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A very good post but it ignores a further issue.
At present we trade with a significant number of non EU countries based upon trade deals negotiated by the EU. These will go. The problem we have is not just with the 27 countries of the EU, but, in relation to various goods and services a far greater range of countries.
Of course these are the countries which the invisable Dr Fox is in charge of negotiating deals with. He cannot start until 2019. He has about 60 countries to do deals with just to get us into the position that were are in now.
Whatever happens will mean a great interregnum lasting many years if not decades. It will be destructive. Our economy will shrink.
Of course, the racists out there will like this situation as a failed economy will mean that no immmigrants in their right mind will want to come here and many others will leave for better opportunities elsewhere. We will also see the departure of home grown and educated talent, ridding the country of much of the despised liberal elite.
May may yet achieve in this country what Pol Pot failed to in his without the need for plastic bags.
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Trade realities expose the absurdity of a Brexit ‘no deal’
The UK has imposed a diversion of effort upon its partners at a testing time
No deal is better than a bad deal. That, as almost everybody must now know, is the position of the woman who is and would be UK prime minister. But this proposition is either empty or nonsensical.
Why empty? The deal the UK will have with the EU has to be worse than the one it has now: that is what Brexit means. Why, after all, would the EU offer better terms to a non-member? So, it will be bad. Theresa May’s proposition only has meaning if she indicates what sort of bad deal, in the range of bad deals, would be worse than no deal at all. But this the prime minister has not deigned to indicate.
Why nonsensical? For trade to continue after Brexit, there must be deals. Brexiters find it difficult to understand that the UK must co-operate with the EU, even after Brexit. Co-operation means deals. The question is not whether the UK needs deals, but rather which deals it must have.
Many seem to think that “no deal” would mean trading with the EU on “World Trade Organization terms”. The UK could in theory trade with the EU in the same way as the latter trades with the US. A series of posts on Conservative Home, a website for Tory activists, discusses what this might mean. But that analysis is done in terms of policy, not the likely effects on trade. The latter is far more relevant.
The UK would be leaving the world’s most integrated trading arrangement. We know that the deeper such arrangements are, the bigger their impact on trade. This is why trade within countries, the most integrated arrangements of all, is far greater than geography alone would suggest. A recent World Bank study argues that if the UK shifted from EU to WTO terms, trade in goods with the EU would halve and trade in services would fall 60 per cent.
Yet a shift to trading on WTO terms is not what “no deal” might mean. Trading after Brexit requires a great many deals on new administrative procedures governing certification of regulatory standards, customs processes and so forth. Trade requires not only such deals, but changes in procedures that would make them work, post-Brexit. So deals will not only have to be reached, but they must be done well before March 2019. In fact, it is hard to see how trade would continue to flow if these deals were not done by the summer of 2018.
Malcolm Barr of JPMorgan has outlined these issues. When the UK leaves the EU, its goods would cease to be “EU goods”. A new set of procedures would be needed to keep trade between the UK and EU running smoothly. Otherwise, the administrative burdens would become impossibly cumbersome. Such facilitation agreements exist between the EU and all its main trading partners.
One difficulty, notes Mr Barr, is that 25 per cent of UK exports to the EU by value go via Calais, which has limited capacity to process non-EU goods. Another is that, without a deal (or deals), UK drivers of heavy-goods vehicles would not be licensed to drive inside the EU. A well-known difficulty is the arrangements to handle the border inside Ireland. Particular difficulties will arise with trade in food and food products, chemicals and pharmaceuticals. Quite simply, continuing trade at anything like current levels will require a host of technical deals.
“No deal” is an absurd notion. To this, optimists will declare: yes, but it will be easy to reach agreement with the EU on such technical deals, because it is in the economic interests of the latter’s members to do so. To this glib optimism, I offer two answers.
First, the two sides will have little time to agree and then set up the new procedures. Above all, they cannot start until they know what to prepare for. The framework for post-Brexit trade will first need to be known. They need, for example, to decide soon that there will be no transitional arrangement if they are to shift early enough to WTO terms.
Second, it is ludicrous to presume that the rest of the EU will co-operate enthusiastically in creating the new trading procedures that are needed. Do Brexiters find it so hard to believe EU members would accept some costs in order to satisfy political objectives? Do they ever look in the mirror?
The UK has imposed a diversion of effort upon its partners at an exceptionally testing time. It has undermined the credibility of a project viewed as existential by many of its members, including its most powerful ones. Brexiters have poured ridicule and scorn on the whole venture. Now they imagine the UK can refuse the EU’s terms for an amicable divorce and yet still count upon active and enthusiastic co-operation in ensuring the smooth flow of trade.
The idea of “no deal” is just ridiculous.