Alexander Downer

Britain’s post-Brexit trade plan could be a missed opportunity

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The economic argument for free trade is politically more important than ever. A drift towards the use of tariffs and other protectionist measures has increased in G20 countries since the global financial crisis and there are signs that the protectionist trend could accelerate in the wake of Covid-19. This at a time when a global economic recovery will urgently need the boost that trade offers.

One of the great opportunities of Brexit is that the UK can lead the world, with countries like Australia, in championing free trade. The UK has made clear that signing free trade agreements is a top priority as it leaves the EU’s customs union. Negotiations with the United States are now under way, and Japan, Australia and New Zealand are earmarked as the next targets. At the same time, the UK is seeking to reach an agreement on the future UK-EU trade relationship.

But UK politicians and policymakers must not lose sight of the fact that the biggest economic benefit of trade comes from lowering barriers into one’s own economy in order to reduce costs for consumers, encouraging competition and boosting domestic productivity. To put it another way, tariffs on imports are equivalent to taxes on exports, since tariffs distort domestic prices and raise costs.

The good news is that Brexit has put decisions over trade and tariff policy back in the hands of UK policymakers. This week, the UK Government published its new ‘Global Tariff‘, which will come into effect at the end of the Brexit transition period on 1 January 2021. This sets out the tariffs that the UK will apply on imports from across the world, unless preferential tariffs are agreed under FTAs.

The new Global Tariff is a step in the right direction, since it removes tariffs on many supply chain components and a range of consumer goods, such as freezers and dishwashers.

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