One of Liam Fox’s main tasks will be to construct a new UK tariff to take the place of the EU’s Common External Tariff which has hitherto applied to imports into the UK from those third countries with whom the EU does not have special trade arrangements. This will not only be an enormously complicated operation for Fox’s Department of International Trade but also one that bristles with tricky economic and political judgements. These will affect the price of goods in our shops and our relations, for better or for worse, with a whole range of countries around the world – for example, the United States, Russia, China, India, Indonesia, Brazil and Mexico. Anyone who doubts the domestic sensitivity of those judgements should just remember that this issue split the Conservative party in the early years of the 20th century, lost it a general election in the 1920s and then split the Liberal party in the 1930s.
In theory, all this hassle could be avoided by deciding not to impose any tariffs on imports into the UK at all – which is sometimes called the Singapore or Hong Kong option and is favoured by Patrick Minford and Nigel Lawson. But since the main protagonist of this course admits that it would probably lead over time to the disappearance of manufacturing industry from the UK, its attractions to the government, to members of parliament and to the electorate would seem to be limited. And to the extent that the vote for Brexit was in part a protest against globalisation, such a “cold turkey” approach to complete globalisation would seem entirely contradictory.
The technicalities of constructing a new UK tariff, for which neither Liam Fox nor the officials advising him have any relevant experience, will themselves be pretty daunting. Tariff rates will need to be set for thousands of tariff positions and sub-positions. Should these be higher than those set in the EU’s Common External Tariff, in which case we will either have to cut tariffs on others products to compensate all our WTO trading partners or suffer higher retaliatory tariffs from them? Or should the tariffs be set lower, in which case UK manufacturers will have to face up to more competition and less protection? Or should they be set at the same level as now, in which case one wonders what all the fuss was about in the first place? And do not be deceived by sweet talk about tariffs being so unimportant now that the average level of the EU ‘s External Tariff is so relatively low. The average tariff is of no interest to a company; what matters is the actual level of the tariffs on the products it imports and on those it manufactures. The least that can be said is that this operation will require a massive exercise in consultation; and that it will give rise to plenty of divided counsels.
The outcome of this exercise will be the basis on which we trade with the EU should we be unable to negotiate a satisfactory trade relationship with our erstwhile partners and have to fall back on WTO rules; it will be the starting point for negotiating with the third countries with whom the EU currently has special trading relationships which will cease to apply when we leave; it will be the framework within which we will seek better trade relations with other third countries who, we were assured by Brexiteers, were thirsting to give us quicker and more favourable deals than they were prepared to do with the EU; it will determine the basis on which important British industries such as agriculture, food and drink will have to operate. So a lot will depend on it.
Did the Brexiteers explain all this to the electorates and say which solutions they favoured? Of course they did not – they did not even agree on which ones they favoured. They just peddled half- truths and outright untruths about the sunlit prospects for Britain’s trade relationships outside the EU. Now it is delivery time and that process may prove to be protracted and painful.