I owe Andrew Neil a favour for destroying me on TV the other night. It has given me the chance to confirm what I always suspected about No Deal Brexit: that Britain has nothing to fear about leaving the EU on World Trade Organization (WTO) terms.
WTO terms are, of course, Britain’s default exit position on March 29th.
In other words, unless Theresa May can persuade the intransigent EU to accept some kind of last minute sell out “deal” or the Remainers in Parliament can find a cunning way of sabotaging Brexit, then No Deal Brexit on WTO terms is what will happen because it’s already written into law.
The line being put about by Remainers is that “crashing out” of the EU in this way will take Britain over a “cliff edge” — something to be avoided at all costs.
Most Leavers disagree. Indeed, across the country, anecdotal evidence suggests that the appetite for a No Deal Brexit is growing.
So are all these Leavers living in a fools’ paradise — victims of their deep ignorance of what leaving on WTO terms actually entails?
Or is it the Remainers who are telling us yet more porkie pies, as they conjure up yet more Project Fear type chimaeras designed to scare the gullible into giving up on Brexit?
What is the World Trade Organization?
WTO is a global organisation dealing with the rules of trade between nations. It was formed in 1995 (having begun life as the General Agreement on Tariffs and Trade, or GATT). Its main function is to ensure that trade flows as smoothly, predictably, and freely as possible. 164 countries are members and trade with each other under WTO rules if they do not have bilateral or multilateral trade agreements in place.
Sounds not very scary
No, indeed. Most world trade is done on WTO terms; the vast majority of the UK’s trade with countries outside the EU is done on WTO terms, and it would be illegal for the EU to impose punitive tariff barriers on the UK, much as it might like to. This is because of the Most Favoured Nation (MFN) principle.
Most Favoured Nation (MFN)?
It just means that under WTO terms you can’t discriminate between trading partners: Grant someone a special favour (say a lower customs duty rate) and you have to do the same for all other WTO members, with very few exceptions.
So, for example, the EU would have to trade with the UK on essentially the same terms it uses when trading with the U.S. This would not be a disaster. Nor, in the future, would it rule out striking more favourable bilateral deals with individual nations — as many countries from the U.S. to Israel and Australia have already expressed an interest in doing.
Yes, but it would still cost, right?
In the EU Single Market and Customs Union member states can trade with one another tariff-free. Outside it, the average EU tariff on non-agricultural goods is around 2.6 percent.
If that sounds trivial, that’s because it is. Fluctuations in sterling/euro year on year can be far greater than that — yet traders manage perfectly well. Also, because of the current balance of trade, the EU would be a much greater loser from reciprocal tariffs than the UK.
As a net importer of EU goods, the UK “could potentially collect over twice as much in tariffs on EU goods than would be levied on UK goods going to the EU” if it opted to levy tariffs at the same rate as the EU.
According estimates in this report by Civitas, the EU would pay £12.9 billion in UK tariffs while the UK would pay around £5.2 billion in EU tariffs. So the UK could be a net beneficiary of the new arrangement by £7.7 billion.
Then, of course, there’s that £39 billion…
This is the sum Theresa May’s negotiators foolishly promised the EU to sweeten the deal that never happened. Under a No Deal Brexit the UK would not be obliged to pay a penny of this. Lance Forman – proprietor of Britain’s oldest salmon smokey and an ardent Brexiteer — calculates that this amounts to £1,400 for every household in the UK.
If Theresa May really wanted to persuade the nation that No Deal Brexit was a good thing, all she’d need to do is hand it out, tax-free of course, to every household. And why not? It’s our money, after all.
It gets better…
Here, according to a report by Economists for Free Trade (EFT), are the four major potential gains from “Clean Brexit” – aka No Deal.
- Free trade with non-EU countries currently subject to high EU protection would bring prices down. For example, as Tim Martin of Wetherspoons has pointed out, New Zealand and Australian wine will become cheaper.
- EU regulation has reduced UK GDP by around 6 percent. Probably one-third of this can be reversed, giving the UK a projected gain of 2 percent GDP.
- EU unskilled immigrants — which the UK currently has no option but to accept — cost the taxpayer a fortune in tax credits and other benefits. EFT estimates the saving could be worth 0.2 percent of GDP.
