Trade in goods with the UK after Brexit: Truly tariff-free?
Trade in goods with the United Kingdom (UK) has changed dramatically as of 1 January 2021. For example, there is now a physical border between the UK and the EU, where goods can be checked for compliance with international trade rules. In addition, goods traders may still face import tariffs if the goods do not comply with the rules of origin of the Trade and Cooperation Agreement (TCA). This chapter takes a first look at the Dutch trade in goods with the UK after the trade agreement between the EU and the UK came into effect. To what extent was import from the UK in the first eight months of 2021 actually tariff-free, and what costs have already been incurred on import duties? In addition, it highlights the product groups that are at high risk of being tariffed when re-exporting to the UK, as they have a high import content from non-EU countries which means they cannot qualify under the trade agreement's rules of origin.
5.1 Introduction
After years of division over the United Kingdom's (UK) membership in the European Union (EU), the British held a binding referendum on this in June 2016. A slim majority voted to leave, after which the UK made the necessary preparations to leave the EU. On 31 January 2020, the UK left the EU, followed by a transitional period during which the UK still abided by European trade rules. The aim was to avoid trade disruptions after Brexit and to be able to establish new relationships in a trade agreement. That transition ended on 31 December 2020.
The lack of clarity about the future trade relationship with the UK regarding border controls, import duties and non-tariff measures1) created great uncertainty for internationally active companies. Although nothing formally changed in the trade relationship between the UK and the EU until 1 January 2021, the uncertainty surrounding Brexit already caused a huge slowdown in growth in international trade between these two partners (Graziano et al., 2018; Douch & Huw Edwards, 2021).
For over 45 years, the UK was a member of the EU or its predecessors, and thus also of the European Single Market that has been in place since 1993. This means for the trade in goods that no import duties or quotas are levied between the participating countries. Goods flows between the Netherlands and the UK could therefore be traded freely until the UK left the European single market on 1 January 2021.
The trade relationship between the UK and the EU would then become like that of all 'third' countries. This means that the Most Favoured Nation (MFN) terms would apply, the British or European tariffs and quotas that apply to all other members of the World Trade Organisation (WTO). In addition, non-tariff measures (NTMs) would also apply between the two trading partners: policies that affect the quantity or price of goods traded, or both (see also CBS (2021) for a further discussion of NTMs). Import duties, quotas and NTMs would make trade between these two partners much more expensive and complicated. Therefore, the UK and the EU negotiated a trade agreement, as the EU has with several countries worldwide.
On 22 December 2020, the European Union and the United Kingdom agreed on a "Brexit deal", the so-called Trade and Cooperation Agreement (TCA) was concluded. Prime Minister Johnson immediately indicated that this was a tariff and quota free trade agreement. As such, the trade relationship between the EU and the UK resembles the one that existed before Brexit, free of tariffs and quotas.
However, tariff- and quota-free trade has become far from a given after Brexit. Where trade used to cross borders unhindered, goods now have to be cleared at customs. To claim tariff and quota-free imports, firms must now actively apply for the preferences, and provide the necessary documents. Utilisation of preferences by firms is not a given. This is partly due to the administrative burden involved and partly to the conditions imposed. The main condition is that a product may only be imported preferentially if it originates within the countries of the trade agreement. The rules for determining whether a product has been sufficiently produced (’obtained’) within the country vary from product to product. The next section will look more closely at the rules of origin and the problems surrounding them.
Due to increased globalisation and widespread production chains, the origin of a product is becoming increasingly difficult to trace. A production process now consists of many steps that are made in different countries. Earlier research has also shown that around 50 percent of re-exports to the UK consist of extra-EU imports (Franssen et al., 2020). It is therefore likely that a significant part of the trade with the UK has its origin outside the European Union, which means that import tariffs still have to be paid on it.
