Brexit What Is The No-Deal Australia Option


Brexit What Is The No-Deal Australia Option

Remember how this time last year we were talking about a no-deal Brexit? Well, it’s back.

It is not exactly the same thing, because the UK left the European Union (EU) on 31 January.

The UK is now in a transition period with the EU until 31 December 2020, which means it is still following EU rules and trade stays the same. The transition was meant to give both sides a bit of time to negotiate a future trade agreement.

But if there is no trade deal by the end of the year, the UK would automatically fall back on World Trade Organization (WTO) rules.

The government now refers to this no-deal outcome as an “Australia-style deal” (Australia trades with the EU largely on WTO rules).

Boris Johnson said on 16 October: “we should get ready for January 1 with arrangements that are more like Australia’s”.

What is the WTO?

The WTO is the place where countries negotiate the rules of international trade – there are 164 members and if they don’t have free-trade agreements with each other, they trade under basic “WTO rules”.

Every member has a list of tariffs (taxes on imports of goods) and quotas (limits on the number of goods) that they apply to other countries with which they don’t have a deal. These are known as WTO schedules.

What happens if there’s no trade deal?

The UK would have to trade with the EU on WTO rules – at least, initially.

In this scenario, the EU would impose its tariffs on imported UK goods.

The average EU tariff is pretty low (about 2.8% for non-agricultural products) but in some sectors tariffs can be quite high.

Cars would be taxed at 10% with some agricultural tariffs higher still – rising to an average of more than 35% for dairy products.

This would have a big impact on UK businesses selling their goods to the EU.

What would the UK do?

The UK would do the same, and impose its tariffs on imported EU goods.

It has already released details of the tariffs it will charge from January 2021 to countries with which it does not have a free trade deal.

In some areas, they will be imposed to protect UK producers – in the car sector, for example, and on most agricultural products, to avoid “additional disruption for UK farmers and consumers”. That will lead to higher prices in the UK for some EU goods.

But the government is also removing some of the tariffs it has been charging as part of the EU – in areas, for example, where there isn’t that much domestic UK production that needs protecting.

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It means that 47% of all imported products will have zero tariffs, compared with 27% when in the EU. Imported yeast, for example, will have its tariff cut from up to 14.7% to zero. That will lead to lower prices in the UK for some goods.

Here are some other items that are having their tariffs cut to zero.

Brexit What Is The No-Deal Australia Option


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