The Foreign Secretary, Jeremy Hunt, says the chances of a “no deal” Brexit are “increasing by the day”. The International Trade Secretary, Liam Fox, has been quoted as saying the chances of no deal are “60-40”. And the governor of the Bank of England, Mark Carney, says they are “uncomfortably high.”
There seems to be a pattern developing here.
Recent debate about no deal – which would mean the UK leaving the European Union (EU) next year without any withdrawal agreement – has focused on the fact that the UK would automatically fall back on World Trade Organization (WTO) trade rules. Those rules would apply automatically to UK trade with the EU and other countries with which the EU has free-trade deals.
So what would WTO rules mean in practice?
First, the basics. What is the WTO?
The WTO is the place where countries negotiate the rules of international trade – 164 countries are members and, if they don’t have free trade agreements with each other, they trade under “WTO rules”.
Every WTO member has a list of tariffs (taxes on imports of goods) and quotas (limits on the number of goods) that they apply to other countries. These are known as their WTO schedules.
The average EU tariff is pretty low (about 2.6% for non-agricultural products)- but, in some sectors, tariffs can be quite high.
Under WTO rules, cars and car parts, for example, would be taxed at 10% every time they crossed the UK-EU border. And agricultural tariffs are significantly higher, rising to an average of over 35% for dairy products.
After Brexit, the UK could choose to lower tariffs or waive them altogether, in an attempt to stimulate free trade. That could mean some cheaper products coming into the country for consumers but it could also risk driving some UK producers out of business.
It’s important to remember that, under the WTO’s “most favoured nation” rules, the UK couldn’t lower tariffs for the EU, or any specific country, alone. It would have to treat every other WTO member around the world in the same way.
What about other checks and costs?
These are what are known as “non-tariff barriers” and include things such as product standards and safety regulations. Once the UK is no longer part of the EU, there needs to be a system for mutually recognising each other’s standards and regulations. Under a no deal Brexit this may not happen, at least not immediately.
You can argue that it might seem unreasonable if the EU was to go from imposing no checks on UK products at borders the day before Brexit, to insisting on all sorts of checks one day later, even though the UK hadn’t changed any of its rules and regulations.
Doesn’t the UK already trade with many countries on WTO rules?
Yes it does, as part of the EU.
Examples include the United States and China, Brazil and Australia. In fact, it’s any country with which the EU (and therefore the UK) has not signed a free trade agreement. That’s when WTO rules kick in.
But it’s more complicated than that. Those big economies don’t just rely on WTO rules – they also have a series of bilateral agreements with the EU on top of that.
The US, for example, has at leadt twebty agreements with the EU that help regulate specific areas of trade, covering everything from wine and bananas to insurance and energy-efficiency labelling.
In the event of a no deal Brexit, (and an abrupt change in relations), the UK could well have no such deals in place and would be in new territory. Both sides would make efforts to introduce some stopgap measures to keep their economies moving but a last-minute breakdown in negotiations would prove very difficult.
It’s also worth remembering that 44% of all UK exports in 2017 went to the European Union on free trade terms, as part of the single market. That’s down from 55% in 2006 but the EU is still by far the largest UK export market.
“Clearly this is not going to be a situation where all trade stops and there is collapse in terms of the economy as a whole,” said the WTO’s director general, Roberto Azevedo, when he was asked in a BBC interview last year about the potential effect of a hard Brexit on the UK and European economies.
“But it’s not going to be a walk in the park. It’s not like nothing will happen. There will be an impact. The tendency is that prices will go up of course, [because] you have to absorb the cost of that disruption.”
Some people say it won’t be a problem
Yes, some supporters of Brexit argue that no deal is the best way forward, because it would allow the UK to pursue an independent trade policy immediately – to go off and start signing its own trade deals.
That is not the government’s view or the EU’s view, nor is it the view of the vast majority of businesses.
A number of recent articles by supporters of Brexit have made reference to the WTO:s Trade Facilitation Agreement (TFA), which came into force in 2017, arguing that it obliges the EU to treat the UK fairly.
But that doesn’t stand up to scrutiny.
The TFA is aimed primarily at less developed countries and it seeks to encourage transparency and streamline bureaucratic procedures.
It does mean the EU cannot discriminate against the UK but it does not mean the UK can expect to be treated in the same way that it is now.
The UK would be treated like any other third country – and in the absence of any trade agreement, that means tariffs and border checks.