This chapter provides a first overview of the extent to which import tariffs have still been paid since the TCA provisionally came into force. We do so especially for imports, because CBS has figures that show per import transaction whether the trade agreement was utilised. CBS does not have such details for exports to the UK, but we use value chain analyses to provide a first insight into the possible problems related to the rules of origin. We examine the extent to which Dutch re-exports to the UK are manufactured outside the EU and may therefore not comply with the rules of origin. We do this by specifying an analysis of Franssen et al. (2020) based on 2017 trade data at the product level. We do this specifically for re-exports because this flow in particular has decreased since Brexit and because re-exports by definition already have a higher foreign value added, which may lead to problems with the rules of origin.
The research questions that are central to this chapter are:
- What rules must be met before traders can utilise the TCA?
- What proportion of Dutch imports from the UK has utilised the TCA since 1 January 2021?
- Are import tariffs still paid on imports from the UK and how high are they?
- Which products that the Netherlands re-exports to the UK are particularly at risk of being tariffed there because they may not comply with the rules of origin?
5.2 Trade and Cooperation Agreement: The devil is in the detail
A major motivation for the United Kingdom to leave the European Union was that the British felt they had to comply with a lot of rules determined in Brussels. With the slogan "Take Back Control" the Leave campaigners, advocates of leaving the EU, then gained sufficient support for Brexit.
Brexit: from "Take back Control" to even more rules?
The question is, however, to what extent Brexit will lead to fewer rules. As far as NTMs are concerned, there is the so-called Brussels effect, the reasoning that countries outside the EU have a large economic motive to conform their rules to European legislation as much as possible. As a result, the same rules may have to be followed after all, but the UK will have less of a say in drafting them (Bradford, 2020). Even if the rules remain the same, compliance must now be demonstrated at the border. The associated customs formalities are time-consuming and therefore also constitute an obstacle to trade.
In the area of import tariffs, too, British and European traders now face more rules. The promise of tariff-free trade applies only to products manufactured within the EU or the UK. And in a world of global value chains, this is no longer obvious. Production is fragmented, and it is increasingly difficult to determine where a product was manufactured. Therefore, within the trade agreement there are detailed rules of origin.
Broadly speaking, there are two ways in which a product can be determined to have originated in the EU or the UK (HM Revenue & Customs, 2021). Firstly, there are “wholly obtained” products. This means that they are wholly obtained in a trade agreement partner, either in one or more EU countries or in the UK. For example, minerals extracted from the soil of one country, animals born, raised and slaughtered in one country, or agricultural crops grown in one country.
The other possibility is that products are substantially processed in a country participating in the trade agreement. Whether a product has been substantially processed can be determined in various ways. The three most common ways are: 1) on the basis of a minimum percentage of value added, 2) when there is a change in a commodity code, and/or 3) when there are certain specified production or processing operations.
The first rule is straightforward. For example, the trade agreement may specify that at least 50 percent of the value of a product must have been produced within the participating countries of the trade agreement in order to be fully classified as originating. This percentage varies from product to product. For example, for passenger cars the MaxNOM (maximum value of non-originating materials) is 45 percent, whereas it is 70 percent for cement and 40 percent for fertilisers (TCA, 2020). In practice, however, it can be difficult to make this estimate or to demonstrate where the value originated.
The second rule focuses on the processing of non-originating intermediate goods in the production process of the final product. If parts originating outside the EU or the UK are used, they can still obtain originating status when the final product has a different commodity code. An example is a yacht made out of non-originating parts from other chapters than Chapter 89 (vessels, boats and floating structures) of the Combined Nomenclature (CN).2) For example, non-originating parts of steel (chapters 72 and 73) or glass (chapter 70) can be used without limitation, regardless of their value, because the final product will have a different commodity code. However, the rule would not be met by a yacht imported into the UK from a third country, where only the fittings are added in the UK before being exported to the EU. The final product then retains the same commodity code and the TCA cannot be invoked: import duties applicable to all third countries must be paid on import into the EU.
Finally, there are specified operations that can give non-originating products originating status. This applies to certain specialised industries or products. Examples are the re-profiling of car tyres, a certain chemical reaction in chemical products or the weaving and cutting of fabrics to make garments. When one of these processes takes place on non-originating products within the EU or the UK, they can still obtain originating status.
