Theresa May has decided to protect sensitive agricultural and manufacturing sectors if Britain leaves the EU without a deal — but to slash duties on all other goods imports in a no-deal Brexit.
The prime minister’s decision follows a bitter clash between Philip Hammond, chancellor, and Michael Gove, environment secretary, over import duties, an issue of huge significance to both producers and consumers.
While many British farmers are intensely worried about being wiped out by cheap imports, the decision to use tariffs to protect products such as beef, lamb, milk and cheese would increase the price of many foodstuffs from the EU.
The bloc provides 30 per cent of food consumed in the UK, but at present this is not subjected to any tariffs at all.
At the same time, the plans to drop tariffs on most other goods in the event of no-deal highlights Mrs May’s willingness to expose much of British industry to competition from across the world after Brexit.
The tariffs, which would initially last for one year, are one of the most important and politically sensitive parts of the UK’s planning for a no-deal Brexit on March 29.
“This is not some dry technical matter,” said one Whitehall official. “It actually goes to the heart of what kind of economy ministers want to have in future, even if there is a Brexit deal.”
The official added that Mr Gove and Mr Hammond were “spitting feathers” at one another at a heated meeting of the no-deal cabinet subcommittee ten days ago. Mr Gove has argued that tariffs on agricultural goods must remain high in order to protect sensitive sections of farming and food production, while Mr Hammond has championed consumers.
Why bother giving concessions to the UK in an FTA [free trade agreement] when you are already getting good access without it?
If the UK left the EU without a deal, it would be required as a World Trade Organization member to impose the same tariffs on goods from the bloc and from other countries around the world. EU products would lose their current preferential access over competitive suppliers such as Australia and New Zealand.
The tariff plan endorsed by Mrs May, set out in a memo from the Cabinet Office to Whitehall departments, would impose high EU tariffs currently imposed on beef and lamb from outside the bloc on all such imports, whether from Europe or beyond.
The UK would retain general duties on pork products, milk and cheese. It would also set tariffs on some products such as sugar to maintain the benefits of special duty-free access it currently allows to developing countries.
Industrial tariffs for all Britain’s trading partners would be set to nil except for certain products.
Trade experts and some officials have warned that such a move on goods would make it harder for the UK to negotiate bilateral agreements with trading partners, including replicating the EU’s existing deals with such countries.
“Why bother giving concessions to the UK in an FTA [free trade agreement] when you are already getting good access without it?” another Whitehall official said.
The exceptions to the nil tariff rate include some steel and ceramic products, where the UK is already planning to impose “trade remedies” — emergency tariffs against imports that it considers are priced at unfairly low levels or state-subsidised.
For finished cars, the UK will also maintain the EU’s 10 per cent import duty.
“If we leave the EU without an agreement, our tariffs will need to strike a balance between protecting consumers and businesses from possible price rises and avoiding the exposure of sensitive industries to competition,” said a government spokesperson, who added that Britain’s priority remained to strike a deal with Brussels.
The government is expected to announce the tariffs at the end of this week after privately informing stakeholders in industry and agriculture. The UK has ruled out suggestions that it use creative interpretations of WTO rules to keep its zero-tariff deal with the EU even after a no-deal Brexit.
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