If there is a subject designed to make the eyes glaze over it is tariffs. These are special taxes which countries apply on imports, basically designed to protect their domestic industries. It pushes up the price of imported products to domestic consumers and pushes them towards buying home products.
And this is not simple. An ESRI working paper published on Thursday, looks to examine the impact of what we have come to call a “ hard Brexit” – a sudden lurch by Britain out of the EU without any agreement on the new trade terms that will apply. It assumes, reasonably, that the same tariff levels apply as are currently in force between the EU and other countries. We are talking here about 5,200 different products and tariffs ranging from 0 per cent to 80 per cent, with many food and drink products in the 30 per cent to 50 per cent region. The ESRI researchers point out that if these levels of tariffs apply, then trade between the UK and EU countries would virtually collapse in sectors such as clothing, textiles and parts of the food industry. Other areas, such as pharmaceuticals, would be largely unaffected. If that doesn’t sound logical it is because it isn’t.
Administrative nightmare
A lot of these tariffs have built up over the years and, typically, heavier products are subject to heavier tariffs. In most cases these are levied as a percentage of the value of the product, but sometimes there is an extra tax based on its weight – for example in the case of some meat products. In short, it is an administrative and logistical nightmare.
This is the “ cliff edge” scenario which Britain’s business leaders were warning the UK government about at their conference this week. Prime minister Theresa May promised to try to avoid this risk. But if the UK is looking for some leeway here, then the EU will demand some concessions in return.
Is the UK willing to continue open immigration after it leaves the EU as a new trade deal is worked out, to avoid this kind of scenario? This is the kind of issue that will make its way on to the table. Ireland’s problem is that we are uniquely exposed, as a big market particularly vulnerable in high tariff areas. Let’s hope we don’t get caught in the middle.
