The EU External Affairs Sub-Committee today is publishing a report on the implications of Brexit for the UK’s trade in goods with the EU. This report considers the potential impact of Brexit on trade in six goods sectors: chemicals and pharmaceuticals, capital goods and machinery, food and beverages, oil and petroleum, automotive and aerospace and defence.
In December 2016, the EU Committee published Brexit: the options for trade, which evaluated four main models for future UK-EU trade. Following from this report, the Sub-Committee considered the impact of tariffs, non-tariff barriers, administration costs, preferential agreements with third countries and the investment and business climate on the manufacturing and primary commodities sectors.
- The manufacturing and primary commodities sectors are important employers, particularly outside the South East of England, and goods make up the bulk of the UK’s trade. Ensuring that these industries do not face additional barriers to trade will be essential to driving growth across the UK, as envisaged in the Government’s industrial strategy.
- The manufacturing and primary commodities sectors are integrated into efficient EU-wide supply chains. Supplies and components may cross the Channel multiple times during production, and tariffs on UK-EU trade in goods could be imposed every time, increasing costs. Many UK businesses cannot easily substitute their imports from the EU, or find alternative export destinations.
- Leaving the EU customs union would be likely to result in a significant additional administrative burden for companies and delays to consignments of goods, incurring additional costs. The customs agreement proposed by the Prime Minister would be unprecedented and it is unclear whether it will be possible outside a formal customs union.
- There may be significant benefits in the UK continuing to participate, where possible, in EU agencies such as the European Medicines Agency and the European Aviation Safety Agency. The Government should clarify whether it would accept being subject to some form of oversight and dispute resolution to so do.
- The Government should give serious consideration to a transitional agreement, as it begins its negotiations.
Chairman of the EU External Affairs Sub-Committee, Baroness Verma, said:
“Goods dominate UK trade, and the EU is by far its largest trading partner. Trade in goods between the two is worth almost £357 billion each year. It is therefore imperative that a trade deal with the EU seeks to avoid the imposition of tariffs on trade in both directions.”
“Non-tariff barriers can pose as significant or greater a barrier to trade as tariffs, and would be more difficult to resolve in a free trade agreement. Witnesses from industry said his is a pressing concern.”
“The Government will need to make a trade-off between mitigating barriers to trade, and the exercise of regulatory sovereignty.”
“Agreeing a free trade agreement within two years is inherently ambitious, so the Government must try to agree a transitional arrangement with the EU.”
“The Government will also need to increase Whitehall’s preparedness for administering UK-EU tariffs and non-tariff barriers to UK-EU trade.”
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