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Companies a free ports it will not be able to enjoy the full benefits of the new tax efficiency zones if they export to certain countries, including Canada, Norway, Switzerland and Singapore, the government has admitted.
Prime Minister Boris Johnson and Chancellor Rishi Sunak have stated that eight new free English ports – announced in the budget – will be a “transformative” benefit of Brexit.
But officials disclosed on Sunday that recent post-Brexit trade agreements with 23 different countries include clauses that specifically prohibit manufacturers of free port-type zones from benefiting from the agreements.
Emily Thornberry, shadow trade secretary, said the clauses could have been easily removed during trade discussions. “On the surface, this seems like a catastrophic mistake of a minister put in the silo,” he said.
“As a result, I fear that manufacturers of towns, cities and regions across our country who have managed to bid for free port status run the risk of losing access to key markets.”
Free ports are usually set up to allow companies to receive components and ingredients from abroad without paying any fees, including tariffs, VAT or excise duties, through a process known as “duty drawback. ”.
But free port companies that enjoy these benefits will be required to pay tariffs on exporting their finished products to any of the 23 countries in question, unlike companies in the country.
The Commerce Department said there had been no “error,” but admitted the so-called “duty-free bans” would apply to those countries.
“It is not uncommon for free trade agreements to have these provisions,” the Department of Trade and Industry said. “When these provisions are applied, companies may choose to benefit from the refund of duties or preferential rates under the free trade agreement (provided that they comply with the rules of origin under this agreement), as appropriate. better “.
Sam Lowe, a senior researcher at the Center for European Reform, said the clauses went against the political “narrative” that eight new free ports announced in the spring budget it would be economically transformative.
“Anyway, I always thought they were largely useless,” he said. “It’s absolutely true that if you produce certain products in free ports you won’t be able to take advantage of many of the free trade agreements.”
Britain’s merchandise exports to the 23 affected countries were worth £ 35.56m in 2019, almost 10% of UK merchandise exports worldwide that year, according to a Labor party investigation.
Thornberry said Trade Secretary Liz Truss should have been aware of the clauses when she reached recent agreements with countries such as Canada, Singapore and Mexico.
“It would have taken an hour of discussion and a stroke of the pen to explain the UK free shipping policy to the negotiators of those countries and remove the prohibition clauses from those agreements, and I can’t understand why Liz Truss didn’t that, ”he said. .
“I have written to Liz Truss asking her to clarify the situation and, if necessary, I urge her to return immediately to the negotiating table with these 23 countries and withdraw these clauses before Britain’s free ports enter. in operation later this year. “
The new free budget ports are at Teesside, London Gateway, Liverpool City Region, Humber, Felixstowe, Southampton, Plymouth and East Midlands Airport.
The issue does not apply to the UK’s trade agreement with the EU, which is by far its largest export market.
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