ANDREW ADONIS: WTO Brexit is the 'Wrecked Trade Option'
PUBLISHED: 16:00 07 February 2019 | UPDATED: 13:15 08 February 2019
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A no-deal Brexit using WTO rules would be disastrous and Brexiteers claiming otherwise are engaging in make-believe, writes ANDREW ADONIS.
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“Let’s go WTO” and “WTO RULES OK” are the latest Brexit banners, trying to make crashing out of the EU with no deal in seven weeks’ time sound benign, even positive.
It is make-believe, like the “£350m a week for the NHS” on the side of that bus. WTO Brexit is simply the Wrecked Trade Option.
Most UK trade is conducted in or through the free trading system of the EU. The WTO is a fire escape when all else fails, applying to a small minority of our trade, depending on a weak organisation bullied and cowed by Trump and China.
Now the Brexiters propose that the fire escape should become the building itself. Nigel Farage asserts that Article 24 of the WTO treaty gives us a right to “up to 10 years of tariff-free trade while we sort out new arrangements”.
Any interim WTO deal on EU trade would have to be agreed with the EU itself, requiring the same process of negotiation and agreement as Theresa May’s existing deal and any future trade deal. Why would the EU agree better terms through the WTO than they would have agreed bilaterally?
Further, because the WTO is a global organisation, non-EU member states will have a say on any short- or long-term proposal for the UK to have lower tariffs vis-a-vis EU states than vis-a-vis them. Not only Trump and Xi, but every small country from New Zealand to Iceland, will disrupt our trade to their advantage.
The second lie is that the only downside of a WTO Brexit is “some short-term inconvenience and disruption”, as a letter signed by 12 hard Brexiter ex-Cabinet ministers put it, and that this will soon be made up by our newfound role as a “global, free-trading powerhouse”.
We know this is hot air because the “powerhouse” depends upon Liam Fox negotiating trade deals to replace or supplement the EU’s customs union, single market and its more than 50 bilateral trade deals with third countries including Japan, Canada, Singapore and South Korea.
Fox promised 40 such deals for the moment after Brexit, including a comprehensive deal with the EU itself which would be the “easiest in history”. Yet apart from one roll-over deal with Israel and the Faroe Islands, all he has to show for the last two and a half years is vast air miles.
Trade expert Peter Ungphakorn describes WTO rules as “a road built through rough terrain with free trade agreements the cars that countries drive on it, some faster like full customs unions and some slower like basic free trade agreements”.
On this WTO highway, the EU is a Ferrari. What the no-deal Brexiters propose is to yank on the handbreak miles from the nearest town and get out and walk. They claim this doesn’t matter because we can run just as fast as we drove. Well, what do you think?
A WTO Brexit threatens destruction of entire British industries. For example, the UK exports 70,000 tonnes of mutton to the EU. The external EU quota – which is what ‘WTO terms’ actually mean – is 378 tonnes. Do the maths.
WTO rules barely exist in respect of services, which account for the UK’s fastest-growing and most lucrative trade with the rest of the EU. Another WTO assertion is that, in Lord Lilley’s words, it will be a “safe haven” to resolve trade disputes.
Safety requires strength, but the WTO’s enforcement powers are pathetic, particularly over superpowers China and the US. Even these powers are undermined by Trump’s refusal to agree to appoint new trade adjudicators to the WTO to rule on trade disputes. The head of the WTO – can you name him? – has taken to warning about his organisation becoming not just weaker but irrelevant in future.
In some respects it is just as well that the WTO is weak because the UK itself flouts WTO rules all the time and gets away with it. By refusing to import chlorinated chicken, genetically modified organisms, and beef stuffed with hormones from the US, we are in breach of WTO rules. The EU circumnavigates them by reaching bilateral settlements with the US.
Without the clout of the EU, we will soon find ourselves locked in bitter WTO trade disputes with the US, China – and yes, the EU itself.
Equally farcical is the claim by Jacob Rees-Mogg that there would no hard border in Northern Ireland under WTO rules. Since WTO rules would allow the UK to diverge from the EU in areas as basic as the health standards of chicken and beef, the only way to guarantee no checks between Northern Ireland and the Republic of Ireland is... the Irish backstop.
Oh, and the best way of avoiding a fire escape is not to start a fire.
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