Fortunately, a new possible strategy has been revealed this month by Nobel Prize-winning economist Paul Krugman. This strategy might allow EU companies to successfully sidestep new chrome taxes by the U.S. In a recent interview with Times op-ed columnist Ezra Klein, Krugman pointed to Northern Ireland’s special circumstance. In his testimony, he claimed that it would give a beneficial through route for EU goods intending to enter the US market more cheap.
Northern Ireland remains part of the UK customs territory. This arrangement produces a practical free trade border with the Republic of Ireland, which is part of the EU. This new, unexpected arrangement presents a very unique opportunity for EU exporters. While Northern Ireland itself is not part of the EU, its customs status facilitates trade flows between the two regions.
In 2016, former President Donald Trump slapped a 10% tariff on goods from the UK. To punish the EU even more, he slapped a 20% tariff on EU goods. As a result, these tariffs have prompted companies to actively look for other routes to lower their expenses. Krugman’s point was that in practice, by trans-shipping EU goods through Northern Ireland, companies would be able to take full advantage of the lower tariff rates.
Most likely, much EU stuff re-ship through Northern Ireland to access the lower tariff rate,” Krugman wrote. His comments are a great reminder of how strategic trade practices can develop in reaction to faraway trade policies.
The consequences of this state of affairs are more than just economic debate. EU companies are already seriously considering their alternatives to avoid these tariffs. Northern Ireland’s current open border with the Republic of Ireland is going to likely be a major factor in determining how they export. While accessing a lower tariff rate would have a big impact on the competitiveness of EU goods. If enacted, this amendment would create fantastic new possibilities for the domestic market.
Paul Krugman won the Nobel Prize for Economics in 2008. He’s perhaps most famous for his pathbreaking work on international trade theory and economic geography. His perspectives throughout the conversation with Klein show a refreshing acknowledgment of the ways that geopolitical realities can inform economic priorities.
Though these trends are certainly afoot, the landscape of international trade is evolving quickly. Northern Ireland could be an even more important transit hub for goods going to and from the EU. All in all, companies looking to enter or better manage their high-elasticity tariff headaches will undoubtedly be looking in this direction as they plan on export opportunities.