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What Would a WTO Brexit Look Like?

by John Brian Shannon

Assuming European politicians can’t get their act together enough to craft a reasonable Brexit deal that works for both sides by March 29, 2019 Europe will be faced with Brexit on WTO terms which is known colloquially as a ‘Hard Brexit’ where the UK would leave the European Single Market and Common Market mechanisms and other EU agreements and institutions without any subsequent deal in place.

Without further ado, and without boring you with statistics, let’s look at how a Hard Brexit would play-out in the months and years following a WTO-style Brexit.


Will There Be Famine in the Land?

Of all of the dubious claims by the Project Fear campaigners (and they’ve made many!) this must rank in first place.

No. There won’t be famine in the UK on account of Hard Brexit. However, you may notice your favorite brand of cheese may be unavailable for a time and you may find your prescription medications come from UK pharmaceutical companies or American pharmas instead of from continental Europe.

Saying the following words out loud will do you good, dear Britons — so repeat after me;

“The United States of America has come to Britain’s rescue in times past and will do so again in its hour of need.”

Regarding agriculture; The United States agricultural belt is unimaginably massive and its farmers and ranchers are just waiting to fulfill the UK’s orders. There are fields of crops in the United States larger than the entire United Kingdom. It takes 3-hours to overfly them in a jet aircraft flying at 500 miles per hour.

Regarding ranching; There are 93.5 million cattle in the United States (2017) and that number continues to rise at a little better than 1% per year, and significant capacity exists to raise it over a relatively short period of time.

Similar agricultural capacity is available in Canada for grains, corn, soybean, and other crops, and Canada boasts 4.6 million cattle at present (2018) and Canada has more arable land than the United States allowing it to exceed even the mighty U.S. in this regard if sufficient firm orders were placed.

To answer the question: “Where’s the beef?” It’s in the United States and Canada… Just pick up the phone and call us! North American farmers and ranchers would love to take your money — instead of the EU taking your money.

Britons might find their food costs plummet as the huge economies of scale that typify North American food production and the favorable growing conditions combine to produce bumper-crop after bumper-crop which lead inevitably to lower food prices.

Countries of origin for UK food consumption

Image courtesy of gov.uk | Figure 1: Origins of food consumed in the UK in 2016 — Department for Environment, Food and Rural Affairs, Agriculture in the United Kingdom data sets, Chapter 14 – the food chain (2017)


Aren’t All American Crops GMO?

Genetically Modified Organisms or GMO crops are grown on every continent, including Europe, which has about the same number of GMO crops as America.

Some Europeans fear that all crops grown in the United States are GMO crops, but except in the case of corn that isn’t true. All corn, no matter where it is grown in the world is GMO and that’s been true for a few decades now. Corn (and maize, which is a type of rough corn that is fed to cattle over the winter months) aren’t commercially viable crops unless the GMO component is added.

Some crops like ‘Yukon Gold’ potatoes, Canola (a seed grain) and every apple sold on the planet have been GMO for many decades.

To alleviate concerns about GMO foods being sold in the UK, Theresa May’s government could simply legislate that any produce or meat that *isn’t* GMO must be identified as non-GMO for UK consumers.

Explainer: Forcing producers to put GMO labels on their produce (if theirs is indeed a GMO variant) is seen as a negative by GMO food producers. But giving non-GMO farmers the right to advertise “Non-GMO produce” or “Non-GMO meat” on their labels would be seen as a positive for their non-GMO produce and meat.

See how easy it is?

Not only won’t there be famine in the land, UK consumers will enjoy a completely new supply chain from which to choose and sufficient labelling for them to make the best choices for their families.


What if the EU Decides to Punish the UK for Leaving?

If the EU wanted to drive the UK directly into America’s arms… the EU would ensure a Hard Brexit and not allow EU goods or produce to be shipped to the UK following Brexit, nor would it allow UK goods or produce to be sold into the EU following Brexit.

If that’s the EU plan, bring it on! Because that plan has a 100% chance of success should the EU choose to make it happen.

