As the Conservative and Labour Parties tear themselves apart over Brexit, I frequently see and hear people in mainstream media touting as their preferred EU exit outcome one of three options. These are:
Teresa May’s Chequers proposal
A No deal Brexit
Scrap the referendum result and stay in the EU
Of these, the only realistic option is no deal, which, in spire of the forecsts of economic doom and the scaremongering of the Remain camp and the EU itself has been the only viable option since the day after the referendum, when EU officials including Jean – Claude Drunkard and Guy Verhofshit started talking about ‘punishing the UK’ for voting to leave.
As two prominent Leave supporting economists, Roger Bootle and Liam Halligan have recently explained in their newspaper columns, a “no deal” scenario is absolutely fine, it will not mean British companies cannot trade with the EU, but that in future we will trade under the conditions applying to members of the World Trade Organisation (WTO).
Those conditions are similar to EU conditions but do not restrict our ability to trade with non EU nations on mutually agreed terms rather than terms imposed by Brussels, and has the added advantage of leaving no residue from our current relationship with the EU, granting the UK freedom to determine its own domestic and international economic policy. Just like every developed country in the world, outside Europe.
There will be a cost to it to leaving in this way. Trading with the EU would not be as frictionless as it is today. There would be tariffs when selling goods to the EU averaging 3.5%. Exporters would have to register their goods before exporting and 2% of consignments would be subject to customs inspections at the border.
But the cost would be small and more than outweighed by the boost to trade with non EU nations freedom from EU bureaucracy will give. As Bootle pointed out, as WTO members the EU and the UK have treaty obligations to ensure frictionless trade. The practical increase in friction would be minimal. Economist Graham Gudgin and businessman John Mills estimated the cost of the additional obstructions to be around 1% of total UK-EU export costs.
Trading on WTO terms is a well-trodden path. We already trade with most of the non-EU world in this way and indeed, very successfully. More successfully than we trade with the EU, with which we have an enormous trade deficit due to our exporting industries being geared to trading outside the EU.
Other complications like flights could be agreed in a memorandum of understanding, allowing current arrangements to continue until alternative arrangements were made. The remain camp have tried to suggest British people will not be able to travel freely in Europe after Brexit. This is one of their most outrageous lies. I was just old enough to travel widely when we entered the EU in January 1973 and never found any difficulty in having to present my passport at borders.
In exchange for the small loss to our trade with the EU — the part that’s less important, is proportionately shrinking and on which we earn a huge deficit — there would be a large gain in regard to the non-EU part — the part that’s more important, is growing and on which we earn a substantial surplus.
After no deal, Theresa May’s Chequers fudge is the next best option, though worse that trying to reverse the referendum result at this stage, or remaining in the EU on unfavourable terms.
May’s half – in, half – out proposal is worse than EU membership, the only redeeming feature being it gets us out of the EU, which opens the possibility of acting unilaterally to sever remaining ties at a later date.
“No-deal” isn’t the best possible outcome though. That would be an FTA with the EU, similar to the one they have with Canada. Amusingly, the EU has already offered this and, in her bid to become a contender in the most incompetent Prime minister ever contest, May rejected it.
Talk about looking a gift horse in the mouth.
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