UK exports blow as exporters face tariffs in 23 countries

Companies in freeports will not be able to take full advantage of the advantages of the new tax-advantaged zones if they export to certain countries such as Canada, Norway, Switzerland and Singapore, the government admitted.

Prime Minister Boris Johnson and Chancellor Rishi Sunak said eight new English free ports – announced in the budget – will be a ‘transformational’ benefit of Brexit.

But officials revealed on Sunday that recent post-Brexit trade deals with 23 different countries included clauses specifically prohibiting manufacturers in freeport-like areas from benefiting from those deals.

Emily Thornberry, shadow trade secretary, said the clauses could easily have been removed during trade talks. “At first glance, it looks like a catastrophic mistake on the part of a minister stuck in his silo,” she said.

“Therefore, I am concerned that manufacturers in cities and regions across our country who have successfully bid for freeport status may miss out on access to key markets.”

Typically, free ports are set up to allow companies to receive components and ingredients from abroad without paying duties – including tariffs, VAT, or excise duties – through a process known as “drawback”.

But free port companies that enjoy these benefits will be required to pay customs duties when exporting their finished products to one of the 23 countries in question, unlike companies elsewhere in the country.

The Commerce Department said there had been no “mistake” but admitted the so-called “duty-free bans” would apply to those countries.

“It is not uncommon for free trade agreements to contain these provisions,” the Ministry of Trade and Industry said. “When these provisions apply, companies can choose to benefit from duty drawback or preferential rates under the free trade agreement – provided that they meet the rules of origin test provided for in that agreement. agreement – depending on what suits them best. “

Sam Lowe, senior researcher at the Center for European Reform, said the clauses went against the political “narrative” that eight new freeports announced in the spring budget would be economically transformative.

“I always thought they were largely unnecessary anyway,” he said. “It is absolutely true that if you produce certain products in free ports, you will not be able to take advantage of many free trade agreements.”

UK merchandise exports to the 23 affected countries amounted to £ 35.56 billion in 2019, nearly 10% of UK total merchandise exports to the world that year, according to a Labor Party study.

Thornberry said Commerce Secretary Liz Truss should have been aware of the clauses when she made recent deals with countries like Canada, Singapore and Mexico.

“It would have taken an hour of discussion and a stroke of the pen to explain the UK’s freeports policy to negotiators in those countries and remove the prohibition clauses from these deals, and I can’t understand why Liz Truss didn’t didn’t do that, ”she said. .

“I wrote to Liz Truss asking her to clarify the situation, and if it needs to be corrected, I urged her to immediately return to the negotiating table with these 23 countries and have these clauses removed before the ports British francs do not come into effect later. this year.”

The new budget freeports are at Teesside, London Gateway, Liverpool City Region, Humber, Felixstowe, Southampton, Plymouth and East Midlands Airport.

The issue does not lie with the UK’s trade deal with the EU, which is by far its biggest export market.

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