Dutch importers must therefore demonstrate to Dutch customs that the goods they import comply with the rules of origin of the TCA. They can do this by supplying the documents of origin, which must come from the exporter. However, these rules can generate a considerable administrative burden for both the exporting and the importing company. The extent to which companies utilise the TCA for Dutch imports from the UK will be highlighted in the next section.
5.3 What does the TCA mean for Dutch imports from the UK?
The UK is an important trading partner for the Netherlands. In 2020, with a share of almost 5 percent, it was the fifth most important country of origin for goods imports, after Germany, Belgium, China and the US (Creemers & Draper, 2021). However, imports are declining, as described in chapter 1 of this publication. In the first eight months of 2021, the Netherlands imported over 15 billion euros from the UK, compared to almost 17 billion euros in the same period in 2019. That is a decrease of about 7 percent, while total goods imports in the period January-August 2021 were actually more than 8 percent higher than in the same period in 2019.
Now that the UK is no longer a member of the European Union, it is considered a 'third country' by the EU, which means that the trade rules of the World Trade Organisation (WTO) apply. This means that goods from the UK entering the Netherlands fall under the Most Favoured Nation (MFN) conditions of the EU. Import duties must then be paid on the incoming goods. Not all goods have an import tariff: about 56 percent of the import value from the UK between January and August 2021 already has a zero tariff under the MFN rules. See also Figure 5.3.1 for a composition of the import value from the UK over the first eight months of 2021.
The remaining 44 percent of the import value is subject to an import tariff (or quota). The import tariff is usually a percentage, and that percentage of the value of the goods must be paid to customs.3) The costs can be quite steep, with rates ranging from 0.4 to 74.9 percent. The value of goods imported from the UK in the first eight months of 2021 was EUR 15.3 billion.4) 44 percent of this (€6.6 billion) is subject to MFN tariffs. If the corresponding MFN tariff had to be paid for these goods imports, this would have resulted in €396 million in tariff costs for the Dutch importers of these goods. On average, the MFN tariff for these goods was thus 6.0 percent.
However, as discussed in section 5.1, the TCA states that goods can be traded between the EU and the UK untaxed: they have preferential access and no MFN import duties have to be paid. However, this is not automatic, and importers have to apply for preferential imports when making the customs declaration. For this purpose, the goods must comply with the rules of origin discussed in section 5.2, and this must be demonstrated to customs with the required documents.
Provisional data on Dutch imports from the UK for the period January to August 2021 show that of the goods that qualify for preferential treatment (because the MFN tariff is more than 0 percent), 68 percent are imported preferentially. This is the utilisation rate, also called preference utilisation rate (PUR).5) Figure 5.3.2 shows that this share varied per month, but did show an increasing trend. This is not surprising, as companies need time to get used to the new regulations, which causes the utilisation rate to increase in the beginning, as is also shown in the literature (Lukaszuk & Legge, 2019). In addition, companies are still entitled to the preferences up to five years back, so the percentage can also increase retroactively.
Month | PUR (%) |
---|---|
Jan | 64.2 |
Feb | 66.6 |
Mar | 65.4 |
Apr | 66.6 |
May | 69.1 |
June | 67.6 |
July | 69.3 |
Aug | 70.9 |
*provisional figures |
Tariff costs
The MFN tariffs could have cost the Dutch importer €396 million, but due to preferential conditions a large part (68 percent) was imported untaxed. The remaining goods, for which tariffs were paid, resulted in tariff costs of approximately €121 million. Figure 5.3.3 shows the cumulative tariff costs per month. A distinction is made between the costs actually incurred in 2021, amounting to €121 million, and the costs that would have been incurred if no use had been made of the TCA, amounting to €396 million for the first eight months of 2021.
