The British government has announced plans to scrap import tariffs temporarily on a wide range of goods in the event of a no-deal Brexit, to limit the economic damage.
To keep the Irish border open, it also says there would be no checks or customs declarations for most goods passing from the Republic of Ireland into Northern Ireland.
As things stand, by law the UK is set to leave the EU on March 29, with or without a deal. On Tuesday, parliament inflicted a second heavy defeat on the exit deal negotiated by London and Brussels.
Under the government’s plan for a no-deal Brexit, 87 percent of total imports into the UK would qualify for zero tariffs – up from 80 percent now.
The new scheme – which would only apply for 12 months - would favour products from non-EU countries.
But tariffs would be imposed on some imports from the EU. The proportion that would be tariff-free would fall from 100 percent to just above 80 percent.
Zero tariffs would be applied to items such as footwear, aluminium and steel, machinery, paper and wood products, and weapons and ammunition.
However, protections are to be kept for certain industries such as car manufacturing, farming and ceramics. This means that European products such as cars and meat would be subject to tariffs, leading potentially to a 10 percent rise in the cost of European cars and a leap in the price of beef, chicken and pork imports from the EU.
Car parts from the EU would remain tariff-free, to help factories in the UK that rely on supplies from the continent.
ING economist James Smith told Euronews that a new UK tariff regime would have to be offset against the likely cost from a fall in the pound and market turmoil, in the event of a no-deal Brexit.
Tariffs would not be the only issue, he added, as goods would be subject to checks as a result of the UK leaving the EU’s single market.
“That just gives the EU a bigger incentive to increase checks on their side, because of fears of smuggling and what’s coming through the UK market. Now those checks, if they do come into force on the EU side, that will only increase frictions at the border… That will increase the logistics costs for manufacturers, for exporters, and that will find its way back to consumers,” he told Good Morning Europe.
The decision to refrain from checks at the Irish border would be temporary while longer term solutions were negotiated. Trade experts say the measures may be tolerated as an emergency measure, despite almost certainly breaching World Trade Organisation (WTO) rules.
Tariffs would be payable on goods imported from the EU via Northern Ireland into the rest of the UK. However, there would be no checks between Northern Ireland and Britain.
Officials acknowledge that this means the system could be vulnerable to abuse.
The British House of Commons is due to vote on Wednesday on whether or not to accept a no-deal Brexit.