Richard North, 17/03/2017  

Pascal Lamy, former EU trade commissioner and one time head of the WTO, has been talking to the press.

On the prospects for a comprehensive free trade agreement, he says that it would take five or six years to negotiate, requiring a transitional arrangement to cover the gap between implementation and the end of the two-year Article 50 period ends.

He also suggests that the administrative task facing the government a "costly and complex" to achieve and that even the "greatest" Brexit deal would impose costs on the UK economy.

"In trade", he says, "there is no way switching from an internal market to any other regime, including the best, will not be costly". But, he adds, without a trade deal, Britain would have to fall back on the WTO trade terms. "The resort to WTO", he says, "would be worse than an agreement".

And that - following Royal Assent for the withdrawal Bill, giving Mrs May permission to invoke Article 50 – really is the crunch, as it always has been. We face the prospect of a catastrophic "no deal" scenario or the possibility of an unachievable free trade agreement.

The response from Mrs May's official spokesman, though, is that the prime minister remains "convinced we can get a good deal within a two year time frame - nothpolticiing has changed".

Certainly, nothing has changed – for years. We have long since known that neither the so-called WTO option nor the free trade option were viable.

Yet, adding vacuity to blind optimism, we have Brexit under-minster telling the Freight Transport Association that the Government is pursuing "a bold and ambitious Free Trade Agreement that allows cross-border trade to be as frictionless as possible".

"We want", he says, "to have a new, mutually beneficial customs agreement with the EU that supports these objectives. But we have a completely open mind on how they will be achieved".

And that last sentence is the killer line: "we have a completely open mind on how they will be achieved". Translated, it means the Government doesn't have the first idea of how it's going to conclude its agreement. Our negotiators are going to go "over the top", straight into the machine guns, with no other plan than to keep marching forwards, stepping over the bodies of fallen comrades.

And there is absolutely no good reason to expect the "colleagues" to help us out. As I point out in my formal complaint to IPSO, about Matt Ridley's Times piece, they are going to be able to restrict entry to their markets, without fear of contravening WTO anti-discrimination rules. On the other hand, we cannot erect barriers against EU-originated produce without also imposing similar restrictions on goods from the rest of the world.

It will be interesting to see how this affects our trade with the EU on cars and automotive parts. Volume shipments through dedicated ports, with their own terminals, are hardly going to be affected by the imposition of customs controls, while manufacturers can reclaim duties paid on imported components which go into vehicles which are subsequently exported.

Equally, cars built on the continent using parts supplied from the UK with also be able to rebate duties paid when they are sold here, reducing the overall amount of duty that would be paid. And considering that the duty on cars is paid on the wholesale price, end customers will only be paying a fraction of the posted 10 percent.

On foodstuffs, much is also being said about punitive tariffs on certain products, but these are rarely paid. Almost all these products have duty-free or low-tariff quotas, so the actual amounts paid will be minimal.

All round, it will be the non-tariff barriers (NTBs) which will do the damage – but mostly in ways our politicians haven't begun to appreciate. Even (or especially) Mrs May is still imbued with the idea that regulatory convergence is the be all and end all of NTBs.

Meanwhile, Lamy thinks it will be ten years or so before the UK will know whether there is any cash benefit from leaving the EU. Oddly enough, though, for all our pessimism about the outcome, we are already enjoying some benefits from Brexit – the politicians are on the rack and, for the first time in decades, they can't blame Brussels for their failures (although they will try).

Given that increased political accountability is one of the main aims of Brexit, and that this brings improved governance, then the actual gains may be quicker in coming then many expect. However, while we may subscribe to the idea that there is no gain without pain, many of us are asking whether to is necessary to suffer so much pain for what gains that actually accrue.

If Lamy is right about the economic lag being in the order of ten years (two electoral cycles), one of the effects could be to render the Conservatives unelectable – if not now, in future elections.

A severe, immediate fall-out, though, is the one thing perhaps which could see Corbyn's Labour Party elected to office. Lamy, therefore, needs to be wrong, although on trade matters, his experience will most likely carry the day.

comments powered by Disqus

Brexit - the first year - New e-book by Richard North
Brexit - the first year - New e-book by Richard North
Buy Now

Log in

Sign THA
Think Defence

The Many, Not the Few