Will the UK have to re-join the WTO after Brexit?
No, it is already a member in its own right.
But it will have to agree a new list of tariff schedules once it is no longer part of the EU.
Like many other parts of the Brexit negotiations, that could be harder than it sounds.
The UK has already submitted documents to the WTO in Geneva, which say that it wants to make a few technical changes to its current commitments as an EU member but otherwise leave them unchanged.
But other countries will want to make sure they are no worse off than they are now after Brexit, while the UK is seeking the same schedules even though after leaving the EU it will represent a much smaller market.
One problem for both the UK and the EU surrounds proposals they have submitted for splitting up their current quotas after Brexit, for the import of sensitive agricultural products such as beef, lamb and sugar from elsewhere in the world. These proposals have already attracted complaints from other countries, including the United States.
And time is running rather short to complete what are always complex negotiations, in which every country will stick up for its own interests.
With a bit of goodwill, the UK hopes it will be able to resolve the debate about WTO schedules. But one of the dangers of a no deal Brexit is that there might not be much goodwill around, especially if it meant that the UK was refusing to pay the more than £39bn it has provisionally agreed it owes the EU as it leaves.
So this is a technical issue, but politics will also play a big role.
Source: Chris Morris, BBC
Chinese authorities as of August 1 have been accepting electronic documents (eDocs) at the point of customs declaration, ceasing to require paper documents as a strict prerequisite for clearance. Until recently, Chinese Customs required paper output of relevant trade documentation originating from online platforms (such as Bills of Lading, Commercial Invoices, Packing Lists, Certificates or Origin etc.).
London-based paperless trade platform provider essDOCS said the news comes from a recent announcement by China’s General Administration of Customs.
It said the Administration noted that the decision is intended “to further promote the convenience of foreign trade and improve the efficiency of customs clearance at ports”.
The General Administration mentions that “if the documents issued by the relevant competent authorities or agencies at home and abroad are used for online verification or internet access, only the document number or a scanned upload is required.”
The announcement adds that certain requirements will need to be met in order to legally accept eDocs for clearance, whereby “if network verification has not been implemented and the Internet cannot be queried, a scanned copy […] is required.”
With the recent decision taking full effect, essDOCS anticipates a significant acceleration of eDocs uptake in China and expect major efficiency gains for our users involved in trades into and out of the Asian nation.
Swedish supertalent Armand Duplantis won the pole vault gold medal in the Atketics Track and Field European Championship in Berlin tonight. He is 17 years old!
In the, according to experts, best pole vault competition ever Duplants broke the Junior World record and the magic 6 meter border by winning on 6.05 meters. The tenth person jumping over 6 meters ever. The first teenager to do so.
6.05 is the second best outdoor pole vault result ever in history, only 9 cm from Sergey Bubkas impissible record.
In this unbelievable competition Armand beat several of the greatest pole vaulters ever – including hos own childhood idol (pole vault legend) Renaud Lavillene from France who won the bronze medal on 5.95.
Duplantis took 5.90, his personal record 5.95, 6 meters and 6.05 meters all in his first attempts.
Now the super talent is celebrated worldwide as the biggest pole vault talent since Sergei Bubka and the new super star of track and field after Usain Bolt. Amazing.
My KGH colleague Lovisa Lindh, who won the 800 meters running ronze medal in the last European Championship, did inspite of a difficult season with inburies, another great championship and run the final also this time on 800 meters. Very well done Lovisa!
How Brazil has been targeted by international trade barriers?
There are many things I love with Brazil; like the people, the nature, the weather, football, samba, music….and Pão de queijo.
Pão de queijo, the traditional, gluten-free Brazilian chewy cheese roll, has been making waves in New York City. A number of restaurants serving this signature food from the state of Minas Gerais have popped up over the past few years.
In the European Union, however, they are banned. Labeled as a dairy product, pão de queijo can’t be exported to the EU – even though, by the group’s own rules, the fact that the product contains only 20 percent of milk derivatives should prevent pão de queijo from being tagged as dairy.
This is a great tragedy – not only since it is one of my personal favourite food products in the world, but also since it is exactly the type of national unique products should shape the basis of an increased Brazilian in international trade and participataion in te global supply chainz
That is just one of the 20 trade barriers identified by Brazil’s National Confederation of Industry (CNI) – 17 of which have been imposed by members of the G-20, the group of the world’s 19 biggest economies plus the European Union. CNI sponsored and supported our work with AEO Brazil 2015-2018.
