The World Trade Organisation (WTO) is an inter-governmental organisation based in Geneva with about 600 staff which regulates international trade. It is a negotiating forum for its members to create international trade rules, and an organisation to oversee how they put the rules into practice. For example, WTO agreements place limits on tariffs (which tax imports) and prevent the spread of disease by establishing sanitary standards on agricultural products. Studies over time have shown that the WTO has boosted trade around the world and that in the absence of the WTO, the average country would have faced a 32% increase in export tariffs. Currently, 164 countries are members of the WTO which embraces about 95% of global trade. The UK is already a member of the WTO in its own right, having co-founded the General Agreement on Tariffs and Trade (GATT), the WTO’s predecessor, with 22 other countries in 1948.
In my previous post I appealed to people who voted Remain in the EU Referendum to give serious consideration to voting for the UK to leave the European Union should there be another referendum on this topic – which is looking increasingly likely. Another referendum relating to the UK’s membership, or not, of the EU would be a betrayal of democracy, of course; our politicians haven’t honoured the EU Referendum yet. On what basis would one believe that the result of another EU referendum would be honoured? But set that to one side for a moment. I said in my last post that in my next post, this one, I’d take a look at what leaving the European Union under WTO rules would really mean.
You Can’t Agree to Agree
With chaos remaining the norm in Westminster, the UK’s departure from the EU is now just weeks away. The legal clause of the Treaty on European Union by which the UK will exit that Treaty is Article 50. Article 50 expects the EU and the departing nation to agree a Withdrawal Agreement as the basis for divorcing. In fact, as any lawyer will tell you, you can’t make potential parties to a contract agree to agree. If counterparties agree then they have a deal (the Withdrawal Agreement in this case). However, if counterparties can’t and don’t agree then, obviously, there is no deal. So, what if there is no deal between the UK and the EU as to how the divorce will be agreed?
Well, first we need to acknowledge that it would appear the majority of our MPs don’t understand contracts and negotiations generally; hence the dog’s breakfast that is Parliament at the moment. We’re told that the majority of our MPs are against no deal. This means that the House of Commons expects the British government to enter into a Withdrawal Agreement with the EU regardless of how bad the deal is – because no deal should not be an option. It’s like you walking into a car showroom and saying to the salesman, ‘I’m interested in buying a new car, but I want you to know that for me, no deal is not an option’. Guess what? Correct: the car salesman will be flogging you a car entirely on his own terms. Why would he not do that?
Imagine the car salesman is the EU’s Chief Negotiator, Monsieur Michel Barnier. In 2016, Mr Barnier said to Le Point, a French weekly news and political magazine, ‘I shall have succeeded in my task if the final deal is so hard on the British that they’ll end up preferring to stay’. Mr Barnier was as good as his word and has done an outstanding job. The deal he forced onto the hapless British negotiators (collaborators more like) was so good for the EU and so bad for the UK that it resulted in the greatest defeat of a government by the House of Commons in modern history, if not all time. The problem is that having declared the Withdrawal Agreement the mother-of-all bad deals, the House of Commons says that no deal is off the table. What MPs can’t get their heads around is that no deal is the table. If there is no deal, then no deal is the deal. Come on, keep up at the back there.
Having thus tied themselves in knots, our illustrious political elite is now thrashing about looking for ways to kick Brexit into the long grass: seek to extend the Article 50 timetable perhaps; ditch Article 50 altogether, maybe (ie cancel Brexit); call a General Election; have another referendum; you name it, anything to untie the rope with which slowly, but surely the British political class is hanging itself. It’s the most unedifying spectacle, isn’t it?
The World Trade Organisation
Notwithstanding, all the time the clock is ticking towards 29 March 2019, the date on which by law the UK must leave the EU. Assume for the moment that Parliament remains paralysed, then on 30 March the UK will default to trading with EU nations on the basis of World Trade Organisation (WTO) rules. Again, our politicians, the establishment, the BBC and much of the mainstream media including Sky News and Channel 4 News, ‘big business’, Uncle Tom Cobley and all are screaming at us that leaving under WTO rules will result in Armageddon; just like voting to leave the EU was going to result in Armageddon the morning after the EU Referendum. Remind me, how did that go, guys?
So, we’re told that the UK leaving the EU under WTO rules will result in Armageddon. Well, brace yourself, but the UK leaving the EU and shifting its trading relationship with EU nations to WTO rules will not trigger Armageddon. Here’s why.
Trading Under WTO Rules | The Good News for the UK
Bear in mind that, unlike the majority of the British electorate, the majority of our Parliament would prefer that the UK remained a member of the European Union. Bear in mind too that the majority of our Parliament is against the UK leaving the EU without a deal. In other words, our politicians are against the UK shifting its trading relationship with the countries of the European Union to WTO rules.
