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The £13 billion cost to EU exporters of failing to agree free trade terms with post-Brexit UK

  • New analysis shows the tariff burden would be greatest on EU firms should tariff barriers be imposed on UK-EU trade
  • British exporters would pay about £5.2bn, while EU exporters would pay £12.9bn, on current trade volumes
  • German exports alone would incur tariffs of £3.4bn a year

EU firms face tariffs worth £12.9 billion a year on goods exported to the UK if Britain leaves the EU’s customs union without a trade deal in place, new Civitas analysis shows.

The cost to British exporters to the EU in such a scenario would be less than half as much as that, at about £5.2 billion.

The analysis illustrates just how much is at stake for European exporters if EU leaders refuse to agree preferential trade terms after Brexit.

On a country-by-country basis, 22 of the 27 remaining EU members would face more tariffs on exports to the UK than UK exporters would face on sales to those individual countries. This includes all of the UK’s major trading partners and the picture is especially stark for the EU’s biggest economies.

Should UK-EU trade be conducted under the EU’s World Trade Organisation tariffs, German exports to Britain would incur tariffs of £3.4 billion and French exports £1.4 billion. British exports to Germany, meanwhile, would incur just £0.9 billion of tariff costs and to France £0.7 billion.

EU car manufacturing would face the biggest hit, with tariffs on exports to the UK estimated at £3.9 billion. British car exports to the EU would face £1.3 billion of tariffs.

The study estimates the volume of tariffs that could be introduced if the present volume of trade between the UK and the EU (based on data from 2015) was conducted under WTO Most Favoured Nations terms.

The higher tariffs facing the EU than the UK reflect the current balance of trade between the two markets – with the UK a net importer of EU goods.

The calculations do not take into account any decline in sales between the two markets that is likely to occur in response to tariff-related price rises and which is likely to fall most heavily, again, on EU exporters.

The analysis is contained in a new briefing, ‘Potential post-Brexit tariff costs for EU-UK trade’, to be published on Monday October 24th.

Its author, Civitas research fellow Justin Protts, said: ‘These figures highlight the importance of securing a post-Brexit trade deal not just for the UK but also for the EU. European exporters have a great deal to lose if without free trade across the continent – the knock-on effect of tariffs and increased prices will harm their ability to sell to the UK.

‘The UK would be better-placed to adjust for these changes. It has the opportunity on leaving the EU to alter its tariff schedule in a manner that is more favourable to UK businesses, reducing tariffs on input products for UK manufacturers and other products that are not manufactured in the UK, while keeping tariffs on goods that can be manufactured in the UK, that are perhaps not yet competitively produced.

‘Further still, the depreciation of sterling, although it will lead to increases in import prices, will reduce the cost of buying goods from the UK. Both these factors will allow the UK economy to adjust for the introduction of tariffs if there is no trade agreement.

‘The EU, on the other hand, has seen the euro rise relatively against sterling. This will put pressure on EU manufacturers who export to the UK.’

Civitas director David Green said: ‘EU leaders are saying that the UK must be made to suffer for leaving in order to deter others from taking the same path.

‘But they can’t make us suffer without suffering twice as much themselves. When the reality of this sinks in then maybe they will come to their senses.’
Notes

‘Potential post-Brexit tariff costs for EU-UK trade’ is a briefing that will be published by the cross-party think tank Civitas on Monday October 24th.

It can be downloaded here.


Potential post-Brexit tariff costs for EU-UK trade

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