A No Deal Brexit Isn’t Ideal, But It’ll Be No Disaster

By |2019-08-22T07:48:18+00:00August 22nd, 2019|Comment|

Last time I wrote an article for Bournbrook my musings stirred up quite a fierce debate between Leave and Remain voters in the comments and across social media. This to me is an illustration of the divided Britain we see everywhere over the issue of Brexit, but likewise other issues too.

A number of these comments missed the entire point of my article which was about failures in the negotiations, the death of the Withdrawal Agreement and the blame that lies with both the UK and EU (but especially the latter). The article was not a ringing endorsement of a No Deal exit and nor will this one be. However, because the fear of a No Deal is dominating the Brexit debate more than ever before (due to its imminence which I explained previously), it seems we must return to the issue.

Here, I will focus in on the many problems and opportunities No Deal presents and, of course, debunk the continuation of ‘Project Fear’ which is banging the drum of economic oblivion – this has occurred since time immemorial, whenever an economic change has dared to take place.

Before we go into what a WTO exit means, I’d like reiterate a point I think many fail to recognise: a No Deal exit is not the ideal Brexit scenario but it is the default. The referendum was a win for Leave and the common argument seems to be that this result is invalidated because it did not make mention of leaving without a withdrawal agreement. That is not strictly true. The referendum did not focus on a deal, or indeed the lack of one, it merely focused on the question of leaving itself.

Leaving, to anyone who believes in Brexit truly, means exiting both the Single Market and the Customs Union. This is something WTO terms achieves most readily, and Philip Hammond himself said it would be the most honest and clean way to exit the EU. WTO terms were discussed by David Cameron in the referendum, and while some voters may not have confronted the implications of WTO terms, it does not invalidate the result or make a No Deal Brexit undemocratic.

In any election, issues are overlooked, but a vote is a vote regardless of the understanding of the voter who cast that vote.

This is a very simple thing to grasp, but the Burke elitist-style democrats have hijacked the argument, turning this into a fierce debate about the nature of democracy itself. I will not veer into this debate!

So, the referendum was about simply leaving. The following election in 2017 was again about Brexit, with both parties promising to leave the Single Market and Customs Union. No Deal was brought up in this election very explicitly with neither party ever saying they would not accept it, although Labour made its preference for a deal clear as did the Conservatives. However, the main two parties were committed to delivering the Brexit result and, at the end of the day, pledged to take us out. They then went on to win up to 80% of the total votes cast in 2017. MPs seemed happy to implement both the EU Withdrawal Bill and the Article 50 act by a huge majority which set our leave date in law, only subject to change via an extension. This was a date that meant we left with or without a deal. If MPs were against us leaving altogether (as shown by their not only future objection to a No Deal, but a deal too) then they should not have signed either of these acts into law. But they did, and now they must accept the implications of that decision and the promise they made to the British people to leave.

Until that result is delivered upon, the mandate to Leave remains and no further vote should be called until we leave (as for my arguments against another referendum, refer to my earlier works).

So not only did the country vote to Leave, the country voted to uphold that result in 2017 and the MPs declared that they would do the same, before making a woeful U-turn. However, the will to leave the EU does not end there. The EU elections saw the Brexit Party come out clearly on top and, contrary to popular belief, Remain parties did not gain the largest vote share combined.

Figures that claimed this nonsense neglected to add the Conservative, DUP and English Democrat Party vote. The two former parties wanted a deal primarily, but neither ruled out No Deal and, as I said, a party explicitly endorsing WTO terms topped the poll. From this we can conclude that a No Deal exit is the democratic and default position that must be enacted in the absence of a deal.

But what does a WTO exit actually mean for the UK?

There is no doubt that a No Deal exit is no ideal scenario. The economic turbulence it would cause is a frank fact. UK businesses have been trading on EU terms for a generation and have become used to the customs rules already in place. Our entire economy is entangled deeply with the EU’s markets and severing ties with those trading terms in the space of twenty-four hours will without a doubt cause issues. However, the main crux of my argument, as the title implies, is that a WTO exit will not be a disaster for the economically versatile UK economy. Any disruption at ports or with business will be a short-term bug bare that can easily be reversed and could actually go onto to grow the UK economy, not shrink it. WTO terms are often painted as entirely negative when it comes to tariff costs. News reporters, Remain talking heads and even the Treasury under Philip Hammond droned on about the increase in tariffs on many different goods that an absence of an FTA causes. However, this neglects the full picture. WTO terms are not a tariff hitting blow for the UK, they are actually somewhat of a mixed bag. Tariffs on some food goods, a plethora of clothing, footwear, carpets, televisions and even batteries will be sliced to zero. This is just a mere small set of items that will cost the British consumer less in the long run.

There is certainly no hiding from the reality that tariffs will increase on many items too and this is not a favourable prospect. However, there are quite a few ways to mitigate this fear. One is to simply start negotiations as soon as possible on an FTA with the EU. I touched upon the fragility of the Eurozone in my last article, and on how the German economy, the centre of the EU, is suffering somewhat. A No Deal exit will not be a desirable outcome for them. Ireland, too, could face thousands of job losses and it does not have the same preparations in place as many do. This will mean an FTA will be a sure priority for the EU as well as the UK, with the desire to free up that vital trade once again.

