“Lawyers for Britain are dispelling the myths on tariffs: Leaving the EU on WTO terms means pulling down the barriers to world trade”


Why prices will fall after Brexit, not rise.

Over the past couple of weeks, the media have been full of lurid scare stories about what will happen if the UK leaves the EU on WTO terms, because negotiations with the EU do not result in a withdrawal agreement.

One of the most ridiculous and unjustified of these absurd scare stories is that it will lead to higher prices, and even shortages, of foods and medicines. In the Sunday Times on 12 August 2018, under the headline

“No deal will hike food bills by 12%”, it was reported that ‘senior executives from the big four supermarkets’ had claimed that a ‘no deal’ Brexit ‘would force up the price of the average weekly food basket by as much as 12%.’

This prediction was apparently based on the suggestion that ‘the biggest tariffs on imports from the EU could include cheese, up by 44%, beef, up by 40%, and chicken, up 22%’.

This suggestion is therefore based on a misconception which is so widespread and so often repeated that I shall call it “the tariff delusion.”

That delusion is that when we leave the EU, WTO rules will require the UK to take the current tariffs which the EU at present forces us to impose on imports from the rest of the world, and impose them on imports from the EU as well.

That delusion is simply not true. The UK is currently in the process of ‘rectifying’ its tariff schedules at the WTO by copy-and-pasting the EU’s current schedules. But those schedules do not specify the tariffs which we will have to charge on our imports: they specify the maximum level of tariffs which we are allowed to charge.

We will be fully free to charge lower levels of tariffs, or zero tariffs, if we feel fit.

What WTO rules do require, under the so-called “Most Favoured Nation” (MFN) principle, is that whatever tariffs we decide to set must be charged equally to everyone, with the exception of countries with which we have customs union or free trade agreements. In those cases, zero tariffs must be charged on substantially all trade in goods under Article XXIV(8) of GATT.

Since we will be leaving the EU’s customs union in a “no deal” scenario without a replacement free trade agreement, we will have to charge the same UK MFN tariffs on imports from the EU as on imports from the rest of the world. But those UK MFN tariffs can be lower than the current EU-mandated tariffs or zero if we want, on some or even all categories of goods. So under a rational policy, food prices – as well as prices for other basics such as clothing, textiles, and footwear – will go down, not up. In fact, it would be an act of lunatic self-harming idiocy for any British government, even a government as stupid as the present administration, to adopt and apply the EU’s external tariffs to imports from the EU as well as on imports from the rest of the world.

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