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1/ So the Treasury is supposedly planning for a no deal Brexit. As a Leaver, this is terrifying. The WTO option is, bluntly, suicide.
2/ Several things happen when we leave eschewing negotiations with the EU. Firstly, we rely on GATT/WTO rules for facilitating trade.
3/ This has a profound impact upon our tariff arrangements with the EU, which currently are non-existent.
4/ Upon leaving the EU and becoming a 'third country', the EU is LEGALLY OBLIGED to impose on us the same tariffs it does other WTO members.
5/ Note that when I say 'other WTO members' I refer to those with whom the EU does not have Free Trade Agreements.
6/ At the heart of the WTO framework is a principle called Most Favoured Nation (MFN). It means members can't discriminate.
7/ If they do onto one they must do uniformly. A tariff here for one country means a tariff here for every other country.
8/ There are certain exemptions to this rule, such as if a member is a CU or has FTAs with members, and slightly different rules apply.
9/ This is how the EU has been able to negotiate preferential tariff schedules over many years. It remains influential and powerful.
10/ So, the EU applies to the UK new tariff schedules, which are inferior to those provided by membership. Prices at home are spiked.
11/ If the U.K. decides to retaliate, then it would need to do so to all other WTO members, as per MFN equal treatment rules.
12/ This is why Patrick Minford says: 'let's go to unilateral free trade'. But this doesn't even begin to fix things.
13/ A good way to spot a fraud or an amateur in Brexit/trade debate is to look for those who talk about trade purely in terms of tariffs.
14/ Tariffs are an issue, but a small one. The real economic minefield that lies behind the WTO door is a web of non-tariff barriers.
15/ Tariffs have indeed come down globally, but this drainage has exposed the magnitude of NTB issues we are left to deal with.
16/ As an EU member the UK enjoys a harmonised system of regulation. The benefit of this is the removal of technical barriers to trade.
17/ Outside of the EU, conformity (or regulatory convergence) is not enough to smooth trade flow. We need to prove we conform to standards.
19/ Where there exists large amounts of trade between two trading partners (like EU+China), MRAs or equivalents built into FTAs are useful.
20/ MRAs are Mutual Recognition Agreements. MRAs promote trade facilitation by helping to assess conformity to standards.
21/ By eschewing EU negotiations, we will have to rely on WTO mechanisms, such as the TBT and SPS Agreements. This will be arduous.
22/ Unlike the EEA, these provisions aren't effective. No country trades with the EU solely using such terms. There is a reason for this.
23/ There will be clashes at external borders, whereby UK/EU will not be able to assess whether standards have been complied with.
24/ This will cause chaos. We will see delays at shipping ports, lorry queues on motorways stretching miles, wasted/devalued cargo etc.
25/ This may sound minor, but take the perspective of an exporter, or even a consumer expecting a product, and you realise it isn't.
26/ NTBs are more important than tariffs because their externalities cause far more profound (and often unseen) economic problems.
27/ Goods will not reach their destinations. Some may make it but scraping their sell-by or use-by dates. In other words: pandemonium.
28/ This is just a brief picture I am painting. There is a lot I don't know. I am trying to learn in time to warn enough people against it.
29/ So when Nigel Farage speaks of the WTO option by comparing possible EU tariffs with our budgetary contributions, this is LAUGHABLE.
30/ The problem extends far beyond tariffs, which will themselves be painful. The WTO option would be self-harm on an unimaginable scale.
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