Tensions on stalled Brexit trade talks intensified as Boris Johnson, the British Prime Minister, said Britons should prepare for a no-deal departure if the European Union (EU) did not compromise, raising the prospect of supply chain chaos across Europe.
Johnson stopped short of saying he was walking away from the discussions, even though a self-imposed deadline for a deal passed on Oct. 15, and EU leaders said they were sending a team to London next week “to intensify these negotiations.”
“From the outset we were totally clear that we wanted nothing more complicated than a Canada-style relationship based on friendship and free trade,” Johnson said.
Angela Merkel, the German Chancellor, called for “the United Kingdom to remain open to compromise, so that an agreement can be reached.”
“This, of course, means that we, too, will need to make compromises. Each side has its red lines,” she said, adding that the bloc’s single market needed to be protected. The two sides are still stuck on state aid rules and fishing rights.
With the Brexit transition period ending on Dec. 31, Johnson said he had to “make a judgement about the likely outcome and to get us all ready” for what he calls the “Australia solution,” effectively switching to World Trade Organization (WTO) rules. This would leave the U.K. as a “third country” when dealing with the 27-member EU.
In general, under the WTO regime, duties vary from 5 to 8 percent for leather shoes and 17 percent for shoes with a synthetic or textile upper.
Earlier this year, the British government presented its new tariff regime known as the U.K. Global Tariff (UKGT), and which will replace the European Union’s Common External Tariff from Jan. 1, 2021. The UKGT will apply to goods exported from countries with which the U.K. does not have a preferential agreement. With the UKGT, the government removed import duties for leather but tariffs for leather footwear remain largely unchanged.
The UKGT will apply to goods exported from countries with which the U.K. does not have a preferential agreement. For Turkey, the U.K. plans to continue trading without tariffs on all goods, as is currently the case in the EU-Turkey customs union, by implementing a U.K.-Turkey free trade agreement by the end of 2020. UKGT will apply on goods outside the scope of the agreement.
According to the UKGT, the import duty on outer soles of shoes made of leather and of leather uppers will also be erased from 3.0 percent currently. But for leather shoes tariffs remain the same for most goods at 8.0 percent.
Footwear with outer soles of rubber or plastics and uppers of textile materials will see tariffs fall to 16.0 percent from 16.9 percent.
British business leaders reacted with dismay to Johnson’s remarks, with the Institute of Directors (IoD) warning that preparations for no deal in the middle of the Covid-19 pandemic “will be a Herculean task.”
“Our figures show that most directors think that Covid will magnify the impact of no deal. It’s tied their hands throughout the year and put immense pressure on cashflow,” an IoD spokesperson said.
Carolyn Fairbairn, the chief of the Confederation of British Industry, said that “neither side can afford to fall at the final fence. A deal is the only outcome that protects Covid-hit livelihoods at a time when every job in every country counts.”