And Americans and Canadians are just waiting… “Please, oh God, please, cause the EU to drive the UK into our ever-loving arms!” said every North American farmer, rancher and manufacturer.

To say nothing about the even more fervent prayers being said by North American auto manufacturers in Detroit, U.S.A. and in Windsor, Canada.

For Britain, a WTO Brexit simply means changing suppliers — with a zero-tariff trade deal in effect with North America — combined with the opportunity to sell UK goods into the vast North American market.

The ball, as they say… is in your court, European Union!


Bonus Video

View the video where HM North American Trade Commissioner is interviewed by Bloomberg Television on March 26, 2018.

Clicking on the image takes you direct to the relevant Bloomberg webpage.

Brexit on WTO rules

Antony Phillipson, HM Trade Commissioner for North America on Bloomberg TV.

 

‘No-Deal’ Brexit scenario would cost both UK and EU billions

by John Brian Shannon

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

How many days until Brexit?

How many days until Brexit? Image courtesy of HowManyDaysStill.com

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.


Related Articles:

Brexit: The Path to UK Sovereignty

by John Brian Shannon | August 26 2016

Britain international trade 2

As the UK government gears up to deal with the will of voters, four paths to trade in Europe appear that merit consideration

  1. EEA membership
  2. EFTA membership
  3. WTO rule-based membership, sans EEA or EFTA
  4. Negotiated trade deals that are none of the above

EEA membership would qualify Britain to trade with other EEA member nations, all of which are located in Europe, but not all are members of the European Union.

From the EEA website:

The EEA Agreement provides for the inclusion of EU legislation covering the four freedoms — the free movement of goods, services, persons and capital — throughout the 31 EEA States. In addition, the Agreement covers cooperation in other important areas such as research and development, education, social policy, the environment, consumer protection, tourism and culture, collectively known as “flanking and horizontal” policies. The Agreement guarantees equal rights and obligations within the Internal Market for citizens and economic operators in the EEA.

What is the EEA Not?

The EEA Agreement does not cover the following EU policies:

  • Common Agriculture and Fisheries Policies (although the Agreement contains provisions on various aspects of trade in agricultural and fish products);
  • Customs Union;
  • Common Trade Policy;
  • Common Foreign and Security Policy;
  • Justice and Home Affairs (even though the EFTA countries are part of the Schengen area); or
  • Monetary Union (EMU).

The Agreement on the European Economic Area, which entered into force on 1 January 1994, brings together the EU Member States and the three EEA EFTA States — Iceland, Liechtenstein and Norway — in a single market, referred to as the “Internal Market”.

Switzerland is not part of the EEA Agreement, but has a bilateral agreement with the EU. You can read more about this agreement on the European Commission website, and on the Swiss Federal Administration website.  


EFTA membership governs free trade relations between EFTA States, which in 2016 are Iceland, Liechtenstein, Norway and Switzerland. Britain was a founding member of the EFTA in 1960 until 1973 when it joined the EC. It would need to apply to the EFTA in order to become a member.

From the EFTA website:

The European Free Trade Association (EFTA) is an intergovernmental organisation set up for the promotion of free trade and economic integration to the benefit of its four Member States.

The Association is responsible for the management of:

EFTA was founded in 1960 on the premise of free trade as a means of achieving growth and prosperity amongst its Member States as well as promoting closer economic cooperation between the Western European countries. Furthermore, the EFTA countries wished to contribute to the expansion of trade globally.

Based on these overall goals, EFTA today maintains the management of the EFTA Convention (intra-EFTA trade), the EEA Agreement (EFTA-EU relations), and the EFTA Free Trade Agreements (third country relations). The EFTA Convention and EFTA free trade agreements are managed by the Geneva office, and the EEA Agreement by the Brussels office.

