A UK exit from the EU could compound issues with increasing prices, UHY Hacker Young has warned, following research which shows that import duties in emerging economies are much higher than in developed countries and are pushing up prices for consumers and limiting competitiveness
UHY studied customs duties levied by 18 economies around the world as a percentage of each economy’s size. While emerging economies charge import taxes equating to an average of 0.81% of their GDP, the global average is 0.47%.
The major EU economies surveyed raised proportionally the least in customs duties, at just 0.13% of their GDP on average – less than one sixth as much as emerging economies.
Countries which are part of the North American Free Trade Agreement (NAFTA), that is the US, Canada and Mexico, levy, on average, a sum equivalent to 0.2% of their GDP in customs revenues.
Ladislav Hornan, chairman of UHY, said: ‘Consumers in emerging economies may still be getting a raw deal, as their national governments continue to strike a highly protectionist stance in an attempt to boost their domestic agricultural and manufacturing sectors.”
‘By creating distortions in the market, the unintended consequence is often that consumers are left facing higher prices, while the duties fail to stimulate uncompetitive domestic industries. They often simply amount to another tax on businesses and consumers that leaves less money available for spending and investment locally.’
UHY says the study found that creating more Free Trade Agreements (FTAs) or customs unions with a more diverse range of countries is becoming increasingly important to increase competitiveness.
For example, Mexico has a network of ten FTAs with 45 countries, as well as 30 investment agreements and nine other limited scope agreements. The US has 14 FTAs with countries including Korea, Singapore and Morocco. Australia has just signed an FTA with China, one of its key trading partners, which should help it to reduce the import duty costs borne by consumers in line with other developed economies.
Hornan said: ‘Consumers in the EU have clearly benefitted from the European free trade zone. While the UK currently has one of the lowest customs duties burdens in the world, there’s a risk that this could shoot up if it leaves the EU following its forthcoming referendum, and relationships deteriorate.
‘A so-called Brexit could jeopardise Britain’s continued participation both in the EU free trade zone and in trade agreements agreed by the EU with third party countries. So much would depend on what the UK could achieve in establishing a whole new raft of bi-lateral trade agreements, should it vote to leave the EU.’
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