Actual tariff costs (mln euros) | Tariff costs in the absence of a TCA (mln euros) | |
---|---|---|
Jan | 7.7 | 23 |
Feb | 22.8 | 71.1 |
Mar | 42.8 | 136.8 |
Apr | 58.6 | 188.4 |
May | 74.6 | 237.7 |
June | 91.3 | 290.7 |
July | 107.3 | 345.4 |
Aug | 120.5 | 395.9 |
*provisional figures |
Food industry makes relatively large use of trade agreement
There are two sectors that account for a large share of trade in the Netherlands, and that also applies to imports from the UK: wholesale and retail trade and manufacturing. These sectors were responsible for respectively 47 and 39 percent of the import value from the UK in the first eight months of 2021.6) The importing companies from these sectors have a preference utilisation rate that is just slightly higher than the average of the total import value, with 71 percent for manufacturing and 70 percent for wholesale.
Within these two sectors, more variation is apparent. For example, it appears that companies involved in the manufacturing of cars make relatively little use of the trade agreement, and paid tariffs on more than half (51 percent) of the value of their goods imported from the UK. These are the goods that are not subject to MFN zero tariffs. Industrial companies involved in the manufacture of other machinery also made relatively little use of the trade agreement with the UK, with a PUR of 59 percent. However, the UK's exporting automotive sector showed a relatively high PUR at 72 percent in April 2021. The first figures on the use of the TCA by exporting companies in the UK machinery industry do match the Dutch figures, with a PUR of almost 50 percent in April (Ayele, 2021).
By contrast, companies in the food industry have a very high utilisation rate of almost 92 percent. This may have to do with the fact that the rules of origin are relatively easy to prove for such goods, as it is generally clear where such products were manufactured. The production chain for agrifood products is generally shorter and less internationally interwoven. The chemical industry also had a relatively high PUR of 82 percent. The first figures on the PUR by UK exporting companies to the EU from these two sectors show the same picture (Ayele, 2021).
No difference in PUR between large enterprises and independent SMEs
In contrast to previous research on the utilisation of trade agreements in Dutch imports (such as CETA; Franssen & Rooyakkers, 2021), we see no difference in PUR between independent SMEs on the one hand, and large enterprises on the other. Both large enterprises and independent SMEs utilised the trade agreement with the UK for 69 percent of their trade value. This includes almost 5 thousand large enterprises, and almost 16 thousand companies belonging to the independent SME sector. Researchers with Swedish data could also find no difference between the preference utilisation of large and small companies in 2019 (Kasteng & Tingvall, 2019).
Determinants of preference utilisation
For almost a third of the goods subject to MFN tariffs, these tariffs were also paid when they were imported from the UK. This share also varies considerably between sectors. Why are not all possible preferences utilised?
Firstly, the administrative rules and procedures to collect the necessary origin documents, although increasingly simplified, can still be too complicated for businesses. Related to this, the cost of collecting the necessary documents may be too high, especially when the trade value is low (Hayakawa, 2013). Also, a small difference between the MFN tariff and the preferential tariff (, i.e. the preferential margin, which is always zero percent in the case of the TCA) can be relatively small (Keck & Lendle, 2012). In both cases, the tariff costs are small, and with both a low trade value and a small preferential margin, the costs involved in getting the preferential treatment may not outweigh the potential tariff cost savings.
However, a 100 percent utilisation rate is not achievable in practice. Not all trade between the UK and the Netherlands is (sufficiently) manufactured in either the UK or the EU. This is especially true for the Netherlands, which is an important hub in international trade with Schiphol Airport and the Port of Rotterdam, through which we import and (re)export many products. These are then simply not manufactured in the EU to a sufficient extent, and cannot comply with the rules of origin. It is not clear how much of the trade would not qualify for the rules of origin in any case. Quantification of rules of origin would be necessary for this purpose. In the following section, we provide an initial insight into the share of Dutch re-exports that are not manufactured in the EU.
