No-Deal Brexit Presents Tariff, Trade Issues for UK, Lawyer Says

The United Kingdom’s post-Brexit tariff plan may not be a viable long term option and may significantly damage certain U.K. farmers, companies and exporters, said Robert Chapman, a London-based trade lawyer with Mayer Brown.

Chapman, speaking during an Aug. 22 webinar on Brexit consequences, said many British politicians have campaigned on a “largely zero-tariff or entirely zero-tariff regime” in order to maintain trade relationships in the short term. But that regime could backfire, Chapman said.

In the case of a no-deal Brexit, the European Union would be required to end its preferential tariff treatment toward the U.K. and instead impose the same tariffs it applies to other World Trade Organization members, according to WTO rules. If this occurs, Chapman said, the EU would be required to impose significantly higher tariffs on imports from the U.K. than it does now. Chapman used lamb as an example, saying the EU would start imposing “60-percent plus tariffs on some types of lamb” from the U.K. Combined with the fact that the U.K. would implement a zero-tariff regime for imports, sheep farmers would likely suffer.

“They would be caught between competing with the cheap imports coming in and not really being able to sell their products internationally because of high tariffs making them not very competitive,” Chapman said. “It’s really difficult to see how that will work long term or that it will be politically palatable.”

Chapman said other U.K. industries would face similar problems. Britain recognizes this, Chapman said, and recently proposed a list of post-Brexit tariffs it may impose to keep its farmers and manufacturers competitive. “So, at the moment, the U.K. government's position is they will charge tariffs on at least some products, at least in the short term,” Chapman said.

Another challenge that may arise from a no-deal Brexit is the differing health and safety standards between the EU and the U.K. The U.K. may face a problem if it signs a trade deal with the U.S. that includes imports of chlorinated chicken, a product banned in the EU, Chapman said. “The EU would need to check chicken at the U.K. border because it will know that the U.K. has chlorinated chicken,” Chapman said. “It will need to carry out checks for that kind of thing. You’ll end up with a position where somehow, once the U.K. exits the EU, there needs to be some way of checking rules and regulations … and this is part of the difficulty.”

The U.K.'s Brexit plan grew more unclear Aug. 28 after Prime Minister Boris Johnson suspended parliament until Oct. 14, according to a Reuters report. The move will limit the time opponents have to oppose the expected Oct. 31 no-deal Brexit.