Monday, January 28, 2019
The WTO myth
I blogged nearly four weeks ago on why the World Trade Organisation offers no solutions to our Brexit problem, so it is helpful to see this article in the Guardian, which adds some further thoughts to the theme.
They quote two European Union law specialists as arguing that the UK will be unable to have frictionless, tariff-free trade under World Trade Organization rules for up to seven years in the event of a no-deal Brexit. The lawyers argue that the ensuing chaos could double food prices and plunge Britain into a recession that could last up to 30 years:
There are two apparently insurmountable hurdles to the UK trading on current WTO tariffs in the event of Britain crashing out in March, said Howard.
Firstly, the UK must produce its own schedule covering both services and each of the 5,000-plus product lines covered in the WTO agreement and get it agreed by all the 163 WTO states in the 32 remaining parliamentary sitting days until 29 March 2019. A number of states have already raised objections to the UK’s draft schedule: 20 over goods and three over services.
To make it more complicated, there are no “default terms” Britain can crash out on, Howard said, while at the same time, the UK has been blocked by WTO members from simply relying on the EU’s “schedule” – its existing tariffs and tariff-free trade quotas.
The second hurdle is the sheer volume of domestic legislation that would need to be passed before being able to trade under WTO rules: there are nine statutes and 600 statutory instruments that would need to be adopted.
The government cannot simply cut and paste the 120,000 EU statutes into UK law and then make changes to them gradually, Howard said. “The UK will need to set up new enforcement bodies and transfer new powers to regulators to create our own domestic regimes,” she said.
“Basic maths shows that we will run out of time but any gap in our system will create uncertainty or conflict,” said Howard. “Some of these regimes carry penalties such as fines – even criminal offences in some sectors.”
Unless there is an extension to article 50, both these hurdles will need to be crossed by 29 March. This, said Howard, was an impossible task. “Negotiating and ratifying the international free trade deals with the rest of the world alone could take over seven years,” she said.
“A no-deal Brexit could double prices for some products like meat and dairy. There is also a greater risk of trade disputes and sanctions, resulting in reduced market access for UK businesses.
“It’s not just about money,” she said. “We are dependent on imports for a lot of things that we don’t make any more or don’t make enough of, or simply cannot make as they are patented or subject to rules of origin – like lifesaving drugs, radioactive isotopes for MRI scans, medical equipment, chemicals, electricity, petrol, even milk. Shortages and delays could cause panic buying or even civil unrest.”
Perhaps journalists will confront Brexiteers with this reality the next time they argue that a no deal Brexit is survivable because of the WTO. I am not holding my breath.
They quote two European Union law specialists as arguing that the UK will be unable to have frictionless, tariff-free trade under World Trade Organization rules for up to seven years in the event of a no-deal Brexit. The lawyers argue that the ensuing chaos could double food prices and plunge Britain into a recession that could last up to 30 years:
There are two apparently insurmountable hurdles to the UK trading on current WTO tariffs in the event of Britain crashing out in March, said Howard.
Firstly, the UK must produce its own schedule covering both services and each of the 5,000-plus product lines covered in the WTO agreement and get it agreed by all the 163 WTO states in the 32 remaining parliamentary sitting days until 29 March 2019. A number of states have already raised objections to the UK’s draft schedule: 20 over goods and three over services.
To make it more complicated, there are no “default terms” Britain can crash out on, Howard said, while at the same time, the UK has been blocked by WTO members from simply relying on the EU’s “schedule” – its existing tariffs and tariff-free trade quotas.
The second hurdle is the sheer volume of domestic legislation that would need to be passed before being able to trade under WTO rules: there are nine statutes and 600 statutory instruments that would need to be adopted.
The government cannot simply cut and paste the 120,000 EU statutes into UK law and then make changes to them gradually, Howard said. “The UK will need to set up new enforcement bodies and transfer new powers to regulators to create our own domestic regimes,” she said.
“Basic maths shows that we will run out of time but any gap in our system will create uncertainty or conflict,” said Howard. “Some of these regimes carry penalties such as fines – even criminal offences in some sectors.”
Unless there is an extension to article 50, both these hurdles will need to be crossed by 29 March. This, said Howard, was an impossible task. “Negotiating and ratifying the international free trade deals with the rest of the world alone could take over seven years,” she said.
“A no-deal Brexit could double prices for some products like meat and dairy. There is also a greater risk of trade disputes and sanctions, resulting in reduced market access for UK businesses.
“It’s not just about money,” she said. “We are dependent on imports for a lot of things that we don’t make any more or don’t make enough of, or simply cannot make as they are patented or subject to rules of origin – like lifesaving drugs, radioactive isotopes for MRI scans, medical equipment, chemicals, electricity, petrol, even milk. Shortages and delays could cause panic buying or even civil unrest.”
Perhaps journalists will confront Brexiteers with this reality the next time they argue that a no deal Brexit is survivable because of the WTO. I am not holding my breath.
