Tariffs will be cut to zero on 87% of imports to the UK as part of a temporary no-deal plan, but prices of some imports including meat, shoes, underpants and cars will go up.
In an attempt to prevent a £9bn price shock to business and consumers while “supporting farmers and producers who have been protected through high EU tariffs”, the government on Wednesday set out its long-awaited pricing regime in the event that the UK crashes out of the EU on 29 March.
But the move landed the UK in a potential row with the EU after announcing the tariffs would not apply in Northern Ireland, fuelling fears the region would become a back-door smuggling route to Britain.
Among the consumer goods that will be hit are imports of beef, prices of which will go up by almost 7%, cheddar cheese, up by about £20 per 100kg, and imported “fully finished” cars, which would attract a 10.8% levy, or about £1,500 for an average new car.
Tins of tuna could go up by 24%, imported men’s wool jackets by 12%, and men’s, women’s and girls’ underpants made of synthetic fibre by 12%.
The announcements were made in a last-ditch attempt to concentrate the minds of MPs who will be voting later on Wednesday to reject a no-deal Brexit after Theresa May’s 149-vote defeat.
Tariffs are border taxes charged on foreign imports. Importers pay them upon entry to the customs agency of the country or bloc imposing them.
Tariffs can be levied in different ways. It can be a flat-rate tariff linked to weight, or calculated as a proportion of the overall value of the goods. It can also be a mixture of both. A country can set a quota, enabling a certain volume of a product to flow in before a higher tariff rate kicks in.
Tariffs raise money for governments, but are primarily used to raise the price of foreign goods, protecting domestic producers from global competition.
Countries signed up to the World Trade Organization (WTO) must impose tariffs at the same level for all other WTO-member trading partners under the organisation’s “most favoured nation” rule – unless they secure alternative deals with particular countries or trading blocs.
Ireland’s European affairs minister, Helen McEntee, said the prospect of tariffs on beef and dairy exports to the UK from the republic would be “absolutely disastrous for Irish agriculture”.
Goods from the EU are currently tariff-free, but in the case of a no-deal Brexit, World Trade Organization taxes would have been the default position without this intervention.
The trade minister, George Hollingbery, said the measures would protect the poorest families in Britain against price rises. “If we leave without a deal, we will set the majority of our import tariffs to zero while maintaining tariffs for the most sensitive industries.”
He said the approach would “help to support British jobs and avoid potential price spikes that would hit the poorest households the hardest”.
The new tariff schedule would apply from 11pm on 29 March in the event of a crash out of the EU with no deal and would be in place for up to 12 months.
In Ireland, goods could travel freely from the republic into Northern Ireland without tariffs or customs checks as part of a “strictly temporary, unilateral approach” designed to avoid a hard border.
Imports of knickers and underpants made of man-made fibre will go up 12% under new tariff regime. pic.twitter.com/ikA1s6JUe3
— lisa o'carroll (@lisaocarroll) March 13, 2019
Lord Mandelson, the former Labour trade secretary and former European commissioner, said a free-for-all on the border was not sustainable under international law.
“Refusing to comply with our responsibilities under international trade law to operate a customs border at any frontier is not a serious or sustainable solution to the problem of a hard border that Brexit – of any variety – threatens,” he said.
A European commission spokesman also questioned the prospect of differential trading regimes. “We will carefully analyse the compliance of the UK plan with WTO law and the EU’s rights thereunder.
“The differential treatment of trade on the island of Ireland and other trade between the EU and the UK raises concerns.”
Responding to the announcement, Carolyn Fairbairn, the director general of the Confederation of British Industry, described the prospect of no deal as a “sledgehammer for the economy”.
“This tells us everything that is wrong with a no-deal scenario. What we are hearing is the biggest change in terms of trade this country has faced since the mid-19th century being imposed on this country with no consultation with business, no time to prepare,” she told BBC Radio 4’s Today programme.
“This is no way to run a country. What we potentially are going to see is this imposition of new terms of trade at the same time as business is blocked out of its closest trading partner.”
The National Farmers’ Union president, Minette Batters, said it was “relieved” that tariffs would be imposed on imported food to protect farmers but it was “appalling” that the tariff regime was published only 16 days before the potential cliff-edge departure from the EU.
The head of the Food and Drink Federation, Ian Wright, said it was disgraceful that with just two weeks to go, restaurants, pubs and catering businesses had to adapt to a new regime.
“It is disgraceful that we are, only now, getting to see these. There must be proper consultation with business before a change of this magnitude is introduced,” he said.
Ireland’s agriculture minister, Michael Creed, said the UK’s decision to impose high tariffs on beef and cheddar exports to the UK was “potentially a disaster” for Irish farmers.
However, fears over price hikes in beef and cheddar from Ireland may be misplaced as generous tariff-free quota levels reflecting current import levels are being set for goods that are in short supply in the domestic market.
Creed said the logic of introducing a different regime for Northern Ireland defied Brexiter logic and accused the UK of being understandably “selective” and “self-serving in terms of what they want to achieve”.
He told the state broadcaster RTE: “It is interesting in the context of what is published today, the UK contemplating bespoke arrangements for Northern Ireland. If we had the bespoke arrangements that are in the withdrawal agreement we would avoid a hard border.”
The absence of checks on the border have also fuelled fears of a smugglers’ charter allowing criminals to supply Britain with tariff-free EU goods through the back door of Northern Ireland.
A “small number” of checks to protect animal and public health would apply on the border between Northern Ireland and Great Britain (England, Scotland and Wales) but these would be at designated entry points and not down the Irish Sea, the UK government insisted.
