It took the Irish famine to finally force Conservative Prime Minister Robert Peel to repeal the Corn Laws of the 1800s, and now we have a Tory government trying similar 19th-century solutions to 21st-century problems. The Corn Laws imposed tariffs on imports to benefit domestic producers. The impact on the cost of importing foreign grain, even when there was a shortage at home, was catastrophic for the non-land-owning classes. Ministers are now proposing – in the event that we crash out of the EU without a deal – to reduce tariffs to zero on the majority of imports. In the meantime, they’re abandoning safeguards for steel and other goods, which could also be catastrophic for our manufacturing industries at what is already a vulnerable economic period.
While UK manufacturers importing goods, parts and components may initially rub their hands with glee, many will be left competing with both hands tied behind their backs. They will face a double whammy of competition in the UK market with tariff-free imports, while paying tariffs on exports. Within the EU, of course, the customs union eliminated tariffs between member states, but outside of the EU and between countries with no trade agreement, it’s the World Trade Organisation (WTO) that agrees tariff arrangements between countries.
Individual countries can unilaterally reduce or even eliminate their own tariffs to make their markets more attractive. But without reciprocal tariff arrangements and measures to ensure labour, social, welfare and environmental standards are of equivalence, why would you? Doing so begs the question, what’s to negotiate? It’s complicated, and more so given we’re also seeking to negotiate customs arrangements with our largest partner, the EU, which will not allow cheap tariff free imports via the UK to undermine their tariff free, single market.
Turkey provides a simple illustration. Our government is desperate for a post-Brexit trade deal, though being able to achieve one has been written off by ministers until after we leave the EU. Even then, Turkey has a customs agreement with the EU and won’t do anything to undermine that. And yet the UK is Turkey’s second largest export market right now, and Turkey has been climbing the league of our biggest export markets. While it still accounts for only around 2% of our overall goods and services, crucially, for our steel industry, 20% of British Steel exports go there – up 14% in 10 years.
It is not scaremongering to say that, in the tariff-free utopia wished for by Tory Brexiteers, devastation would follow. Turkey would be able to land its products tariff-free at Dover while UK steel manufacturers would have to pay a 40% tariff to export into its market. Our steel and tyre industries have already been pushed to the brink of collapse due to the dumping of below-cost Chinese products, but for us to now price our steel product out of a major market like Turkey verges on industrial vandalism.
Look also at our ‘jewel in the crown’ of UK manufacturing: the automotive industry. The UK exports vehicles to more than 160 countries worldwide and we’ve seen calamitous damage done by the refusal of the Prime Minister to take no deal Brexit off the table and negotiate access to a customs union with the EU. On top of this, it’s now being suggested in this madcap proposal that completed cars imported from the EU will face new tariffs of over 10%, but components from Europe won’t. At face value, that’s better than the tariff plan for steel, right?
The key question in answering that is what counts as an EU-made car. It’s the first that should have been asked when piecing together this proposal. Few vehicles have core components from just one country, and most found in cars imported from the EU come from the UK.
Every day, thousands of trucks cross into the UK from the continent – tariff-free and mostly without being checked at customs – to deliver some £35m worth of components to UK vehicle and engine plants. They help to build 6,400 cars for export and 10,500 engines, alongside transmission and electronic control systems, powertrains, braking systems and thousands of individual parts, the bulk of which are then shipped back to EU automotive assembly plants and customers.
Take the Ford Fiesta. It’s the UK’s biggest seller – built in Germany with UK-made engines and many other components. What is its country of origin? This is important, not just for the manufacturers, workers and communities whose livelihoods depend on the UK car industry, but for consumers too. If tariffs are slapped on cars made (or finished) in the EU, or indeed elsewhere in a global market and imported into the UK, coupled with new WTO tariffs on UK-made components shipped to the EU, the inevitable outcome is both an undermining of UK competitiveness as an exporter of components and increases to showroom prices of new cars, by several thousands of pounds.
This is not rocket science, it’s basic economics, now abandoned by the Tory hard right in their ideological drive for a ‘clean’ Brexit. The so-called party of business has forsaken it to the free market. Margaret Thatcher’s former adviser Professor Patrick Minford famously predicted that Britain leaving the EU would “mostly eliminate manufacturing”, leaving us with a mainly service sector economy. Steel and autos are just two examples of the impact of this proposed post-Brexit, no deal, tariff regime – industries that support thousands of UK jobs, families and communities – likely to prove Brexit’s favourite economist right.
The Tories’ internal battles over free trade have been raging for centuries, and our country is as much at the mercy of that party war as it was in the 1800s. MPs must oppose this reckless move on tariffs that imperils manufacturing communities across the UK and force Theresa May to stop her economic vandalism by taking unilateral tariffs and a no deal Brexit off the table while placing a new customs arrangement with the EU firmly on it.