Non-tariff barriers to trade following the UK’s exit from the European Union could be equivalent to a tariff of 10 to 15 per cent, according to HSBC.
In a report released today, the bank argues non-tariff barriers are the “bigger threat” to UK exporters and has pointed to “meaningful” costs that the US faces trading with the European Union compared to the UK under its existing membership of the single market.
Non-tariff barriers include border measures, such as customs procedures, and measures flowing from domestic law, regulation and practices.
In particular, the report says UK exporters would face “rigorous” proof of origin checks for goods sold into the EU, which would create an administrative burden and higher tariffs for those who do not pass the checks.
The report questions how the Channel Tunnel and Northern Irish border would be managed, adding to an already expected increase in journey time for imports and exports.
It says establishing strong bilateral links with the US and China would reduce the UK’s dependency on the EU, but that this could only be achieved over the long term.
It also warned that many Brexit voters have expressed dissatisfaction with globalisation.
“It is hard to imagine them being happy with the UK embracing a more extreme form of globalisation based on the benefits of ‘sink or swim’ exposure to international competition.”
However, the report says it is in the EU’s best interests to negotiate a good deal.
“It is frequently argued that it is in the EU’s interests to do a good deal with the UK on goods trade, since it is such a big consumer of, for example, German cars and Italian sparkling wine. We do not disagree with this assessment.”
The report says the UK has more to lose from services trade where it operates a surplus with the EU; however, it notes that the UK conducts a sizeable amount of its services trade with the US (24 per cent in 2013) with zero preferential access.
Within financial services, the report says that equivalence is not equal to a passport and that there are not provisions for retail banking or asset management.
It states: “The UK would no longer be part of the Ucits directive, which is aimed at providing a harmonised framework to sell retail investments across the EU.”
The report says UK financial services firms that did gain equivalence would operate under the threat of it being revoked.