Business Secretary Greg Clark reportedly thinks we should stay in the EU’s Customs Union for another seven years. Based on the data the Economic Policy Centre has accrued, I have never been more convinced that the sooner we leave the Customs Union, the better. Taking snapshots once a month, for nearly two years, we have been tracking the relentless rise of commodities subject to import tariffs and the revenues taken from consumers.
With our website, www.eutariffs.com, we have two missions. First, hold the import tariffs of the Customs Union to account. And secondly, work towards their elimination by raising their public profile. So we always want to know: how many and what kind of commodities are subject to tariffs; with which countries; for whom have they been introduced; and how much are British consumers paying for them?
I’ve long become tired of hearing how the EU is a liberalising force on trade when the facts belie something else. As at 23rd June 2016, the number of commodities subject to tariffs of more than 0% stood at 12,641. As at 1st June this year, there was a net increase of almost 500 to 13,138.
Of course, that wouldn’t matter so much if the total tax take was falling. But it is not. It is rising and has done so quite a bit faster over the last year. In 2015/16, receipts stood at £3.089 billion and in 2016/17 they ratcheted up to £3.359 billion.
Within the usual 13,000 or so, there are now 551 commodities subject to anti-dumping tariffs. I really have my doubts about the validity of “dumping” – where the price of a product sold in the importing country is less than the price of the product in the exporting country. What about the consumer interest in cheaper goods in a consumption-driven economy?
What about if your own country doesn’t even produce those goods at all?
That is the case with EU tariffs on Chinese solar panels, which can run to 64.9%. The UK has no solar manufacturing capacity but these tariffs have hit jobs in the UK solar industry by raising the overall cost of the installation. As the UK Solar Trade Association will attest, imports create jobs too. This is a fact seemingly lost on EU ProSun – the lobby for mostly German solar manufacturers – and others who are trying to extend import controls further into the future.
And whilst even in these sunny times you may not be a big fan of solar power, you really shouldn’t have any doubt about the ludicrous 48.5% anti-dumping duty on Chinese bicycles. This was due to be lifted on 6th June. Unfortunately, after lobbying by the European Bicycle Manufacturing Association which fervently advocates re-shoring of bicycle manufacturing, these will remain in place, subject to review.
So little of our lives is untouched by the Customs Union, even outer space. With the EU working hard to bounce the UK out of Galileo and reduce our participation in the European Space Agency, an early candidate for tariff elimination has to be the one on Spacecraft (including satellites) and suborbital and spacecraft launch vehicles at 4.20%. Inevitably, in the near future, we are going to have to buy a lot of space hardware from America. So, embarrassingly for Sir Richard Branson, he will have to choose between a) the best interests of his US-based companies Virgin Galactic and Virgin Orbit and b) his long-standing opposition to Brexit.
So what’s coming next?
Unfortunately, it seems likely the volume of tariffed commodities may now grow substantially further. As members of the Customs Union, we are at risk of being drawn into a ruinous trade war with a major trading partner and a great friend, the USA.
How could that possibly be in British interests?
As you can see, several hundred products have been identified by the Commission for “trade defence” (or should we say consumer defeat?) for additional duties. You’ve probably already heard about steel. But some of the others are suspiciously specific, like the 50% on “Plasma cleaner machines that remove organic contaminants from electron microscopy specimens”. Or the 25% on eye make-up preparations. Or even the 50% on fishing vessels – hardly helpful to the recovery of the British fishing industry post-Brexit.
That’s why anyone who thinks that the Customs Union is some sort of benign, stable status quo just hasn’t paid attention. Each month, even every day, there are hundreds of small and sometimes large changes – none of which are subject to democratic oversight or consumer first impact assessments. I have always found that Remainers have a hard time defending import tariffs. But then defending the indefensible is always tough work.
No question, for British consumers, the key metrics of the Customs Union are all going in the wrong direction.
Greg Clark should note: staying in the Customs Union any longer than necessary is not only an opportunity cost; it is a certain risk in an increasingly less liberal world trade order.
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