Much of the drummed-up anxiety regarding “crashing out” of the EU has begun to abate as the UK government, along with its Dutch and French counterparts, has ramped up preparations for no-deal Brexit in light of the wholly disappointing offer from the EU. Despite the tireless efforts of the media and status quo commentariat who still insist that the UK will collapse into recession, severe supply shock and civil unrest, it is now emerging that trading with the EU under WTO terms will be manageable, if tumultuous in the early days.
We know that the EU’s WTO tariffs are low on most products and where they are higher, the pound’s devaluation will do much to compensate. We also know that WTO rules require that its members do not impose unnecessary or arbitrary conformity assessment inspections at borders. This means that French and Dutch authorities should not tie up our exports at their ports to teach us a lesson. The Dutch have sensibly built up their customs facilities, hiring more inspectors and setting aside land at their ports for the limited additional inspections which may be required, primarily for agricultural products. Pragmatic French authorities have made similar assurances, aware that they will lose out to their Dutch neighbours if they attempt to frustrate Brexit maliciously, much as they know that were the UK to retaliate by blocking French exports it would harm their economy as much or more as it does ours. Brexit will not mean that there will be a blockade in the English Channel, as many strangely wish us to believe. Europe will remain a close trading partner regardless of the UK’s lack of participation in the customs union or the single market. The UK government has declared, as it has all along although few wanted to listen, that it will not restrict imports of EU products, treating them much as it has done before. There is no need to stockpile goods as many media outlets had urged us to do, recklessly creating a sense of panic in their wake.
We were told many times how WTO rules do not cover services, laying waste to our vital financial sector. But the EU has made commitments on commercial presence financial services under the WTO’s General Agreement on Trade in Services, allowing UK firms to serve EU markets by establishing branches there. This was a cost to be sure, but it is one that has already been borne by many firms as they wisely prepared for exiting without a free trade agreement months ago. Indeed, many in the City will tell you they are now indifferent between deal or no deal. For some firms, no deal will simply mean using intermediaries or filing more paperwork. An irritation to be sure, but one to which they will adapt. It is also fairly certain that any dangers of a no-deal Brexit have already been priced into the stock market, suggesting that a plunge in the LSE is unlikely. If anything, modest gains can be expected in the period after Brexit as it dawns on everyone that no deal isn’t a big deal.
A number of the crucial non-WTO “side deals” which commentators gleefully warned were essential to avoid the devastation of post-EU isolation have now also materialised. Airplane landing rights, drivers’ licenses, Euro clearing are now settled. We also have promises from the EU and Ireland that there will be no hard border, as one isn’t really needed and never was. The WTO certainly never insisted on it. Many EU citizens living in the UK are already following the straightforward process for obtaining permanent residency.
Now seemingly in a final gasp at inducing alarm, some observers have turned to attacking the WTO itself as a multilateral trade institution, a curious paradox for those who are so committed to a close relationship with the supra-national EU. It is true that the WTO’s court system is struggling, with the US blocking appointment of new judges, but this is but one feature of the system which has worked well to liberalise trade globally for decades. Reforms to the WTO’s dispute settlement system are in the pipeline and rumours of the US’s withdrawal from the system are misplaced. The WTO has much life left in it yet.
This does not mean that the UK should not pursue bilateral trade relationships with other countries once a WTO Brexit is complete. It can and it will. Unlike the EU, the WTO does not demand exclusivity. If the recent comments from the US Ambassador are any indication, we can expect a free trade agreement with the US in the near future. Even greater opportunities await in Asia where most of the world’s economic growth can be expected in the coming years.
No-deal trading with the EU will mark a change in how things have been done and careful preparation is necessary. Rather than recoiling from it in fear, a WTO-Brexit should be embraced with enthusiasm and optimism. In the long run it will lead the UK on a path to prosperity.