Back in 2016 I suggested the idea of an EU “tariff mirror” in a change.org petition. I wrote:
The UK must be prepared to trade under WTO rules if necessary, but should prefer no tariffs. Between those extremes the UK should offer a “tariff mirror”, i.e. match whatever tariffs or taxes the EU imposes on broad categories of goods and services from the UK. Mutual interest would require such tariffs to be low.
What I didn’t cover was how to put this into practice in a way that would not fall foul of the WTOs “most favoured nation” rule. This has now been addressed by the idea of an Import Excess Tax (IET) promoted in an article at Brexit Central by David M. Owen.
In essence, we would not set tariffs on EU goods as such, but would levy a new tax on UK companies with net imports from the EU. The rate would be set to exactly balance any tariffs the EU puts on the UK’s goods, and would be paid through the quarterly VAT return. So as in my original proposal, if they don’t charge us any tariffs, they don’t have to pay any.
As I understand it, such a policy would comply with WTO rules provided we set a global zero tariff on all imports. This policy has been strongly advocated elsewhere.
I will defer to David M. Owen on the details of WTO tax regulations. I do however think that Tariff Mirror is a rather more catchy and intuitively understandable name for the idea than Import Excess Tax. What do readers think?