EU ‘to suffer more from lack of a free trade deal than UK’

TARIFF costs running into several billions of pounds a year would hit European firms twice as hard as UK ones if Brexit meant leaving the continental customs union with no alternative free trade deal in place, new analysis suggests today.

The stark warning from the Civitas think-tank follows an assurance from Chris Grayling, the Transport Secretary who was a leading Brexiter during the EU referendum campaign, that Brussels would, in the end, agree to a tariff-free trade deal with the UK because of the huge amount of business Europe did with Britain. And he made clear that post-Brexit Britain would not run into the same difficulties faced by Canada with its proposed EU trade deal, which last week was blocked by the European region of Wallonia.

Playing down the prospect of Walloon resistance to a future UK-EU trade deal, the secretary of state said: “We buy a whole load of produce from Walloon farmers, so therefore it is not going to be in their interests to see tariffs.

Read more: Theresa May warned imposing Brexit settlement on Scotland could break up Britain

“This is why I have always been convinced that we will have tariff-free trade; we will have sensible trading arrangements because it is in both of our interests that should happen,” he added.

Within Europe’s customs union, there are no tariffs or quotas on industrial goods exported to EU countries, but the EU’s external tariff has to be applied to goods imported from outside the EU.

According to Civitas, if Brexit meant leaving the customs union with no other trade deal in place, then EU businesses would face tariff costs of almost £13 billion a year on exports to the UK, more than double the £5.2bn bill British businesses would face for sales to the other 27 states.

Read more: Theresa May warned imposing Brexit settlement on Scotland could break up Britain

A report by the think tank highlighted the importance of striking a deal to both sides in the Brexit negotiations and suggested Prime Minister Theresa May could use the balance of trade to her advantage in the forthcoming talks with the remaining 27 EU leaders.

On a country-by-country basis, the analysis showed 22 of the 27 remaining EU members would face more tariffs on exports to the UK than UK firms would be hit on sales to those individual nations.

Germany firms alone would face £3.4bn in tariff costs if the relationship between the EU and UK fell back on World Trade Organisation most-favoured nation rules.

UK exporters, in return, would face £0.9bn of tariffs on goods going to Germany. The respective figures for France and the UK would be £1.4bn and £0.7bn.

Supporters of Brexit have argued that German car manufacturers and French winemakers would put pressure on their governments for the EU to strike a deal with the UK to protect the valuable British export market. The analysis suggests the European motor industry would face tariffs of £3.9bn in car-related exports to the UK, including £1.8bn for the German automotive sector alone, while British exports to the remaining 27 states would face £1.3bn in costs.

Read more: Theresa May warned imposing Brexit settlement on Scotland could break up Britain

The paper said that “realising the potential cost of reintroducing tariffs to trade between the UK and most of Europe is the first step in making the case for a trade deal that will allow both EU and UK citizens to benefit from continued tariff-free trade”.

Report author, Civitas research fellow Justin Protts, said: “These figures highlight the importance of a post-Brexit trade deal, not just for the UK but also for the EU.”

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