Now, the EU was never, ever going to give the UK a ‘good deal’ to leave the EU (that would mean the EU signing its own death warrant). Instead, our politicians were offered a ‘bad deal’ by Mrs May (a deal written for her by Michel Barnier, not surprisingly) but they rejected that. Meantime, our politicians – who, as you know, are not the sharpest knives in the cutlery drawer – won’t accept ‘no deal’. So, whilst Parliament spins itself around in ever-decreasing circles before disappearing up its own exhaust pipe, here is a quick, non-exhaustive list of the benefits of having the UK deal with the EU under WTO rules that you are unlikely to learn from your MP or the BBC:
- Big price reductions in food and consumer goods such as clothing and footwear: EU tariffs and other trade barriers raise clothing prices by up to 8%, and food prices by around 5%.
- The ability to reorient our future trade towards the most dynamic areas of global growth, eg Asia, South America and Africa. The EU’s own analysis suggests a network of such deals could add 2% to UK GDP in the longer-term.
- Large competitive advantages in reducing damaging and unnecessary restrictions, which the EU itself estimates costs 4 – 6% of UK GDP.
- No longer paying £10 billion a year to the EU in membership fees – which are equivalent to a ‘tariff’ of 6% on our exports to the EU.
- Taking full control of the UK’s fishing grounds – worth up to £3 billion a year in the medium-term.
- Having a tailored, skills-based immigration policy without EU preferences, which could cut the benefit bill by £1.6 billion per year.
These benefits alone would constitute in total a major spending boost: just the tariff cuts could boost consumer incomes by £15 billion per annum, equivalent to around £800 per family per year.
The point is this: from my own research I could write several pages explaining to you why the UK leaving the EU and migrating to WTO rules would not be Armageddon; it would not be the end of the Earth; indeed, we, the British people would be much better off trading with the nations of the world under WTO rules than remaining shackled to a doomed politico-economic construct, the European Union.
May I suggest that if you’d like to read chapter-and-verse on why the UK migrating to WTO rules on leaving the EU would not only constitute nothing to fear, but would in fact be highly beneficial to this country in the medium- to longer-term then you start by reading this analysis and then perhaps this one and then take it from there.
It’s difficult to exaggerate the extent to which pro-European Union voices in our society dominate the agenda; dominate what is and isn’t explained and discussed, particularly through our mainstream media outlets. Personally, for example, I only listen to, and look at BBC news and current affairs these days primarily out of curiosity, not to be informed or educated. Some of the BBC’s analysis and reporting merits attention, of course; however, for me it’s not the go-to source of knowledge. At the risk of offending, more fool anyone who believes seriously these days that the BBC offers unbiased reporting and comment on Brexit or anything else for that matter (but that’s a subject for another day).
All that BBC-bashing aside, did you watch the BBC’s Question Time programme on 17 January? Not surprisingly, the Panel comprised four Remain-voting guests and one Leave-voting guest, the formidable Isabel Oakeshott, a political journalist and broadcaster – who attended the same school as my daughters as it happens, Gordonstoun, but that’s by-the-by. At some point in the programme, the issue of how the UK should leave the European Union was discussed. Now, bearing in mind we’re being told that for the UK to leave the EU under WTO rules, ie with no deal, the result would be the collapse of the British economy, check out how the audience reacted to this horrifying prospect:
So, there you have it. You could be forgiven for thinking that most of us were scared fartless at the prospect of the UK leaving the EU under WTO rules; like most of us were supposed to have been scared fartless of the UK leaving the EU at all. However, bearing in mind that the Question Time audience is always carefully selected by the BBC (you have to complete a questionnaire to get a seat in the audience), it is interesting if not comforting to note that perhaps many of us would be happy just to see the UK leave the EU, full-stop. To hell with having a deal. Let’s just do it and get out.
I suppose the question is, does leaving the EU and having our country trade with the nations of the European Union under WTO rules, certainly initially on departure, bother you? In the fullness of time, the UK might choose to try and develop certain special trading arrangements with the EU, but my guess is that the EU wouldn’t be too interested. After all, they’re doing their damnedest to screw us over now, so why would they want to offer us a ‘good deal’ in the future?
A couple of afterthoughts. If the UK leaves the EU under WTO rules, we save ourselves £39 billion; that’s an awful lot of public services that could benefit. Furthemore, if our politicians delay or stop Brexit altogether, we really do enter the proverbial ‘uncharted territory’ as far as our democracy is concerned. Oh, and the Conservative Party would, quite rightly, be despatched to oblivion.
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