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No deal is still better than a bad deal

On the Andrew Marr programme, the Chancellor of the Exchequer, Philip Hammond, said that no deal with the EU would be a “very, very bad outcome“. However, as has been mentioned on this site before, there are still opportunities that will present themselves if the UK leaves the EU under WTO terms, meaning that leaving the EU with no deal is no disaster.

The essential reason why it wouldn’t be a disaster is that there is no incentive for it to be so. The UK had an overall trade deficit of £61 billion with the EU in 2015, where a surplus of £28 billion on trade in services was outweighed by a deficit of £89 billion on trade in goods. With high amounts of trade in certain goods (German cars and French wine being bought in the UK) and services (financial services from the UK to across the EU), it means that both parties in the Article 50 negotiations are essential trading partners with one another. It means that even if no deal is reached, there is no economic incentive for either one to place tariffs on the other as, if there were tariffs introduced by either party, it could provoke retaliation and effectively prove to be an exercise in self-harm.

Of course, there are challenges; however, there has been significant amount of thought put into how to overcome them. One document that spells out a number of solutions across the board is Change or Go, produced by Business for Britain in the run up to last year’s EU Referendum. As stated within the document’s 1,032 pages, “the UK could enjoy a ‘Common Market’ relationship with the EU even if it did not sign a special deal after exit”. There were multiple reasons for this assessment, not least as the World Trade Organization (WTO) tariffs are much lower now than they were when Britain joined the EEC. Indeed, this piece of research gives an excellent assessment – as yet unrivalled in scope – on what Leave might look like if the UK exits the EU without any ‘special deal’.

Study of what WTO terms might mean for the UK has also been continued in a series of excellent blogs on ConservativeHome, which we have highlighted in other articles.  Furthermore, BrexitCentral have also continued the debate with a range of insightful pieces from economists, politicians and legal experts on what opportunities WTO terms might produce.

There should be a recognition that WTO terms are not as bad as members of the Government are currently saying. If we allow this narrative to continue then it could allow the Government to get away with a poor deal by selling the alternative – the WTO – as the worst of all worlds. As illustrated above and elsewhere, WTO terms are not all that bad. Indeed, it could be seen as the start of a new chapter where the UK becomes the champion of free trade and kick-starts the process at the global (WTO) level.

 

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