LEEDS, UK: June 02, 2016. As 'Vote Leave' supporters rely on the transport industry to promote their cause, logistics specialist Tudor International Freight (TIF) says British businesses face “severe consequences” if the UK decides to leave the EU.
David Johnson (right), managing director of TIF, said a ‘Brexit’ Britain would face three possible outcomes in trading with the EU - describing them as the “Norway, Switzerland and China scenarios”.
“Probably the most straightforward and favorable trading model is that adopted by Norway, which, as a member of the European Economic Area, has a free trade agreement with the EU," he said.
“A Norway-style arrangement wouldn’t involve UK companies paying duties or taxes when moving goods across borders. However, they would need to produce documents proving where the goods originated, to confirm that they weren’t eligible for duties. This is an increasingly costly task, given the ever-greater complexity of modern supply chains.”
His second scenario would see the UK making a series of bilateral trade agreements with the EU, similar to the 120 treaties the Union has with Switzerland. However he warned that when entering Switzerland, goods exported from the EU still have to undergo Customs clearance and are usually subject to VAT and import duties.
With the China scenario, Johnson said this would take effect if the UK left the EU after the official two-year withdrawal period without agreeing to the Norwegian or Swiss trading options and would mean implementing World Trade Organisation (WTO) rules: “The system would involve us and our former EU partners granting each other access to their markets and charging the same import duties they levy on other WTO members with whom they don’t have free trade agreements.
“In our case, these duties currently range up to the 32 percent levied on wine. The 53 free trade agreements we currently have with other countries as a member of the EU would lapse if we left.”
Johnson noted that moving goods across borders within the EU is currently easy and cheap: “When we import dental uniforms and medical scrubs from Germany for a workwear company, the only documentation we need is a copy of the packing list or commercial invoice and the travel document.
“For air freight this is a waybill, for sea consignments it’s a bill of lading and for road haulage it’s a CMR note, the initials of which are derived from its French title. No Customs clearance process or duties apply and VAT doesn’t have to be handed over before the goods can be moved from the receiving port or airport. This system is the same whatever the import.”
However In a post-EU, WTO regime, he said importing £50,000 worth of medical scrubs and gowns from Germany would require a VAT payment of £10,000 at the UK point-of-entry, plus £5,000 in import duties.
Johnson said his three scenarios would all involve time or cost increases when moving goods across frontiers.
His conclusions coincide with a report by the OECD that claims an EU exit by Britain would result in a 3.0 percent drop in GDP by 2020 or a loss of £2,200 per household.
OECD secretary general Angel Gurría declared: “Leaving Europe would impose a ‘Brexit’ tax on generations to come. Instead of funding public services, this tax would be a pure deadweight loss, with no economic benefit.”