Trading With The Rest Of The World Post Brexit.
Monday, 10. September 2018
If you read the reports in the press it’s easy to believe that we currently only do business with Europe and once we extract ourselves from the EU we will suddenly be free to trade with the rest of the world. This is a nonsense, we’ve been buying cars from and selling cars to the US for as long as I can remember.
Currently, we buy cars from the US and we pay customs duty for the privilege. This isn’t something that has been organised through the EU, we simply trade with the US. We are invoiced for cars, we pay 10% duty, add that to the cost of the car, add on shipping costs and add VAT to the lot (no duty payable on the shipping costs). And that’s what happens at the moment. So nothing will change after Brexit.
In the short term there is little advantage, however, in the long term we will be free to negotiate a free trade agreement with the US and save 10% on imports whilst US businesses will be able to import UK built cars for 10% less. However, that could take a long time as all imports and exports would need to be reviewed with less chance under the latest Trump protectionist policy.
Outside the EU we will lose the negotiated free trade agreements that already exist such as South Korea. We import a lot of Kias and Hyundais to the benefit of UK drivers but until we can re-negotiate a deal, just for the UK, we will end up paying 10% more in duty. On the other hand the EU exports goods to South Korea and other countries with whom they have free trade agreements. However, the free trade agreement only works if over 55% of the items exported are made (or have added value) in the EU.
But as we are leaving the EU if our component manufacturers and service providers such as designers contribute towards the overall cost of the products being exported on Free Trade Agreements they will no longer be part of the EU content and could give rise to either UK manufacturers moving to Europe or the EU exporters sourcing components and services from inside the EU. It really is more complex than was originally thought. By Graham Hill
