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A new report by a prestigious polling firm says that a so-called ‘No-Deal’ WTO-style Brexit will cost one EU country €5.5 billion over the next two years, as opposed to a Brexit with a trade agreement where losses for that country would likely total €1.5 billion over the next two years.
That country is the Republic of Ireland.
“A hard Brexit could cost the Irish economy more than €5.5 billion over the next two years, a government-commissioned report has said.
A “soft” Brexit including a transition arrangement would cost less than €1.5 billion over the period, highlighting the importance to Ireland of the UK’s withdrawal talks with the EU.
The study by Copenhagen Economics, which examined four possible scenarios, also warns that the UK will probably take at least five years to implement new trade agreements, complicating Irish efforts at contingency planning.
[Ireland’s ‘Taoiseach’ which is the official title of the Irish Prime Minister] Leo Varadkar said last night that a comprehensive free-trade deal with the UK would be the best way to avoid a hard border. After a meeting with Theresa May, the UK prime minister, he said: “We both prefer [the option] by which we can avoid a hard border in Ireland, and that is through a comprehensive free trade and customs arrangement.
“That is the best way we can avoid any new barriers — north and south, and also east and west.”” — The Times
Other EU Nations Would Take a Hit in the ‘No-Deal’ Scenario
We can extrapolate that other EU countries would also take an economic hit in a ‘No-Deal’ scenario, but due to their much larger economies when compared to Ireland, such losses would amount to tens or even hundreds of billions over the same two-year period. Just think of all those German cars that wouldn’t be sold in the UK due to the higher tariffs that would automatically be imposed on EU countries in a ‘No-Deal’ Brexit!
Almost every country in the world uses WTO rules as the foundation of their trading relationship with other countries (but important to note) those same countries also diligently pursue bilateral trade deals with their important trading partners that allow both sides to legally sidestep the more costly WTO tariff ruleset in favour of something that works better for both partners. (And that trading relationship/tariff structure can be anything the two sides want in regards to any trade that happens between them)
So if country A and country B decide they want to trade, they’re completely free to build a better tariff structure than the comparatively expensive WTO ruleset, and that agreement will thenceforth supercede the WTO tariff structure. However, it only applies on trade between those two countries — the rest of their trade with the world would still be conducted under the auspices of the WTO.
It’s a pretty basic thing. Countries that do anything more than a smattering of trade between them negotiate bilateral free trade agreements to bypass the more onerous WTO trade rules and tariff regime.
There’s Still Time to Negotiate a Trade Deal with the EU
As of this writing there are 409 days remaining until Brexit and either we will have a trade agreement with the EU, or we won’t. If not, it will be costly for both sides, but more costly for the EU by one order of magnitude!
However, saying that there are 409 days remaining ’til Brexit — isn’t the same as saying there are 409 days left to negotiate a free trade agreement. Far from it!
The two sides have 258 days to arrange a free trade agreement. Let’s hope our politicians (and theirs) are up to the job (and if not, why are we paying them?) otherwise almost everything that citizens and businesses purchase will become much more expensive on both sides of the English Channel in the post-Brexit timeframe.
UK Prime Minister Theresa May has stressed that October 29, 2018 is the last date that both sides can agree a trade and customs deal before the UK must begin readying for the implementation of WTO trade rules. And on that point both sides agree. Even six months (during the period from October 29, 2018 to March 29, 2019) would barely suffice to put in place the necessary measures and standards to allow industry to prepare for life after Brexit.
UK and EU voters should remember who did, and who didn’t, get a free trade agreement signed when they head to the polling booth at the next election.
“It was a dark and stormy night; the rain fell in torrents — except at occasional intervals, when it was checked by a violent gust of wind which swept up the streets (for it is in London that our scene lies), rattling along the housetops, and fiercely agitating the scanty flame of the lamps that struggled against the darkness.”
Oops, that was another lifetime. But in the here and now, London rain still falls in torrents, violent winds sweep up and down the streets, and the flames of freedom still struggle against the forces of darkness.
