The UK currently charges complex import duties on oranges thanks to the EU. Will they survive Brexit? And will other countries want a say? Exploring post-Brexit tariffs: part 3


By Peter Ungphakorn

POSTED SEPTEMBER 10, 2016 | UPDATED AUGUST 27, 2017


UPDATES:

1. The goods schedule for the EU's enlargement in 2004 to 25 members (EU–25) was certified and circulated in December 2016. Details are here


2. Some of the EU's import duties on oranges from South Afirca are being eliminaged gradually under the EU-Sothern African Development Community(SADC ) Economic Partnership Agreement (EPA) which took effect from October 10, 2016. The details are pretty complicated. It has already scrapped duty on imports in the period June 1 to October 15. Over nine years the duty-free period is being exended by six weeks to 30 November but apparently starting from 16%. During the Mediterranean harvest period imports are still charged duty, although from April 1 to May 31 it seems to be 12%. See this press release, and the full text of the agreement including tariff reductions (pdf).

The UK can easily adopt the EU's customs duties as its own after Brexit. That's a common assumption, and for most of the thousands of traded products it's likely to be true, both for the actual duties charged and for the commitments the UK will re-establish in the World Trade Organization (WTO).

But with many other products the UK might find that simply carrying on with the EU's duty rates is not so easy, particularly in agriculture. A lot depends on how other countries react. Oranges are as good an indicator of their possible reactions as any other product.

There are three sides to the test: what the UK itself does, how non-EU countries respond, and how the EU reacts.

Each of those will play a part in whether negotiations are settled quickly and easily or get bogged down in friction and ill-will.

A third angle

This is the third look at some of the complexities of tariff negotiations facing the UK as it seeks to re-establish itself as a WTO member independent of the EU by recreating its own WTO commitments.

'Good sense, humility and the abandonment of amateur hour will be essential ingredients of success' — Patrick Low

The two previous parts examined tariff quotas (where import duties for limited quantities are lower than normal) and the particular complexity of duties on bakery, confectionary and other products made with milk, cereals and sugar.

This one looks at normal import duty rates (or tariffs) more broadly — known in trade jargon as "most-favoured nation" (MFN) or non-preferential tariffs. For many of these tariffs, the EU's rates can still be pretty complex.

The common assumption is that these only require a straight conversion from the EU's rates to the UK's, but even here other countries might want a say.

Some argue that setting up the UK's tariffs is simpler than this series of articles suggest. To some extent the differences are nuanced.

For example, Richard Eglin, a former director of trade policy reviews in the WTO Secretariat, told a meeting of two House of Lords' sub-committees on September 8, 2016 that the task would be straightforward. But negotiations would be needed on the "quantitative" parts of the UK's "schedule" (lists) of commitments, particularly tariff quotas.

"It could take years before the schedule is actually certified by consensus […] but in that period we would continue to trade on the terms in which we proposed we should trade, as long as they were reasonable," he said.

But he wanted to be clear that it would not be simple, particularly for agricultural products, and that some "clever" negotiation could be needed.

"I do not doubt that there will have to be a negotiation of some sort, but we do not have to renegotiate our membership. We need perhaps to renegotiate our schedules," he said (See preliminary transcript, pdf.)

How other countries react will be key. That means it will be important for the UK to keep them onside. Eglin stressed the need to talk informally in the WTO with the most important countries, and to listen to them.

Another former WTO director shares that view: "The WTO can be a flexible institution, but giving rein to pragmatism will be hostage to the degree of goodwill the UK can generate among its trading partners," writes Patrick Low, who was the WTO's chief economist.

"Good sense, humility and the abandonment of amateur hour will be essential ingredients of success," he concludes.

In other words, goodwill cannot be taken for granted. It would quickly evaporate if the UK just decided what it wanted to do and presented that to the rest of the world