Tags: Brexit | brexit | tariffs | regulations | opportunities

The Brexit Opportunity: Lower Tariffs, Fewer Regulations

The Brexit Opportunity: Lower Tariffs, Fewer Regulations
(Getty Images/Daniel Leal Olivas)

By    |   Friday, 01 July 2016 07:41 AM

The UK’s vote to leave the European Union (Brexit) has taken the world by surprise. There has been much debate about what it means, if anything, to America.   Whatever the outcome, which will not be known for years, it shouldn’t undermine America’s resolve to grow exports and expand our global leadership.

Yes, the vote caused a ripple in the stock market, but most economists agree that it is temporary. 

Do you know what can never be temporary? The stability of the American economic system, our leadership position in the global economy, our support for US exports, and the innovation of our companies.

We should not be panicking over Brexit or listening to those who would castigate the globalization of America, steering us toward isolationism. That would be a tragic mistake. 

The Smoot-Hawley Tariff in 1930 designed to shield American companies from foreign competition, provided a steep tax on imports. The unintended consequence of this tariff was dramatically less trade between America and its foreign trading partners. This predictably led to many countries economically retaliating against the US causing a major disruption in the flow of goods and services.  Many believe this was the spark that set off the Great Depression.   

Let’s put things in perspective.   US trade with the 28-member EU totaled $1.1 trillion last year — making it the world’s largest bilateral commercial relationship. Of that, 21 percent was with the UK alone, according to US Commerce Department data, covering a diverse group of goods and services from air travel to wheat.

However, our two largest trading partners are Canada and Mexico, and have been so for many years. Coincidentally, they are also our NAFTA partners and the perfect examples of why free trade is vitality important to our economic success.

The most stressing outcome of the Brexit vote is that in the decades since the European Union was created; American exporters have, with some exceptions, been able to count on a uniform set of regulations and standards. Some say Britain will now be freed from EU rules and could begin the years-long process of replacing them with its own, potentially impacting many US companies with uncertainty and costly compliance.

It is true that unfair regulations and tariffs have been the bane of American exporters.

The EU has been a big trading partner with the US under The Integrated Tariff of the Community, referred to as TARIC (Tarif Intégré de la Communauté), which is designed to show the various rules which apply to specific products being imported into the customs territory of the EU.

The EU is a customs union that provides for free trade among its 28 member states--Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Sweden, and The United Kingdom.

The EU levies a common tariff on imported products entered from non-EU countries.
Consequently, although the UK is just one of 28 member states of TARIC, as America’s seventh largest trade partner, any new regulations outside of TARIC could make it harder to trade with the UK, requiring more paperwork and lag times. In fact, it would mean that the US and UK will need to negotiate a separate trade agreement.

Herein lies the opportunity and why this is much to do about nothing. The average tariff for American goods sold in Europe is two percent and the average duty of European products sold in America is the same: two percent. British trade with Europe will not have tariffs any higher than that with America, meaning the worst case scenario of a two percent tariff will have zero impact and will not be noticed by consumers.

However, because of this physiological shift in the relationship between the UK and Europe, the UK will seek a much closer trade relationship with the US. They will likely petition for a Free Trade Agreement and we should accept this immediately. Brexit will mean tariffs for American products in the UK, which represents 21 percent of our trade with the EU, could ultimately be zero, and much of the restrictions and regulations between our countries could quickly go away.

This isn’t a time to lapse into fear about the UK’s decision.  This should be a time to strengthen our relationship with the UK and EU while continuing to recognize the importance and opportunity of the UK as a growing, less restrictive trading partner.

Exports drive our economy and job creation, so all Americans should be supporting US manufacturers and the fight to expand American exports. 

Brexit could very well mean lower tariffs and fewer regulations with our seventh-largest trading partner. It’s good for America and good for our trading partners who covet the quality and innovation of American goods and services.   

Neal Asbury is chief executive of The Legacy Companies. To read more of his work, CLICK HERE NOW.

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NealAsbury
The UK's vote to leave the European Union (Brexit) has taken the world by surprise. There has been much debate about what it means, if anything, to America.
brexit, tariffs, regulations, opportunities
818
2016-41-01
Friday, 01 July 2016 07:41 AM
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