The Government wish to inform the House about plans to implement a temporary tariff regime in the event that the UK leaves the EU without a deal on 29 March 2019. The Government will bring forward the necessary secondary legislation in the light of the votes in Parliament this week.
The temporary tariff would apply equally to all countries where the UK does not have a trade agreement or other preferential agreement in place. In the event of no deal, this would include the EU.
The temporary tariff will apply for up to 12 months. At the end of the temporary period, the Government will introduce a long-term tariff regime. This will be developed over the course of the coming months following a full public consultation process.
The Government faced a choice:
We could maintain our current external tariff regime and apply it to the EU, imposing new tariffs on EU imports and driving up prices for consumers and disrupting business supply chains.
We could maintain the open trade that we have with the EU, but we would then have to extend this to the rest of the world. This would minimise disruption to EU trade but would fully open the UK to competition from other countries.
The Government do not believe either of these options on its own is the right approach. Instead, the temporary tariff would take a balanced approach to support the UK economy as a whole. It would maintain open trade on the majority of UK imports, to support consumers and business supply chains, but retain necessary tariff protection for particular sectors of the UK economy.
Under the temporary tariff, 87% of total imports to the UK by value would be eligible for tariff-free access.
The Government recognise the importance of retaining necessary tariff protection for some sectors of the UK economy. Therefore, tariffs would apply on 13% of total UK imports:
in some agricultural sectors which have been historically protected from non-EU producers through high EU tariffs. Producers in these sectors would face significant adjustment costs should these be immediately liberalised. Therefore, for beef, sheep meat, poultry, pigmeat, butter and some cheeses a mixture of tariffs and quotas will be used, with the aim of being broadly neutral in their impact on production and consumption patterns.
in sectors where tariffs help provide support for UK producers against unfair trading practices. This includes products such as certain ceramics, fertiliser and refinery products.
a set of goods, including bananas, raw cane sugar, and certain kinds of fish, where preferential access to the UK market is important for developing countries.
a number of finished vehicles will retain their tariff in order to support this sector and in the light of global market conditions.
Information on specific tariff rates that would apply under the temporary tariff has been made available through the Government website.
In developing the temporary tariff, the Government have given regard to the five principles set out in the Taxation (Cross-border Trade) Act 2018:
the interests of consumers in the UK;
the interests of producers in the UK;
the desire to maintain and promote external trade of the UK;
the desire to maintain and promote productivity in the UK;
the extent to which goods are subject to competition.
Throughout the temporary period, the Government would also consider exceptional changes where clear evidence is provided by stakeholders against the criteria set out in the Taxation (Cross-border Trade) Act 2018 and would provide a mechanism to hear business and consumer feedback.
This statement should be read in conjunction with the written ministerial statement laid in parallel on the Northern Ireland border.