Our protagonist is of course the redoubtable Theresa May, Prime Minister of the United Kingdom who has given repeated assurances since her July 2016 inauguration that “Brexit means Brexit” and “Brexit will occur on March 29, 2019” and has repeated many similar expressions of intent.
But not much has changed.
For all the talk by Remainers and their skulking ‘Project Fear’ campaign, none of their shrill accusations have materialized; The economy didn’t crash, unemployment didn’t skyrocket, the deficit hasn’t increased, and governments haven’t fallen.
It’s been a rather bit dull, hasn’t it?
For all the talk by Leavers and their loud promises to save £350 million per week (and redirect the money to the NHS) and to save UK taxpayers £8.6 billion (net) per year, and the largely unfulfilled increase in British exports due to renewed interest in UK goods, not much has happened there either.
In fairness to the Leave campaign, as Brexit hasn’t yet occurred they can’t be faulted on promises which can’t be kept until Brexit completes.
So, What Has Happened?
Politicians on both sides of the Brexit line have been talking, and they’ve decided to talk some more.
Apparently, the talks are going so well that one side wants to pay the other side £40 billion in advance of gaining a bespoke trade deal, while the other side say that talks have progressed so well that they’re going on to ‘Phase II’ — more talk — but this time the talk will be about trade.
Oh, and March 29, 2019 appears to be the mutually agreed official Brexit date, but negotiators on both sides have created a policy ‘Mulligan’ allowing them to postpone the official Brexit date in case one side misses the target date by a few days or weeks.
How very European.
And you must know they agreed on the Mulligan as the first order of business, but then delayed announcing it until concluding their ‘Phase I’ negotiations.
Hehehe, I love the Europeans. Really I do, while knowing full well that if an alien attack ever occurs, the interstellar invaders will be told in the most indignant of tones “Oh no old boy you mustn’t attack now, it’s tea-time — and as civilized people we must agree to delay the start of the war.” (Or some variant of that)
Here in North America such concepts as missed deadlines aren’t tolerated. ‘Get it together or you’re fired’ is how deadlines are kept in the U.S.A. (and no Mulligans)
What’s on the Horizon?
Next-up appears to be working towards a trade deal by October 29, 2018 — as a lack of agreement by that date will indicate a WTO-style Brexit.
NOTE: October 29, 2018 is cited by many as the latest possible date to sign a Brexit trade deal and still have time for industry and government to properly implement such agreements.
Newspaper columnists are wondering aloud about a CETA-style deal between the UK and the EU. (CETA is a trade deal between Canada and the European Union that took 7 years to negotiate and even into the 8th year isn’t fully implemented)
Still, CETA is an excellent basis upon which to build a future trade relationship with the European Union. The UK could do worse than using CETA as a template to forge a new trading arrangement with the EU. Such an agreement could be further tailored in later months or years to meet specific needs on both sides of the English Channel.
But as of December 2017 we’ve not seen much urgency for trade discussions. However, as October 2018 draws close, the speed at which things happen will increase exponentially.
Nobody wants to fail at getting a trade agreement — UK and EU industry would crucify politicians who didn’t sign a viable and timely trade agreement — and voters would likely punish their respective politicians at the following election. Yet, if some horsepower isn’t soon applied to the slow-motion Brexit discussions, policymakers on both sides are likely to find themselves speaking from the opposition benches after the next election.
Either Way, We’re On Our Way to a Cordial Brexit
Whether a trade deal is signed in time or not, in typical European fashion a cordial parting looks set to occur.
Three years will have passed from the June 23, 2016 Brexit referendum and the only variable seems to be whether politicians will manage to negotiate a free trade deal that is ready to sign by October 29, 2018 thereby leaving enough time for implementation ahead of the final Brexit date of March 29, 2019.
Only 461 days to go, Prime Minister…
With Theresa May at the helm for the foreseeable future it may take plenty of time to arrive at certain Brexit waypoints. Yet irrespective of ongoing Brexit frictions — UK relations with the European Union are likely to improve even from their present (high) level. Which in the final analysis, means that quiet diplomacy is the most profound of Theresa May’s political qualities.
Wishing you all a very Happy Holiday season and a safe and prosperous New Year!