EFTA was founded by the Stockholm Convention in 1960. The immediate aim of the Association was to provide a framework for the liberalisation of trade in goods amongst its Member States. At the same time, EFTA was established as an economic counterbalance to the more politically driven European Economic Community (EEC). Relations with the EEC, later the European Community (EC) and the European Union (EU), have been at the core of EFTA activities from the beginning. In the 1970s, the EFTA States concluded free trade agreements with the EC; in 1994 the EEA Agreement entered into force. Since the beginning of the 1990s, EFTA has actively pursued trade relations with third countries in and beyond Europe. The first partners were the Central and Eastern European countries, followed by the countries in the Mediterranean area. In recent years, EFTA’s network of free trade agreements has reached across the Atlantic as well as into Asia.

EFTA was founded by the following seven countries: Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom. Finland joined in 1961, Iceland in 1970 and Liechtenstein in 1991. In 1973, the United Kingdom and Denmark left EFTA to join the EC. They were followed by Portugal in 1986 and by Austria, Finland and Sweden in 1995. Today the EFTA Member States are Iceland, Liechtenstein, Norway and Switzerland.


World Trade Organization (WTO) membership is perhaps the easiest way forward as Britain (and virtually all nations) are already members and the WTO is merely a standardized set of rules that govern trade between nations.

The present ruleset governing UK trade is the EU ruleset, meaning that who the UK trades with, tariff rates, and other rules and conditions have been decided by 28 EU nations — and not always in the interests of the UK — but in the combined interest of 504 million EU citizens.

The main thrust of this means that WTO rules would continue and that the UK would not be allowed to charge higher tariffs on EU-sourced imports, than what the EU charges on UK imports into the EU. Although the UK could certainly decide to charge lower tariffs than the EU charges. That could be a significant benefit for some UK industries.

There are other benefits to WTO membership. And as most nations are WTO members anyway, the ruleset is well-understood around the world.


In February 2014, the Swiss voted in a referendum to no longer pursue EU membership and left the bloc. The government of Switzerland has therefore negotiated a series of bilateral trade agreements with the European Union AND is a member of the EFTA, but not the EEA.

Of course, WTO rules still apply — unless both parties agree to abrogate or change some of the WTO rulesets.

Keep in mind that both the EFTA and EEA are European trading area agreements and don’t apply anywhere else in the world, while the WTO applies everywhere.

Therefore, non-EU trade will be largely governed by WTO rules (as is the case with most countries) while Britain’s trade with the EU could take several different paths.

Any combination of WTO, EFTA, or EEA, or bilateral agreements that supercede WTO rulesets could be negotiated between Britain and the EU.


At the end of it all, why did 17 million+ voters choose to Brexit?

Two main themes appeared to gain considerable traction during the campaign.

One, the democratic deficit in Brussels, and two, the wholly unregulated movement of people from eastern Europe and the Middle East/Levant and a complete breakdown of the Schengen Area border control system.

Brexit effectively solves the democratic deficit problem in Brussels by returning governance to the House of Commons and the House of Lords. While the mass migration problem is solved as Brexit returns sovereignty of Britain’s borders to the UK government.

The revised EFTA convention (the Vaduz Convention) extends beyond free trade in goods, and includes provisions on free trade in services and the free movement of capital and of persons. None of these should be problematical to the UK given that the Vaduz Convention only applies between its members and so would not act as a gateway for the free movement of persons from the r-EU or elsewhere.  All four EFTA states have standards of living comparable to or even higher than the UK so do not present any mass migration risk. — Brexit and International Trade Treaties, The European Free Trade Association (EFTA)

Recommended Read Brexit and International Trade Treaties by Lawyers for Britain


None of this can occur until Article 50 is triggered and a 24 month clock begins ticking to end Britain’s membership in the European Union.

It would be quite wonderful if Prime Minister Theresa May would hold a press conference every six months to inform Britons of the various areas of progress and ongoing obstructions until the Brexit process is complete — a process that could take as long as 5-10 years from the June 23, 2016 start date.

We are in uncharted waters and Britons are excited to be getting their country back. They know it’s going to take time, resolve, and they know full well that there will be difficulties along the path to restoring Britain’s full sovereignty. But the payoff in 5-10 years will be brilliant.

Whatever Britain is now, it’s only going to get better.