Unveiling the cost and extent of the 12,651 EU import tariffs – and why we should repeal them

Unveiling the cost and extent of the 12,651 EU import tariffs – and why we should repeal them

The Economic Policy Centre today publishes The Essential Guide to EU Import Tariffs 2016 and launches a new public-facing database website at www.eutariffs.com

It’s a safe bet that at least a few of you have never drunk unfermented coconut water or even knew there was such a fruit as a Bitter Melon. And it’s almost certain that you are completely unaware that in the few months since the Brexit referendum, the EU has introduced substantial import tariffs on both – 17.6% and 12.80%.

These tariffs and 12,649 others tell us a story, sadly: on trade, Europe has been – and is still – moving in the wrong direction. And that is the theme of a new paper, The Essential Guide to EU Import Tariffs 2016, and accompanying interactive website www.eutariffs.com that we at the Economic Policy Centre are launching today.

It first has to be understood that as part of our membership fee to the Single European Market, we must adhere to the Customs Union. So the UK pays over £3 billion a year in import tariffs on 12,651 goods and must then levy VAT at 20% on almost everything except food and a few other exceptions. With a net increase of 1,494 tariffs since 2009 and revenues growing by 2.6% per annum since 2000, the cost has been high.

While it has not yet been decided exactly how or indeed when the UK will leave the EU, the options are clear when it comes to import tariffs post-Brexit: we could seek to remain within the existing Customs Union or we can be like Norway or Singapore and set our own. Both those nations have sovereign control over their import tariffs with just over 1,000 tariffs levied in Norway and zero in Singapore. Crucially, unlike us, they can also set their own VAT rates on imports which they do at 25% and 8% respectively.

Perhaps those latter two options might sound a bit radical to some ears. There are some fears that without this protectionist wall in place, the British economy will run into serious trouble.

However, all you have to do is look at the tariffs to know that this is nonsense.

Before conducting this extensive research, I assumed that most tariffs would involve food, the motor industry and steel. But in terms of revenue these amount to very little. By far the largest number of tariffs – 1,409 in fact – are levied on “organic chemicals”. These include tariffs on goods with names that one can barely pronounce like 2-Bromo-5-iodo-benzenemethanol at 5.5%, also introduced since 23rd June.

You might also take the view, for example, that the UK economy would fall over if we don’t continue to levy a 2.7% tariff on tennis balls or a 10.20% tariff on tomato ketchup. But presumably it would not be shared by the Lawn Tennis Association. As a body that has long disappointed in its quest to get more people playing, they should be trying to lower the costs of entry to the game. Equally, the hospitality industry which employs so many young people would see the value of lowering input costs to condiments and sauces.

More seriously, retailers like Sports Direct which depend on dollar and euro-priced imports and have been hit by the falling pound could only gain from the elimination of a 16.90% tariff on sports footwear.

But as the depth and scale of the tariff wall became clear to me, the greatest issue of all struck me as the lack of democratic accountability behind these tariffs. Who decides, and on what basis, which tariffs are introduced, increased or even reduced?

Do they make these decisions on the basis of collection of revenue, strategic interest, crowding out competition or following industry specific lobbying? Or are they just some leftover tariff for something that doesn’t really matter any more?

So we need to have an inquiry, ideally a Royal Commission, to consider this question and report back not just to the British people but also to the EU as a whole. On our own side, HMRC needs to make available on a monthly basis details of revenue both by import commodity code and in aggregate on an open data basis. That way, we can have a really informed debate.

I’m also very struck by how many of these tariffs are effectively paid for by consumers on the high street: just over a third are for clothing and footwear which invariably are made in much poorer countries than our own. So we should be aiming early to prioritise tariff- and VAT-free imports from countries with GDP of less than $10,000 per capita.

Helping their poor as well as our own is a great virtue of trade and should be a defining cornerstone of our future trading arrangements.

These EU corn laws have no place in the 21st century: the EU import tariffs must be repealed.