Sigh... Would you like an ELI5 of why #Brexit economics is garbage?
You have a lot of apples. You sell 50 apples to the EU for a £1 each, and you sell 50 to the rest of the world (ROW) for £1.20 (Germany sells 80 btw). That's 100 apples, £100. (the £20 is tariffs)
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You have a lot of apples. You sell 50 apples to the EU for a £1 each, and you sell 50 to the rest of the world (ROW) for £1.20 (Germany sells 80 btw). That's 100 apples, £100. (the £20 is tariffs)
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If you cut off all trade to the EU as you propose, you would have to negotiate a lot of FTAs *and* sell at least 100 apples at £1 to the ROW to make up for the loss of stopping selling to the EU. And even then you're only breaking even.
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50% becomes 100% of exports, but 50 apples doesn't automatically become 100 apples. Until you can sell more apples you've cut your income from £100 to £50.
While this is what you implied, I don't think this is what you meant, so I'll move on.
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While this is what you implied, I don't think this is what you meant, so I'll move on.
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If you just leave the EU, use WTO rules, and then you sell to the EU at £1.20 (because tariffs) and lets say lose 20% of your business. Why? Because of the increase in cost and your customers can get apples cheaper from within the EU (Germany, for example).
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You can now sell apples to the ROW at £1, but only to countries that enter into a FTA - everyone else is still at £1.20. Unfortunately, an FTA takes time...
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How many countries would you have to make an FTA with? Well, it depends on the product, and how much more they want to buy - oh, and each country wants an FTA on imports to the UK in return. I'll come back to this later.
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For some reason German apples are preferable to British apples - right now they seem to be selling more than the UK even at the same price. Will a drop of 20% in the price be enough to persuade the ROW to increase their apple order to outweigh the loss in the EU market?
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Maybe the ROW can grow its own apples and the price isn't the deciding factor? Maybe they value the quality which may be why, while they like our apples, they like German apples better?
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Also, the countries you want to enter an FTA with on apples insist on a reciprocal deal on spam and jam. Currently they import to the UK with a 20% tariff. In return for a 0% tariff for buying UK apples, they want a 0% tariff for spam and jam.
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We don't make spam so great! Cheaper spam! Jam we do make, but the ROW makes much more, and much cheaper. Removing tariffs and therefore reducing the price of imported jam will put UK jam-makers out of business.
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This is bad. We are going to have to sell even *more* apples to make up for the hit on the national jam industry, and hope that the jam-makers don't mind having to stop making jam and, I dunno, start planting apples or something.
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Oh shit, it turns out that not every country is running a spam and jam-based export economy and each one wants a separate deal on something else, like pears, or pants, or cheese, or something. That's a problem - after all, blessed are the cheese makers...
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So now, everyone's trying to find new customers for apples, we haven't worked out why the Germans are STILL selling more apples than us, all the jam-makers are unemployed, it turns out the spam is tainted, and we're subsidising the cheese-makers - for what??
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Are we going to do this so some guy with an orchard in the UK can make a little more money? And some guy with a spam and/or jam factory in ROW can make a shit-load more money?
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But yay! At least spam is cheaper!
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tl;dr; The answer to what should be done is to find out how Germany is selling so many apples and maybe start doing that.
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