Documents to download

Economic theory suggests that free trade is beneficial to the trading countries, and that tariffs, which are taxes on imported products, reduce economic welfare. Nevertheless, the arguments for and against tariffs are contested, and there is evidence that one of the most common, that of enabling new industries to grow, is supported by some historical episodes.

Tariffs have been employed since 300BCE, and at times have played a key role in countries’ economic policies. Today, however, non-tariff barriers to trade are considered to be more significant. These include, for example, safety standards, sanitary checks on food and how products are advertised. Non-tariff barriers are particularly significant for trade in services.

International efforts to regulate trade and reduce tariffs began after World War II, leading to the establishment of the World Trade Organization (WTO) in 1995. WTO members account for 98% of world trade. Trading on ‘WTO terms’ requires each member to apply equal tariffs to all other members. However, this does not apply if members form a formal trading area, such as the EU, have a bilateral trade agreement, or in certain other circumstances.

As a member of the EU, the UK trades with other members free of tariffs and with efforts to minimise non-tariff barriers, while each member of the EU applies a common tariff to non-members. This will change when the UK leaves, but the UK’s position after Brexit will depend on the form of its departure. With a deal, little would change in practice until the end of the implementation period, and somewhat similar arrangements could continue to apply (although for goods only) for longer if the ‘backstop’ comes into force. In the event of no deal, the UK would move to trading on WTO terms immediately. The Government is attempting to replicate the EU’s trade agreements with other countries, which could then be put in place bilaterally to ensure continuity of trade arrangements either after the implementation period or in the event of no deal. Some have been agreed and others are still under negotiation. However, they cover a small percentage of UK trade, and would not include EU countries, which themselves are the partners in around half of UK trade.

The UK has also published its proposed schedule of tariffs to apply to countries where there is no trade agreement in the case of no deal. Overall, these tariffs are slightly lower than apply at present as a member of the EU. However, there would be large changes for some specific goods. The Government has stated that they are intended to balance the interests of consumers and industries.


Documents to download

Related posts

  • International Women’s Day 2024: Economic inclusion of women

    Economic disparities persist between men and women globally, with women generally facing lower pay, higher levels of informal employment, and more unpaid care work than men. Internationally, the UK government has made commitments to promote gender equality and economic inclusion, but concerns have been raised about the level of aid funding. In the UK, the government has expanded childcare places for working parents and supported private members’ bills to make changes to employment law.

    International Women’s Day 2024: Economic inclusion of women
  • Higher education: Contribution to the economy and levelling up

    The economic output of the UK higher education sector is estimated to be at least £116bn and graduates often experience better employment outcomes than non-graduates. Improving skills features in the government’s levelling up strategy and ministers have said that higher education institutions play a vital part in supporting regional economies. However, some stakeholders have criticised the government’s plans to restrict access to certain higher education courses and for not putting enough emphasis on the benefits provided by the sector.

    Higher education: Contribution to the economy and levelling up