- Ending the UK’s Budget contribution to the EU will save around 0.6 percent of GDP
Added together, these could add about 7 percent to UK GDP.
That’s not what the Remainers say. They say that prices will go UP.
Yes, of course they do. This is Project Fear 3.0. (Or is it 4.0? So much fear!) This depends on the obvious fallacy that the UK will act against its own interests by setting punitively high tariffs on imports from the EU. According to one scaremongering prediction by “senior executives from the big four supermarkets” (i.e. corporatist Remainer stooges) “the biggest tariffs on imports from the EU could include cheese, up by 44 percent, beef, up by 40 percent, and chicken up by 22 percent.”
Well, are they wrong?
The Customs Union of the EEC (precursor to the EU) was created to protect Continental producer interests — French farmers and cheesemakers, German car makers, Italian clothing and shoe manufacturers — so the tariffs in areas like dairy and animal products are set unusually high.
After Brexit, the UK could keep these tariffs in order to protect — say — its sheep farmers from being undercut by cheaper imports from New Zealand, or its beef farmers who would suddenly find themselves slapped with tariffs of 40 percent. In practice, though, any rational UK government will strike a balance between the interests of consumers (who want lower prices) and of producers (such as Welsh sheep farmers; Scottish beef farmers) who naturally don’t want their livelihoods destroyed.
That’s the advantage of having commercial autonomy: suddenly it will be up to the UK government, not Brussels to decide how high it wants its tariffs. The notion that only EU bureaucrats have the wit to ensure smooth, fair trading is so fatuous, weird and self-defeating that only #FBPE Europhile loons could harbour it. In reality, there are perfectly simple solutions to the tariff issue.
On beef (and other meat produce), Martin Howe QC offers the solution:
The answer is to set a new lower UK tariff applied equally to beef imports from both the EU27 and the rest of the world, in order to maintain the price of beef in the UK domestic market at its current level.
Oh, and sheep…
The same applies to tariffs on sheep, which Andrew Neil — properly playing devil’s advocate — mischievously chose to confront me with on the show because they are anomalously extreme and therefore most conducive to Remain’s hysterical case against WTO. Without the protection of the EU’s Single Market won’t our sheep industry just die?
The UK, it’s true, is the largest producer of sheep (and goat) meat in the European Union, contributing 40 percent of all meat production. The UK sheep meat market is worth around £2.2 billion (2015), 64 percent is consumed domestically. So let’s say that the export market is worth about £880 million and let’s assume — unrealistically, of course — that this market will be utterly destroyed once we leave the bosom of the EU.
Well, the solution is simple, isn’t it? If we value our sheep farming communities — as I think we do — we either adjust our tariffs as per beef above; or we cushion their economic loss with subsidies; or we encourage a massive Buy British Lamb campaign — all things the UK will amply be able to afford with an unallocated £39 billion in its coffers.
Yes, it’s true we couldn’t achieve all of the savings possible from reducing tariffs unilaterally and receive all of the extra revenue possible from taxing imports at EU rates at the same time, but the whole point of Brexit is that British voters should be empowered to decide when we slash tariffs to help consumers and when we retain or even increase tariffs to help producers, or offer support through alternative strategies, according to our needs — without being constrained by the EU’s inflexible, one-size-fits-all approach.
A sovereign government can look after its people and its economy as it chooses.
So what are the Remainers bleating about?
In a nutshell, their case rests on a number of heroic assumptions which, when added together, are unlikely almost to the point of impossibility.
They assume that:
1. The WTO has no real power to enforce free and fair trade for its members.
2. That the European Union will pursue a vengeful, scorched earth policy — e.g. non-tariff barriers, violently enforced — which will hurt its member-states more than the UK.
3. That businesses aren’t in the business of doing business and that they won’t pursue every means possible to carry on trading frictionlessly and cheaply.
4. That the UK, on regaining its sovereignty, will flap about like a headless chicken and prove quite incapable of making sensible decisions on trade without EU bureaucrats telling it what to do.
They hate and fear No Deal Brexit on WTO rules because it is the closest to what their Brexit enemies voted for in the June 2016 Referendum. All these claims of the disasters that will ensue if the UK “crashes out” on No Deal terms are pure wishful thinking. They tell you far more about the mindset of the hysterics making these claims than they do about economic reality.
