Thread by @KellerZoe

It is Europe that would take the biggest aggregate hit from a no-deal Brexit and see a captive market slipping away for decades to come .
telegraph.co.uk/business/2020/…

Britain is being subjected to the Syriza treatment of 2015: the pain is being dialed up until resistance breaks.
The EU is stating that the UK must accept the “ratchet clause” and swallow terms (dressed up as level-playing field clauses) that do not exist in normal trade deals.

Moreover, the EU will not try to reach a modus vivendi. This is the latest “no-escape” twist. The EU Commission is instructing member states to engage in a systematic non-cooperation policy, insisting that the UK must be forced back to the table “as soon as possible”.

Hardliners think the UK will have to accept even worse terms after facing the trauma of port chaos, pauperisation, and further fracturing of the union. A "very dangerous assumption" says the Irish foreign minister Simon Coveney, who understands the Brit mind better than they do.

Such coercive methods did succeed with Greece in 2015 because Greece had been shut out of the capital markets and had no sovereign lender-of-last-resort as a € member. The ECB gradually and illegally cut off Target2 liquidity for Greek banks until the financial system collapsed.

Syriza’s bluff had been called. They wanted to end the EU-IMF Troika but they were desperate to keep the €.
The UK is not in the €. “The gigantic difference is that the ECB cannot shut down Barclays, RBS, Lloyds, and HSBC”, said Varoufakis, Greece’s former finance minister.

The UK issues debt in its own sovereign currency and has the Bank of England at its back. You can get away with almost anything under the cover of QE.
Plus: the UK does not want to stay in the single market or the customs union. It is not asking for anything.

The UK is offering continued tariff-free/quota-free access to its market in return for reciprocal access to the EU market, on equal terms, and along the lines of existing EU trade deals with Canada, Korea, or Japan.
Nor is the UK bluffing. Boris has carte blanche for a no-deal.

It's remarkable is that the EU has not tried to close a deal that is already so tilted in their favour. “It gives them everything that they need for their manufacturing and agricultural interests, but doesn’t give us anything that we need for services,” said @ShankerASingham

The UK has agreed to a competition regulator. It has happily accepted the principle of both non-regression clauses and a dispute mechanism so long as both are on normal global terms.
Yet despite securing so much already, the EU has upped the ante with the ratchet clause,

which compels the UK either to “shadow” EU legislation as legal dependency or face sanctions. This is the same “dynamic alignment” rejected long ago and now reintroduced in another guise.

The EU is pushing its luck: there is not much difference between WTO terms and the skinny package on offer from the EU. “So few items are affected by high tariffs on WTO terms that you have to ask whether it is really worth bothering with a deal,” said a veteran trade negotiator.

It is often easier and cheaper for companies to pay tariffs than submit to rules of origin paperwork under a trade deal, as happens routinely within NAFTA. Most tariffs are modest.

There are exceptions: finished cars and farm goods are protected behind very high EU tariffs. But these are sectors that make up most of EU>UK £95bn bilateral trade surplus. These exporters would be priced out of the UK market with their share destroyed by global rivals.

An EU Parliament report said EU agri-food exports would fall by 62% or around €25bn, while British competitors would reap a net gain of 2.1% through #ImportSubstitution.
Once the switch-over to a WTO regime happens there can be no return to the status quo ante.

Many EU exporters will lose their market share forever to more competitive producers. EU farmers will be swept away by the likes of Canada, New Zealand, Argentina, or Ukraine. The French Chambers of Agriculture warns that Macron is playing with fire by threatening a veto.

Irreversible changes will happen with industrial goods and parts once Britain is forced to change its supply lines. Nissan might activate its contingency plan and double down on Sunderland to snatch share from EU producers exporting into the UK market, shutting its EU plants

Most EU threats involve self-harm. We are warned that electricity interconnectors might be cut off. But the UK can switch to imported LNG gas from Qatar. It is France’s EDF that would lose a revenue stream. Rational countries promote their exports, not hurt them.

Irritating steps have been taken or are threatened (on pet passports, green cards, health cards, Schengen stays) to make travel more difficult for UK tourists who want to spend their money on the EU. Usually, countries try to attract tourists.

My guess is that, 6 months after a WTO Brexit, the UK position would have hardened rather than softened. We might find WTO terms less painful than feared and would no longer be willing to offer the EU a pure goods deal with nothing for services.

By then the UK would have taken steps to join the Trans-Pacific trade bloc and the US might well be following suit, creating by far the biggest global market. The world’s commercial system would be shifting on its axis.

Gordon Brown warns that the UK will be in a state of “economic war” with the EU if there is no deal. But a ratchet trade deal is itself a formula for constant war. The UK would find itself in disputes whenever the EU passed a new directive.

It would be subject to the ‘Swiss treatment’ with a gun held constantly to its head. The EU has yet to reciprocate ‘equivalence’ for financial services and has not agreed ‘adequacy’ for data flows. All is withheld as a pressure tool. A deal settles nothing.

We may love European food, or German cars, or easy Tuscan travel, but in strict macroeconomic terms the consequences of a no-deal have been greatly overblown. It is the EU that would take the biggest aggregate hit and see a captive market slipping away for decades to come.

Who is calling whose bluff exactly?

Excerpts from:
Greek torture won't bring Britain to its knees over Brexit
by Ambrose Evans-Pritchard
telegraph.co.uk/business/2020/…