5.4 Origin of Dutch exports to the UK
In the previous section, we already saw that imports from the UK in 2021 were lower than in 2019, while substantial tariffs were also paid in 2021. However, exports to the UK showed an even larger decline, which is entirely explained by the drop in re-exports. Total Dutch exports to the UK in the first eight months of 2021 were €24.1 billion, whereas between January and August 2019 they were still €26.7 billion. A decrease of almost 10 percent, while total exports to all countries grew by almost 10 percent. Dutch-made exports to the UK still grew between 2019 and 2021, by over 14 percent, while re-exports decreased by almost 34 percent, see Figure 5.4.1. Chapter 1 of this Internationalisation Monitor showed that quasi-transit to the UK also contracted sharply.
Export flow | Year | Value (bn euros) |
---|---|---|
Domestic exports | 2015 | 12.5 |
Domestic exports | 2019 | 14 |
Domestic exports | 2020 | 11.2 |
Domestic exports | 2021* | 16 |
Re-exports | 2015 | 11.5 |
Re-exports | 2019 | 12.7 |
Re-exports | 2020 | 10.6 |
Re-exports | 2021* | 8.4 |
*provisional figures |
The question is whether, and then to what extent, this trend of decreasing re-exports to the UK can be explained by the fact that since the beginning of 2021 import tariffs can be levied between the UK and the EU. Dutch Customs does not keep track of which part of exports to the UK enters there preferentially and which part does not, as it does for imports. CBS does, however, conduct research into exports and re-exports to the UK, for instance by determining the origin of these re-exports on the basis of value chain analyses. For example, Franssen et al. (2020) showed that of the €17 billion that the Netherlands imported to re-export to the UK in 2017, €9 billion came from non-EU countries. This makes the non-EU import content of re-exports to the UK 53 percent on average. A large proportion of this comes from China (€2.5 billion) and the United States (€1.8 billion), see Figure 5.4.2. With such a high non-EU import content of re-exports to the UK, it is plausible that this trade flow may in some cases be at risk of non-compliance with the treaty’s rules of origin. The import tariffs that then apply may be a reason for the apparent diversion of trade flows whereby the EU is bypassed and the UK gets its stuff directly from non-EU countries (Smid & Frankena, 2021). In particular, the Netherlands and its large role in the import, transit and re-export of goods with the Port of Rotterdam could potentially be greatly affected by this.
Kolom1 | Imports from the UK re-exported to partner country by the Netherlands (bn euros) | Exports to the UK imported from partner country by the Netherlands (bn euros) |
---|---|---|
Germany | 3.322 | 2.951 |
Belgium | 1.433 | 1.435 |
France | 0.966 | 0.791 |
Italy | 0.526 | 0.419 |
Spain | 0.458 | 0.301 |
United States | 0.351 | 1.678 |
China | 0.145 | 2.479 |
Source: CBS, Franssen et al. (2020) |
Which products are particularly at risk?
Instead of specifying the previous analysis by origin and destination of re-exports, it is more interesting in the context of the rules of origin to look at the extra-EU import content per re-exported product. Before doing so, in Table 5.4.3 we first look at the product groups that have experienced the largest decline in 2021 (January-August period) in terms of re-export value since 2019 (January-August period). These are telephones (-1 billion euros), refined petroleum products (-737 million euros), office machinery (-331 million euros), computers (-245 million euros) and clothing (-188 million euros).
2019 | 2020 | 2021* | Decrease 2021 compared to 2019 | Decrease 2021 compared to 2019 (%) | |
---|---|---|---|---|---|
Product groups (SITC3) | |||||
(Mobile) phones, modems, routers, etc. | 1,705 | 1,216 | 702 | -1,003 | -59 |
Refined petroleum products | 875 | 346 | 138 | -737 | -84 |
Office equipment | 621 | 373 | 289 | -331 | -53 |
Computers, laptops, tablets | 581 | 646 | 337 | -245 | -42 |
Clothing and textile accessories | 304 | 285 | 115 | -188 | -62 |
Dredges and excavators, earthmoving machinery, pile-drivers and snowploughs | 219 | 139 | 45 | -174 | -79 |
Components and accessories for machines | 167 | 142 | 59 | -108 | -65 |
Footwear | 182 | 134 | 78 | -104 | -57 |
Medicines | 255 | 261 | 160 | -95 | -37 |
Alcohols, phenols and derivatives | 170 | 119 | 81 | -88 | -52 |
* provisional figures |
There are several reasons why these products have such a high decrease. Firstly, these are simply products that are widely (re)exported, so that a small percentage decrease already leads to a large contraction in absolute values. In addition, it may be more efficient for the UK to get its goods directly from the country of origin, rather than transporting them across Europe, whereby the goods cross several national borders. Finally, there are the potential tariff costs to be paid.
