Britain’s Free Trade incentives

The UK plans freeports and tariff changes to boost global trade

Britain is embarking on a two-pronged strategy to bolster free trade. Plans are afoot for independent trade deals outside the European Union. The strategy comprises “freeports” and tariff cuts.

The groundwork for this strategy is taking place during the 2020 transition period with the EU. During the post- Brexit adjustment phase, the UK remains part of the EU customs union and single market. The government, however, can begin preliminary negotiations with the US, Asia, Middle Eastern, Africa, South America and others.

Trade deals with non-EU nations can take place from 2021. Foreign secretary Dominic Raab branded the UK as “Global Britain” when he was in Japan, Singapore and Malaysia recently.

Freeport plans

Rishi Sunak, the new chancellor of the exchequer, is a strong backer of freeports. The government aims to have up to 10 freeports at harbours or airports from 2021 onwards.

“Freeports will unleash the potential of our historic ports, boosting and regenerating communities across the UK,” Mr Sunak said. “This is part of our mission to be an open, outward-looking country, championing global free trade.”

Freeport incentives

Imports can enter a freeport with simplified customs documentation. There are no tariffs. Businesses operating within port areas can manufacture goods using the imports. The finished product can then be exported tariff-free. Tariffs can only be applied if the goods enter the domestic UK market.

Besides benefiting external trade, freeports should attract new businesses and foreign and local investment, said Mr Sunak. They will create opportunities for towns and cities across the UK.

Businesses to provide trade and tariff ideas

The UK Department for International Trade has launched the second prong of the strategy. Large and small businesses can advise and suggest a new independent “global tariff” policy.

“It is time for us to look forward to our future as an independent, global champion of free trade,” said International Trade Secretary Liz Truss. “It is vitally important that we now move away from complex EU tariff schedules.”

A new UK ‘Global Tariff’ will ensure that UK businesses compete on fair terms with the rest of the world, Ms Truss said. British households will be able to choose quality products at lower prices.

The consultation with businesses will be open online until March 5. All views will be considered before the Global Tariff Policy is finalised and comes into effect from January 2021.

Free trade and tariff ideas and a “Trade Remedies Authority”

The government is seeking views to simplify and tailor tariffs. Ideas on the table include removing tariffs of less than 2.5%. Others are the reduction of high tariffs or total removal.

“The new UK Global Tariff Policy will apply to goods from countries around the world unless there are different arrangements. Examples include free trade agreements or tariff suspensions already in place.

A new Trade Remedies Authority will be established to protect UK businesses from unfair trading practices. These include dumping and subsidies.

Latest UK exports and imports

The UK’s exports of goods and services totalled £689 billion ($896 bn) in 2019, compared with imports of £718 billion. According to official figures, there was a goods trade deficit of £130 billion, but services achieved a surplus of £100 billion. The UK has a trade deficit with the EU. It imported 55% of total global imports from the EU in 2018. Exports to the EU were 45% of the total. Thanks to services, the UK has a trade surplus with non-EU countries.

© Neil Behrmann. This article was first published in The Business Times Singapore.

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