Ah but there’s no smoke without fire. You’re not seriously trying to claim that all the concerns raised by serious, informed experts about the chaos of a No Deal Brexit are completely without foundation?
Look, this is really about politics — particularly visceral, emotive politics at that — and both sides have articulate advocates with a burning, vested interest in ridiculing the other side’s position into oblivion. It would be glib and unrealistic to say that there will be no transitional problems leaving a Customs Union after 40 years in order become a global free trader. However, the Project Fear 3.0 stories of an approaching “cliff edge” are pure propaganda.
And very effective propaganda too. The vast majority of people in this debate have picked their side based on a mix of gut feeling, personal ideology and circumstances, not on the kind of how-many-angels-can-dance-on-the-head-of-a-pin minutiae I’ve explored in this piece.
Most Brexiteers, for example, will have tended to take on trust the considered opinion of experts like Lord Lilley, Martin Howe QC, Ruth Lea, Patrick Minford, and Jacob Rees-Mogg that No Deal is the best option — without feeling the need to acquaint themselves in any detail with the nuances of WTO. Because why should they?
I have a lot of sympathy for this position. We can’t all be experts on everything. On a matter like this which involves wading through small print, we not unreasonably think this a job best left to trusted representatives with a background in international law or finance or politics.
Most Remainers, on the other hand, know just as little about WTO terms as most Brexiteers. The difference is that their experts — from a vast, Remain-dominated Establishment ranging from the BBC and the Treasury to sundry EU apparatchiks, Big Business and innumerable globalist institutions such as the International Monetary Fund — tell a completely different story. Remainers believe it with fervent passion not because they know better but simply because it confirms all their worst prejudices.
So what you’re saying is that there IS going to be chaos but you’re too biased to admit it?
On the contrary. I’m saying that having spent most of this weekend boning up on the subject, I find myself believing more strongly than ever that No Deal is the UK’s best hope for a prosperous, stable future which honours the Referendum vote.
I’m saying that I’ve read and absorbed documents like Lord Lilley’s 30 Truths About Leaving on WTO Terms and that I find the arguments more compelling than anything I’ve heard from Remainers.
I’d love to be able to rehearse these arguments in more detail here, but I see that this piece is already approaching 2,000 words which is more than enough for one article.
Suffice to say that the paper makes an informed, highly persuasive case that the UK will benefit hugely from a No Deal Brexit on WTO terms, that the problems of doing so have been grossly exaggerated and are eminently soluble, that the UK (and the EU) is already far better prepared for this scenario than either party (for Remain propaganda reasons) will admit.
It covers everything from the “micro-agreements” Remainers assure us are going to make genuine free trade impossible, to all the stories about delays to imports and exports and about problems with planes, hauliers, product compliance, financial transactions etc.
It demonstrates why there will be no shortages of medicines, no shortages of food or sandwiches; no problems with Just-in-Time deliveries; no problems with clean water; no problems with flights in and out of the UK. Even cheap roaming charges for mobile phone users are safe…
Do read the document if you’ve time. But I don’t blame you if haven’t. It’s in the nature of living in a complex world with far too much information to sift that we tend to contract out our expertise to preferred specialists, much as in days of yore we might have chosen our favourite knights to represent our cause in the lists.
If you can’t be bothered to do your homework on this issue, just take it from me: this is one of those issues not unlike global warming. There is a vast, well-funded Establishment determined to protect its interests at whatever cost — even to the point of getting lots of “prestige” figures (economists, heads of big business, etc) to tell barefaced lies about the imaginary disasters that lie ahead if we don’t do what they say.
I just ruined my weekend wading through this incredibly boring detail so that you don’t have to.
Last word
If I went back on BBC This Week with the knowledge I have now, I would almost undoubtedly have avoided my car crash experience with Andrew Neil. My biggest regret about not having boned up on the subject is that I handed to the Remain camp an easy ‘gotcha’ moment over which — as I’ve said before — they’ll be pleasuring themselves frenziedly for weeks and months on end.
But I’m sorry, Remainers: me making a dick of myself on TV is really, really not the same thing as your being proved right. It simply means that a journalist on a particular night did not have the information available in his head to answer some pertinent questions. It really doesn’t mean that there are no answers to those questions. The fact that so many Remainers think it does speaks volumes about their unhinged stupidity.
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