To get an overview of these costs, we use the information on the UK MFN tariffs since the UK broke away from the EU. These tariffs are generally somewhat lower than the European tariffs. For example, the average MFN import tariff is now 1.5 percent instead of the 2.1 percent that applied under EU rules (Winters, Gasiorek & Magntorn Garrett, 2020). These authors also show that tariffs on about two thousand products (about 17 percent of the total number of products) are now completely removed. For another 40 percent of products, tariffs have been 'simplified', which means rounding down or converting non-ad valorem tariffs (e.g. tariffs based on quantities) to ad valorem tariffs (as a percentage of the price).
By specifying the analysis of Franssen et al. (2020) at the product level, we can see from each exported product which goods have a relatively high non-EU import content and therefore may not comply with certain rules of origin. Table 5.4.4 provides an overview of the ten products with the highest risks in terms of potential trade costs that would have to be paid in the UK if they would not comply with the rules of origin.
Product group (CPA3) | UK average MFN tariff (%) | Total value of re-exports in 2017 | Non-EU import content in 2017 (%) | Potential tariff costs based on 2017 data |
---|---|---|---|---|
Clothing | 10.9 | 1,010 | 49.6 | 110 |
Footwear/leather products | 4.6 | 618 | 39.8 | 28 |
Tobacco products | 41.7 | 68 | 2.4 | 28 |
Fruit and vegetable juice | 19.7 | 97 | 34.4 | 19 |
Other goods | 1.4 | 1,375 | 46.2 | 19 |
Vegetables | 9.8 | 183 | 17.9 | 18 |
Fruit | 6.5 | 257 | 60 | 17 |
Vegetable and fruit products | 14.8 | 102 | 37.7 | 15 |
Other machinery, equipment and parts | 0.7 | 1,879 | 46.2 | 14 |
Radio/TV/video etc. | 3.8 | 341 | 72.3 | 13 |
Clothing clearly stands out. Since this is a relatively large re-export flow and also subject to a relatively high import percentage in the UK, this re-export flow runs the risk of being tariffed for more than €100 million. The average non-EU import content of this flow is also high at almost 50 percent. This is in addition to the possible import tariffs that were already paid when the products entered the European Union (i.e. the Netherlands).
Goods that are particularly at risk because of their high extra-EU import content are radio/TV/video etc., electrical machinery and equipment, oils/cattle cake and optical photo equipment. Other product groups that appear frequently in the list are agricultural products, as these are relatively heavily tariffed in the UK.
The key question, of course, is to what extent this high non-EU import content in re-exports to the UK can explain the drop in re-exports in 2021. To answer that question, further research would be required. For example, the figures in Table 5.4.4 are based on 2017 data while of course there has been a lot of development in the re-export figures. There are several more reasons for this than just Brexit, including of course the coronavirus. Finally, rules of origin come in different forms, as section 5.2 explained. Ideally, at an even more detailed product level, we would put value-added rules of origin alongside our estimates. Only then can we say to what extent certain rules of origin may hinder the re-export of specific products to the UK.
However, based on the comparison of tables 5.4.3 and 5.4.4, we can arrive at some insights. We see, for instance, that the products whose re-exports have declined in particular are also found in the list of products that are at high risk of tariffs (table 5.4.4). This applies in particular to clothing, but also to fruit, for instance.
