UK-EU trade agreement has caused £44bn hit to trade
A fall of 14% of UK exports to the EU was caused by the terms of the EU-UK trade and corporation agreement (TCA). Furthermore, there was a decline in EU exports to the UK of almost 1/4 in the first 7 months of the TCA. Both of these events have caused a drop of £44bn in the UK economy.
UKTPO research examined the initial period of the TCA agreement (January to July 2021) and discovered that £32.5bn was lost in potential imports to the UK and £11bn in exports to the EU. Furthermore, goods trading wasn’t the sector which was most heavily hit. The services sector had a drop of 12% in exports and 37% in imports. Research assistant in international trade at UKTPO, Guillermo Larbalestier says that the effect of the TCA has compromised the ability of the UK economy to recover from the pandemic.
Additionally, UKTPO’s research led to concern towards tariffs. Showing that for the first time for the EU, the TCA includes 100% tariff liberalisation. This means there will not be any quotas or tariffs for the movement of goods between the two sides if exporters can prove their goods meet ‘rules of origin’. However, this study shows that many exporters are not prepared for this and, if not completed properly, will result in payment of duties by the exporter. In fact, 32% of UK exporters are still paying for tariffs.
The sectors that were most strongly hit were: footwear and headgear (exports drop by 77.2%), textiles and clothing (export drop by 60.2%) and vegetable products (export drop by 43.5%).
For many UK businesses, trading with EU countries means moving goods back and forth over the Channel. Since Brexit, one of the additional procedural requirements has been to work with commodity codes. Traders on both sides of the border must research the relevant tariff to ensure compliance with the rules.
Any import (including from the EU) will need the full 10-digit import HS code, with the first six digits being consistent with the code advised by the shipper. For exports from the UK, you only need the first 8-digit code. However, the UK importer/exporter should endeavour to research the full ten-digit TARIC and correct eight & 10-digit UK Global Tariff commodity codes and keep up to date within their internal systems, regardless of the information supplied by the EU exporter.
Shifting trade patterns and inequality in rich countries
Towards the end of the 1990s and the start of the 2000s, there was a boom among developing countries such as China. Consequently, trade barriers and tensions have increased. An example of this is the USA taking a stance with their trading relations with China. Furthermore, the UK is experiencing a remodelling of its trading agreements due to Brexit.
These sudden changes in trade patterns have also had highly uneven effects across the population of developed countries. Larger exposure to import competition has also led to greater increases in crime rates, decreased health outcomes, breakdown of family structures and more significant support for far-right political parties.
On the other hand, import competition has created price competition as consumers gain from lower prices. However, local businesses can be severely affected as they cannot match the low prices, leading to closures and increased unemployment rates.
One of the many consequences of Brexit is a rise in trade barriers between the UK and EU. The forecast is that workers in many different industries will actually lose out from this change. As costs of production inputs and reduced export opportunities outweigh the benefits of reduced import competition with the EU. However, the real side effects of Brexit are to be still discussed.
Trade secretary steps up export support for clean growth businesses
Anne-Marie Trevelyan, International Trade Secretary, plans a Clean Growth program to push UK exporters to discover a sector that will be worth £1.8 trillion by 2030.
British businesses will now enjoy the benefits of the ever-growing international green sector which was launched on the 11th of November 2021.
By 2030, the UK’s low carbon economy is predicted to grow by 11% which is 4 times faster than the rest of the economy. Furthermore, it is predicted to deliver up to £170 billion of export sales and boosting export opportunities will help create green jobs across the country.
The formal launch took place at the recent COP26 event alongside the Department for International Trade and Formula E. It is expected that this will increase the promotion of the country’s export capability. Additionally, this will help UK exporters create international opportunities and encourage homegrown British businesses to export their clean-growth related goods or services worldwide.