industry groups in recent weeks, the Huffpost website first reported.
The Telegraph understands that the Department of International Trade is concerned that consumer prices could rocket under a no-deal scenario if the value of sterling plummets. He thinks cutting import tariffs might be the only way to offset soaring inflation.
Fox has been talking to the US for a while. The duty free Britain plan is probably already a done deal. Fox mentions a fall in the £, and rising inflation. These elements could also be in the plan.