{"id":1268,"date":"2017-10-17T08:11:04","date_gmt":"2017-10-17T07:11:04","guid":{"rendered":"http:\/\/blogs.sussex.ac.uk\/uktpo\/?p=1268"},"modified":"2017-12-12T16:49:01","modified_gmt":"2017-12-12T16:49:01","slug":"changinglanes","status":"publish","type":"post","link":"https:\/\/blogs.sussex.ac.uk\/uktpo\/2017\/10\/17\/changinglanes\/","title":{"rendered":"No deal\u2019 Brexit tariffs could mean millions of households facing price rises of over \u00a3500 a year"},"content":{"rendered":"Share this article: <\/em> \"Facebook\"<\/a>\"twitter\"<\/a>\"reddit\"<\/a>\"pinterest\"<\/a>\"linkedin\"<\/a>\"mail\"<\/a>

17 October 2017<\/em><\/p>\n

Lower-income households would be disproportionately affected should the UK revert to WTO tariffs<\/em><\/p>\n

Exiting the EU without a trade deal and reverting to WTO \u2018most-favoured nation\u2019 (MFN) tariffs with the EU would lead to significant price rises across a range of goods, with low-income households facing the biggest cost pressures. This is according to a new joint-report published by the Resolution Foundation<\/a> and the UK Trade Policy Observatory at the University of Sussex.<\/p>\n

While there is much debate, even within Cabinet, about the wider challenges and opportunities of a \u2018no deal\u2019 scenario, the one certainty is that it will lead to a major change in the UK\u2019s trade tariffs.<\/p>\n

Changing Lanes<\/em><\/a> examines what impact this concrete change would have on the prices of household goods, and what different \u2018no deal\u2019 post-Brexit trade policies could mean for consumers.<\/p>\n

The report comes ahead of a crucial EU Commission meeting later this week, at which the Prime Minister is keen to kick-start discussions of the UK\u2019s future trading relationship with Europe.<\/p>\n

The government says it wants to negotiate a comprehensive free trade agreement with the EU that will keep tariffs at zero. However, it has also stated that it is preparing for a \u2018no-deal\u2019 scenario, in which the UK exits the EU without a trade deal and imposes the same tariffs on the EU as it does for other WTO countries. The report models this and an alternative \u2018no deal\u2019 scenario, advocated by some economists, in which the UK unilaterally reduces all tariffs to zero after Brexit.<\/p>\n

Looking at the impact of imposing most-favoured nation (MFN) tariffs on the EU \u2013 the government\u2019s stated \u2018no deal\u2019 scenario \u2013 the report finds that tariffs on imports of dairy products from the EU will rise by 45 per cent, on meat products by 37 per cent, and on clothing, footwear, beverages and tobacco by 10 per cent.<\/p>\n

These tariffs would feed through into significant price increases, with the average price of dairy goods rising by 8.1 per cent, meat products by 5.8 per cent and transport vehicles by 5.5 per cent.<\/p>\n

These price rises will have a significant effect on living standards. The report finds that the cost of the average annual household\u2019s current consumption would rise by \u00a3260, and that over three million families would see price rises of over \u00a3500 a year.<\/p>\n

The report also finds that poorer households would be most affected by a \u2018no-deal\u2019 scenario in which tariffs and prices rose.<\/p>\n

Looking at the impact of MFN tariffs on different households, the analysis finds that the proportionate effect on the poorest fifth of households will be one third greater than on the richest fifth of households. This is because lower-income households tend to spend a greater share of their income on food and essential items of clothing, products which would be most affected by new trade tariffs.<\/p>\n

The impact of new tariff-induced prices rises would also be a third larger in Northern Ireland than in London, one of the least affected parts of the UK.<\/p>\n

The report finds that unilaterally reducing tariffs to zero would reduce expenditure by an average of \u00a3130 a year. The impact is smaller because eliminating tariffs means that they remain unchanged (at zero per cent) between the UK and the EU and a large share of UK imports comes from the EU.<\/p>\n

However, it adds that unilateral tariff reduction is unlikely to have happen as it would have major consequences beyond price changes, such as reducing the UK\u2019s ability to strike future trade deals and exposing some industries and parts of the UK to relatively sharp competitive pressures, without other countries being obliged to open up their own markets to competition from the UK.<\/p>\n

The report concludes that from a living standards perspective a \u2018no deal\u2019 scenario in which the UK imposed WTO tariffs on the EU is undesirable, particularly as poorer households would bear the brunt of price rises.<\/p>\n

Stephen Clarke, Economic Analyst at the Resolution Foundation, said:<\/p>\n

\u201cBritain\u2019s hasn\u2019t had to negotiate its own trade agreements since it joined the EEC over 40 years. Ministers are keen to sign lots of new free trade agreements after 19 March 2019, but a comprehensive agreement with the EU matters most.<\/p>\n

\u201cHowever those trade talks have yet to begin, and the government has said that while it wants a comprehensive trade agreement it is also preparing for a \u2018no deal\u2019 scenario when we leave the EU. Such an outcome \u2013 which could see the UK imposing tariffs on EU imports \u2013 would increase the annual shopping bills of millions of households by \u00a3500, with poorer families taking the biggest hit.<\/p>\n

\u201cWhile trade may not have been the biggest issue in the referendum it is one that will affect the day-to-day living standards of every family in Britain. The government must rightly continue to prioritise a comprehensive new trade agreement with the EU in order to avoid households having to fork out for a \u2018no deal\u2019 outcome through higher prices and squeezed households budgets.\u201d<\/p><\/blockquote>\n

Ilona Serwicka, Research Fellow at the UK Trade Policy Observatory at the University of Sussex, said:<\/p>\n

\u201cThe UK Government\u2019s objective is to ensure that the new trade relationship with the EU delivers trade that is as frictionless as possible. But a \u2018no deal\u2019 scenario that would see the UK and the EU trade on WTO terms also remains a possibility. Our research shows that this scenario will increase the cost of essential goods, such as food and clothes, which will impact most adversely on those households who already struggle to get food on the table and make ends meet.<\/p>\n

\u201cTo avoid the real economic danger of a \u2018cliff-edge\u2019 scenario \u2013 that will see the cost of living for households up and down the country go up \u2013 the UK Government must realise that walking away from the negotiating table is the worst possible outcome.\u201d<\/p><\/blockquote>\n

Republishing guidelines<\/p>\n

The UK Trade Policy Observatory\u00a0believes in the free flow of information and encourages readers to cite our materials, providing due acknowledgement.\u00a0For online use, this should be a link to he original resource on the our website. We do not however, publish under a Creative Commons\u00a0license. This means you CANNOT republish our articles online or in print for free.<\/p>\n","protected":false},"excerpt":{"rendered":"

Share this article: 17 October 2017 Lower-income households would be disproportionately affected should the UK revert to WTO tariffs Exiting the EU without a trade deal and reverting to WTO \u2018most-favoured nation\u2019 (MFN) tariffs with the EU would lead to significant price rises across a range of goods, with low-income households facing the biggest cost pressures. This is according to a new joint-report published by the Resolution Foundation and the UK Trade Policy Observatory at the University of Sussex.<\/p>\n","protected":false},"author":213,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[130195],"tags":[96141,123645,123644,123634,147852],"_links":{"self":[{"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/posts\/1268"}],"collection":[{"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/users\/213"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/comments?post=1268"}],"version-history":[{"count":4,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/posts\/1268\/revisions"}],"predecessor-version":[{"id":1350,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/posts\/1268\/revisions\/1350"}],"wp:attachment":[{"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/media?parent=1268"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/categories?post=1268"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/tags?post=1268"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}