UK may suffer from non-tariff trade measures

by Inside Logistics Online Staff

Non-tariff measures (NTMs) could cause major fractures in post-exit trade relations between the United Kingdom (UK) and the European Union (EU), knocking up to US$32 billion, or 14 percent, off UK exports to the EU, according to a new UNCTAD study.

NTMs are policy measures other than ordinary customs tariffs that can potentially have an economic effect on international trade in goods, changing quantities traded, or prices, or both. They include regulatory measures protecting health, safety and the environment – such as packaging requirements and limits on the use of pesticides ensure food safety; restrictions on toxins in toys protect our children; mandatory voltage standards for household plugs enable regional mobility; and emission standards for cars limit climate change – as well as traditional trade policy measures such as quotas and non-automatic licensing.

Potential losses under a “no-deal” Brexit from tariffs that may be imposed by the respective parties are estimated at between $11.4 billion and $16 billion or five to seven percent of current exports. The new study, Brexit beyond tariffs: The role of non-tariff measures and the impact on developing countries, says NTMs would double those losses.

The study also projects that even if a “standard” free trade agreement were to be signed by the parties, the UK’s exports could still drop by nine percent.

The losses would deal a major blow to the UK’s economy, as the EU market accounts for 46 percent of the UK’s exports. Mounting trade costs due to non-tariff measures and potentially rising tariffs would more than double the adverse economic effects of Brexit for the UK, the EU and developing countries, the study notes.

“EU membership has its advantages to deal with non-tariff measures that even the most comprehensive agreement cannot replicate,” said UNCTAD’s director of international trade, Pamela Coke-Hamilton.

The UK left the EU in January. The two parties aim to determine their future trade relations during a transition period that lasts until the end of this year.

While a “hard” exit scenario would result in the study’s projections, the economic effects of a “soft” exit in which the status quo is largely maintained pending negotiation of a future trade relationship would depend on the details of that relationship.