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1/ "No deal" Brexit and the Great Deception
2/ There is a lot of bollocks being spouted about a no deal Brexit, trading on WTO terms and unilaterally abolishing tariffs and quotas.
3/ The only country that trades on WTO terms is Mauritania! More on Mauritania later.
4/ the reason countries do free trade agreements is because WTO terms are not great. Ask yourself why leading Brexiters argue we need to leave the EU to do our own trade deals but also say we will be fine on WTO terms. It is one or the other as an argument. Not both.
5/ The current argument the Brexiters propose is we can crash out and trade on WTO terms on a short term basis (up to 10 years) under Art 24. No! Part 7 of that article allows any other WTO member to block such a move which is why no country uses this model.
6/ "No deal" means pretty much the entire regulatory system governing cross border activity with the EU (and countries the EU has deals with) - from taking pets on holiday to shipping radioactive isotopes (which the UK imports to treat cancer patients)- stops immediately.
7/ It is not “project fear”. It is a consequence of ending a legal system. If you don’t renew your car insurance you don’t magically have insurance. Now scale up that example to cover the activities of a nation
8/ the EU does not need us more than we need them. Around half of UK trade is with the EU (UK exports to the EU are 13% of UK GDP and EU exports to the UK are 3% of EU GDP). This is in part because of the gravity model. You tend to trade with those nearest you.
9/ A simple example of this is if you need a pint of milk. How far would you travel (bearing in mind time/cost/environment etc)? No further than the corner shop, if you can.
10/ The trade figure with the EU shoots over 65% if you include trade with countries the EU has a trade deal with. Ask @Jim_Cornelius or @mac_puck
11/ The EU is the most successful free trade negotiator in the world. The 28 member states (including the UK) represent the most successful free trade zone in the world.
12/ Of the top ten global economies 4 are in the EU. The EU has 35 free trade deals and more being negotiated. It also has hundreds of bilateral agreements on specific issues - for example, about 147 with the US and around 71 with China.
13/ The US has 20 trade deals, Japan 18, China 16, Canada 15, India 7 and Brazil 5. Most of these arrangements are with their neighbouring countries/trading blocs. (It's that pesky gravity model again).
14/ ah but the EU is protectionist I hear you cry! To a point yes. As is every other country or trading bloc.
15/ If you unilaterally abolish tariffs and quotas you unilaterally give away your leverage to get trade deals that suit your economy because WTO means you have to offer everyone the same terms. But other countries can still impose quotas and tariffs on your products
16/ This also means you open the UK up to lots of imports that will be cheaper than UK produced goods. For example, if you abolish tariffs on food, you may get cheaper (and potentially lower quality) food...
17/ Sounds good until you realise you make UK farming uncompetitive which in turn would lead to job losses and raises questions about the degree of self-sufficiency the country has
18/ but the EU also operates the Everything But Arms scheme whereby 49 of the poorest countries benefit from duty and tariff access for importing goods (except arms!). Of which one is Mauritania.
19/ So even Mauritania would have better trading terms with the EU than the UK if the UK goes to WTO terms. Hmmm...
20/ The UK economy is 80% services which is the least developed area under WTO rules and the hardest to liberalise under free trade deals. Going from the system we have now to WTO terms is probably the worst step you could take for your economy.
21/ Reverting to WTO terms also leads to hard border in Ireland and creates problems at Dover. How so?
22/ The UK will want to set its own regulatory standards (such as whether food or medicine is safe) above and beyond what the WTO recommends.
23/ So you need to decide what your regulatory standards are (by 29 March!) and then decide whether products from other countries meet those and how. For example, how do you legally and safely import insulin or radioactive isotopes if the system for those products is not clear?
24/ One option is to align with current EU rules (as the UK is proposing) - but then what is the point?
25/ Another way to go is not to have any standards or checks.
If you don't have those after all, then you create a porous border (prone to smuggling) and you expose your people to the dangers of unsafe or unhealthy products .
If you don't have those after all, then you create a porous border (prone to smuggling) and you expose your people to the dangers of unsafe or unhealthy products .
26/ If you do want checks first you need to set your own regulatory standards & carry out those checks (for good reason). But that creates a border & delays because it is no longer frictionless (like now) as the UK is out of the framework of the single market and customs union.
27/ But why not check only some goods from some countries?
28/ If you do carry out checks only against certain goods from certain countries you are no longer treating everyone the same as required under WTO rules. Which leads to other countries complaining of discrimination. Which leads to the UK then checking all goods from everywhere
29/ And hey presto you have border checks which undermines the Good Friday Agreement and breaches the UK’s own EU Withdrawal Act
30/ If you have checks at Dover then you knacker all the sectors that rely on frictionless trade and just in time supply chains - Car manufacturing, medicines and supermarkets.
31/ My favourite example is that the UK has 1 day’s worth of supplies of toilet roll because most of it is imported...A more serious example is insulin which is mostly imported.
32/ All this to say, these are some consequence of leaving without a deal. It is not project fear. Just reality. Leaving on WTO means the UK will then spend the next generation trying to replicate as best it can the systems it has now but at great effort and with less leverage.
33/ By all means support no deal Brexit and WTO terms if you want, but please be aware what it means for everyone.
34/ I've tried to explain all this as clearly as I can. No doubt there are better qualified people who can correct or clarify my thread but I hope it helps explain things in simple terms.
35/ Thanks you to those esp @fascinatorfun for updating me re Mauritania
36/ See here
