Monday, March 13, 2017
The shocking real cost of Brexit
An unpublished Treasury document predicts that Theresa May’s plans to rely on World Trade Organisation tariffs in the case of a hard Brexit will cause a “major economic shock” and is worse than any other option.
The document, which was leaked to the Independent, warns that crashing out of the EU without a trade deal is the "alternative to membership with the most negative long-term impact" on the economy.
They say that the 36-page report uses language far stronger than that employed in the Treasury's published analysis of Brexit's long-term impact on the economy:
The document claims that consumers would no longer benefit from the end to mobile phone roaming charges, EU compensation for delayed flights or cancelled holidays, or protections covering purchases in an EU country. It warns that the WTO regime would mean “new taxes on British trade” – tariffs and duties in the 53 countries with which the EU has free trade agreements. The UK’s privileged access to these markets would be “terminated”, and it “would take years” to strike trade deals and be difficult to replicate the current terms.
“UK agricultural exports to the EU would face new tariffs of 14.4 per cent on average, and non-agricultural goods an average tariff of 4.3 per cent – enough to undermine the competitiveness of some UK businesses,” it says. “The UK would have less access to the [EU] single market than Pakistan, Rwanda or Yemen.
“The EU would trade with the UK on the same terms as it does with countries like China – with no preferential access.”
The report describes the WTO’s coverage of services, which account for almost 80 per cent of the UK economy, as “out of date, based on a set of commitments that are 20 years old. It lacks the ambition the UK’s modern economy needs.“ It argues that, without a trade deal, the EU would have no scope to lower tariff rates for the UK without cutting them for all members of the 164-nation WTO.
“After we left the EU, we’d need to renegotiate the terms of our WTO membership,” the document, drawn up a month before the referendum was held, says. “This would trigger bureaucratic negotiations with other WTO members, lasting for months or years …This could be a very complex exercise involving a review of every tariff line – over 5,000 – to determine what rate the UK wished to apply.”
Although Britain could lower tariffs on EU imports to soften the blow of rising prices, it would have to reduce them by the same amount on all imports from WTO members. “This would put the UK in a weak position if we wanted to negotiate trade deals to secure more market access for UK exporters – other countries might avoid coming to the table if we’d already opened up access to our market.”
Let us hope that the Prime Minister takes note.
The document, which was leaked to the Independent, warns that crashing out of the EU without a trade deal is the "alternative to membership with the most negative long-term impact" on the economy.
They say that the 36-page report uses language far stronger than that employed in the Treasury's published analysis of Brexit's long-term impact on the economy:
The document claims that consumers would no longer benefit from the end to mobile phone roaming charges, EU compensation for delayed flights or cancelled holidays, or protections covering purchases in an EU country. It warns that the WTO regime would mean “new taxes on British trade” – tariffs and duties in the 53 countries with which the EU has free trade agreements. The UK’s privileged access to these markets would be “terminated”, and it “would take years” to strike trade deals and be difficult to replicate the current terms.
“UK agricultural exports to the EU would face new tariffs of 14.4 per cent on average, and non-agricultural goods an average tariff of 4.3 per cent – enough to undermine the competitiveness of some UK businesses,” it says. “The UK would have less access to the [EU] single market than Pakistan, Rwanda or Yemen.
“The EU would trade with the UK on the same terms as it does with countries like China – with no preferential access.”
The report describes the WTO’s coverage of services, which account for almost 80 per cent of the UK economy, as “out of date, based on a set of commitments that are 20 years old. It lacks the ambition the UK’s modern economy needs.“ It argues that, without a trade deal, the EU would have no scope to lower tariff rates for the UK without cutting them for all members of the 164-nation WTO.
“After we left the EU, we’d need to renegotiate the terms of our WTO membership,” the document, drawn up a month before the referendum was held, says. “This would trigger bureaucratic negotiations with other WTO members, lasting for months or years …This could be a very complex exercise involving a review of every tariff line – over 5,000 – to determine what rate the UK wished to apply.”
Although Britain could lower tariffs on EU imports to soften the blow of rising prices, it would have to reduce them by the same amount on all imports from WTO members. “This would put the UK in a weak position if we wanted to negotiate trade deals to secure more market access for UK exporters – other countries might avoid coming to the table if we’d already opened up access to our market.”
Let us hope that the Prime Minister takes note.
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Hi Peter, I raised this scenario with some senior EU folks and they don't believe May would go for such a cliff edge. I'm not so sure however and I think *IF* the Tories can successfully blame the EU for it "those evil Europeans offered such an awful deal we had no choice", they'll do it.
A Westminster staffer told me a few weeks ago that there is a lot of Tory in-fighting behind closed doors, particularly on Brexit which is why nothing much is progressing on Brexit or anything else (NHS crisis???). This is now being seen following Heseltine's sacking.
BTW I think this was a strategic mistake by May as (a) it looks vindictive and (b) it's given Heseltine and his very reasonable polite views far greater attention than they would have done otherwise. May no doubt sacked him to please the hard right Brexiters to whose tune she dances, forgetting that they're not the majority of her MPs or even her party, never mind the country.
I also reckon that by now even men as stupid/ill-informed/arrogant as David Davis and Liam Fox have worked out that the have-your-cake-and-eat-it deal with the EU that they and their fellow Brexiters sold to the public is impossible. Boris Johnson already knew it was impossible, I think that's why he really ducked out of becoming PM.
So if you're going to have to try to deliver the impossible, your inevitable failure to do so will either be attributed to deceit (you knew it wasn't possible) or incompetence (you were too badly informed to know it wasn't possible). The only way out is to blame someone else and the dastardly EU "punishing Britain" (Brexit speak for "defending their own interests and not bending over backwards to accomodate the UK's every unreasonable demand") is probably the best candidate.
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A Westminster staffer told me a few weeks ago that there is a lot of Tory in-fighting behind closed doors, particularly on Brexit which is why nothing much is progressing on Brexit or anything else (NHS crisis???). This is now being seen following Heseltine's sacking.
BTW I think this was a strategic mistake by May as (a) it looks vindictive and (b) it's given Heseltine and his very reasonable polite views far greater attention than they would have done otherwise. May no doubt sacked him to please the hard right Brexiters to whose tune she dances, forgetting that they're not the majority of her MPs or even her party, never mind the country.
I also reckon that by now even men as stupid/ill-informed/arrogant as David Davis and Liam Fox have worked out that the have-your-cake-and-eat-it deal with the EU that they and their fellow Brexiters sold to the public is impossible. Boris Johnson already knew it was impossible, I think that's why he really ducked out of becoming PM.
So if you're going to have to try to deliver the impossible, your inevitable failure to do so will either be attributed to deceit (you knew it wasn't possible) or incompetence (you were too badly informed to know it wasn't possible). The only way out is to blame someone else and the dastardly EU "punishing Britain" (Brexit speak for "defending their own interests and not bending over backwards to accomodate the UK's every unreasonable demand") is probably the best candidate.
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