If it does not act, the EU will only have itself to blame when the impacts really start to be felt on the continent. Of course, the UK too could suffer. However, an FTA could take a long period to negotiate and, in the meantime, those pesky tariffs could continue to impact the markets. This is where an already proposed solution could really help. Remainers will curse at the screen when I bring it up, but Article 24 on the General Agreement on Tariffs and Trade treaty can help suspend all tariffs for a two-year period in which intense negotiations on a new trading relationship with the EU can begin. The common criticism of this, outlined in the infamous 5c paragraph, is that it will require agreement on all side which many critics say could take time, or indeed be impossible. However, there is no need to object to this move, there is no impetus on any side to do so. The logical goal would be to ensure the negative economic impacts of a No Deal exit are prevented, so this remains at least a potential option in the UK’s armoury and reinforces the point that a clean break will be no disaster for either side.

The issue of trade is important but one thing many fail to consider is the preparation the UK government has already done. Over two billion pounds have been allocated by the Treasury to prepare. Ports have been prepped (with Calais maintaining the line that they are ready also), traffic disruption is already being anticipated and ready to be avoided, stockpiling of medicine is taking place and the government is issuing information to business owners and the wider population about the raw facts of a clean-break exit.

With many fears regarding flights and mobile phone roaming already debunked, the UK government is doing all it can to ease the situation and this preparation cannot be denied or taken out of the equation, because it will change the nature of what some say is the worst scenario (outlined in the now false Yellowhammer leak that was compiled under Theresa May’s administration). This is only scratching the surface and I’m sure more will be revealed as the UK prepares itself for what will be a huge and impactful change.

Returning to the issue of trade, the UK will actually not be entirely on WTO terms. This is an assumption many make. But Liam Fox and now Liz Truss of the Trade Department have secured continuity deals with non-EU member states. These deals mean that free trade will continue with a number of countries. Currently, there are thirteen deals, but that does not mean thirteen countries will be operating tariff free in a no deal scenario; the figure is actually closer to thirty-eight, with most of the deals encompassing multiple countries.

These countries include Barbados, Costa Rica, Central America and even Guyana, just to name a few.

As we speak, the Trade Department is ensuring free trade continues to operate with the entire South African Customs Union which accounts for six countries alone. This is a fact that is almost completely neglected in public debate about a no deal exit and I think it lifts a massive economic burden upon the strong and lofty shoulders of our great United Kingdom.

Following on from that point, an independent UK can negotiate these deals entirely within its own interests. Trade deals conducted by the EU are slow and have to make sure that all member states benefit. This can lead to situations like the Mercosur deal, which Ireland was dissatisfied with, severing the false harmonious view of relations between Dublin and Brussels. The UK can then ensure that these deals help businesses in the UK, increasing exports as well as imports. This could be aided by a potential skills-based migratory system that would bring in the people needed to realise our new potential economic future as a global trading power.

This, in my eyes, makes the short-term impacts of a clean break seem like small fish when a whole plethora of opportunities await us. The Withdrawal Agreement, which I admit to previously endorsing, slows down this impact dramatically. It enables the ECJ to keep its jurisdiction, locking the UK in like a ‘vassal’ state – to quote Jacob Rees-Mogg- and it contains the toxic backstop (which contrary to popular belief, is not the only way to maintain a seamless border, an issue I may address another time).

A WTO exit is the cleanest, best and most democratic way to secure our exit from the EU and Boris Johnson has a good chance of succeeding against the antics of Parliament and securing our hard-fought exit.

To close off, I think it’s about time I address the elephant in the room: the US trade deal. This is where Project Fear seems to have really been allowed to seize the narrative. Before the discussions or planning had even taken place, there was talk of chlorinated chicken, lower food standards, chemical madness, cheap imports and a privatised NHS. None of this will be a reality and none of it has even been discussed or formally proposed.

EU rules allow chlorinated vegetables as it is, and consumers can just as easily not buy chlorinated chicken if this outlandish prospect even comes true. The NHS is also not on the table, as every single side of the debate has insisted despite the misguided slipup of President Trump during his state visit, which he backtracked on likely after his team informed him of what the NHS actually was (I will assume he may not have even known).The UK government has also pledged to keep its food standards the same, and even to improve on them, something only made possible if we exit the EU in a full fashion.

So that’s the rundown of a WTO exit. I believe that trading freely with a partner that accounts for fifteen per cent of our trade should be a goal we aspire too, even if it’s just one of many opportunities as more and more close friends and allies talk of ambitions for similar deals. There’s much more to be said about a clean break exit, and this article will likely enflame passions on both sides of the aisle but that is the beauty of politics; it represents human passion in an intellectual form. Just keep it civil, will you?

Photo by Tiocfaidh ár lá 1916 on Flickr.

One Comment

  1. bestringtoness.com September 10, 2019 at 2:57 am - Reply

    All 27 EU leaders would have to unanimously agree to such an extension (they might, they might not, they may set a different date, who knows) and Parliament will also have to approve the extension that Johnson, or some other prime minister, brings back. It can’t stop a no-deal Brexit, but it binds the prime minister, by law, to at least go back to the EU and try to get an extension.

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