(Mobile) phones, modems and routers, the product group with the highest decrease in re-exports, is also one of the product groups with the highest non-EU import content. No less than 81.2 percent of the re-export of this product group to the UK came from outside the EU. However, the potential additional tariff costs are not so high, since the average import tariff on these products is only 0.1 percent. The fact remains, however, that this flow is tariffed twice before the goods actually reach the UK. On top of this, there is the potential loss of time associated with the additional customs check, which could lead to UK companies choosing to import this flow directly. The same goes for computers, laptops and tablets, fourth on the list in table 5.4.3. With an average non-EU import content of 58 percent, this flow runs the risk of not meeting the rules of origin. However, the British do not levy tariffs on this, so the tariff threat is not as high.
5.5 Summary and conclusion
By leaving the European common market, international trade between the European Union and the United Kingdom has become more difficult. This can be seen first of all in the introduction of border controls, where, among other things, it is checked whether goods comply with the rules, but also whether they can enter the country tariff-free or not. In the Brexit agreement, it was agreed that products of European or British origin could be traded tariff-free between the two trading blocs. However, due to global production chains, it is no longer obvious that a product exported from the EU was also made in the EU. This chapter outlines the reality: to what extent is international trade between the EU and the UK actually free of trade costs as of January 2021?
For imports, it is possible to directly observe which transactions have entered tariff-free and which have not. We have shown in section 5.3 that the PUR in the first eight months of 2021 was 68 percent. This means that 68 percent of the Dutch imports from the UK that qualified for it were preferentially imported. MFN tariffs were therefore still paid on some €2.1 billion, resulting in €121 million in tariff costs paid on imports from the UK in the period January to August 2021.
Large and small enterprises utilised the TCA to the same extent, but large differences were visible between industries. For example, the food and chemical industries had a relatively high utilisation rate, while the machinery and automotive industries had a relatively low rate. This may have something to do with the fact that the chains in the machine and car industries are longer and more complicated, making it more difficult to prove origin. In the case of foodstuffs, it is often clearer where the product originates from, which makes it easier to claim preferential treatment.
For exports, it is more difficult to estimate what part entered the UK free of tariffs, because these figures are registered by British Customs. However, based on previous research (Franssen et al., 2020), we can estimate the share of (re)export to the UK that was added outside the EU. We specifically look at re-exports here because they have declined drastically since Brexit and because, by definition, they contain a higher foreign value added. This analysis shows that products such as clothing, telephones, modems and routers, as well as computers - products for which re-exports have collapsed - also have a relatively high non-EU import content. It is therefore more likely that these will not be able to meet the rules of origin, resulting in the UK MFN tariff having to be paid. This is a particularly big risk for clothing, because the British import tariff there is on average 10.9 percent and because this is a relatively large re-export flow. It is therefore likely that the British will want to import this flow directly.
It must be stressed, however, that this exercise is only a rough first estimate of this phenomenon. More research is needed to see to what extent rules of origin form a problem for Dutch (re-)exported goods, so that these can be tariffed and will possibly decrease in the future. By looking more specifically at the rules of origin of individual products and at the importance of such products for the Dutch economy, this type of research can provide further insights into the risks and opportunities of the Trade and Cooperation Agreement for the Netherlands.
5.6 References
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2) This is the classification of goods prescribed by the European Union for the statistics on international trade in goods.
3) There are also import duties that are determined on the basis of quantities or weight of goods.
4) The figures in this chapter may differ slightly from those in chapter 1. This monitor uses very recent, provisional data that is still being improved. The data in chapter 1 are slightly more recent than those in this chapter.
5) Eurostat also publishes figures on the PUR, but these usually differ from the CBS figures. This is partly because Eurostat includes transit in its trade figures and CBS does not.
6) A part of the Dutch imports cannot be attributed to a firm established in the Netherlands. This import is done by foreign parties without representation in the Netherlands. These parties are not registered in the Business Register, which means that this part of the trade in goods cannot be allocated to individual companies and therefore cannot be broken down by industry or company size.