According to data from Fundação Getulio Vargas, the country’s leading think tank, Brazil loses around 14 percent of its exports due to trade barriers and sanitary controls – amounting to USD 30.5 billion in 2017 alone. Some of the country’s main exports, such as sugar, meat, orange juice, and electronics, are the main targets.
While the European Union has imposed restrictions on Brazilian meat after a series of sanitary scandals, some of the restrictions smack of pure protectionism, such as the pão de queijo example.
Let’s hope that that this will change in the near future, even though emerging and increasing trade war measures hangs over us as rain clouds for the moment.
I want to start my days with Pão de queijo, also whem I am not in Brazil – but home in Europe.
World Trade Organization Director General, Roberto Azevedo, in today’s papers: “I am calling on everyone who believes in trade as a force for good, and who believes that global trade rules are an essential foundation for econom and prosperity, to speak up. Silence could prove as damaging as actions that lead to a trade war.”
Global trade is under threat. Whether or not you call the current situation a trade war, certainly the first shots have been fired. This calls for our attention, and most importantly, our action.
WTO data shows a marked escalation of trade-restriction measures over the last six months. A number of import-facilitating measures were also recorded during the same period; but crucially the value of trade covered by these measures is falling, whereas the coverage of the restrictive measures is rising rapidly. Restrictive measures can include tariffs, quotas and stricter customs regulations.
The situation is extremely serious. Reciprocal trade restrictions cannot be the new normal. A continued escalation would risk a major economic impact, threatening jobs and growth in all countries, hitting the poorest hardest.
There is a responsibility on the whole international community to help resolve these issues. I have been consulting with governments and leaders around the world, urging dialogue and exploring steps to unwind the current situation. But I have also been talking to a wider range of contacts across civil society – including parliaments, business, think tanks and the media – to raise awareness of what is at stake. I am calling on everyone who believes in trade as a force for good, and who believes that global trade rules are an essential foundation for economic stability and prosperity, to speak up. Silence could prove as damaging as actions that lead to a trade war.
There have been some signs of progress. People are beginning to raise their voices. Business leaders and associations are calling on governments to refrain from putting up new barriers. They are asking for governments to negotiate and find solutions. We are seeing a wider understanding that higher tariffs mean higher prices and lower salaries in real terms, and that greater uncertainty risks investors pulling back and jobs being lost. And from leaders around the world, we are seeing much greater engagement in the WTO. Instead of tearing it up, they want to strengthen the system and improve it. This could potentially help us to defuse tensions and find a path out of the current crisis in global trade.
The prospect of a “no-deal Brexit” appears to have grown after the European Union’s negotiator rejected last month central elements of Prime Minister Theresa May’s proposals for a new trade agreement.
Bank of England Governor Mark Carney said on Friday the possibility of Britain leaving the EU without striking any deal with Brussels was “uncomfortably high”. Trade minister Liam Fox has put the chances at 60-40.
May’s office repeated on Monday she believed Britain would negotiate a good agreement but that “no deal is better than a bad deal”.
The pound hit an 11-month low against the dollar on Monday with traders linking this partly to the possibility of no deal. It rose modestly on Tuesday.
Following are some questions and answers about what a no-deal Brexit might mean.
What will happen if Britain and the EU fail to get a deal?
Britain is a member of the World Trade Organization so tariffs and other terms governing its trade with the EU would be set under WTO rules.
EU tariffs are quite low, averaging about 5 percent, but they are higher for some important British exports including cars which would face a 10 percent tariff.
Exporters could face other barriers including complying with EU standards for goods such as food and electrical products. British exports might get stuck at the EU border.
Many British services firms, especially in the giant financial industry, would probably face more restrictions on doing business in the bloc than under May’s preferred deal.
Under WTO rules Britain and the EU could not offer each other low tariffs, quick border checks, or close cooperation on services, unless they offered these to all WTO member states.
What’s the downside of a no-deal Brexit?
Most economists say the higher the barriers are to trade with the EU, the bigger the hit for Britain.
The National Institute for Economic and Social Research says a no-deal Brexit would cost each person in Britain 800 pounds a year more than the effect of a “soft Brexit” under which Britain had ties to the EU similar to Norway’s. May’s plan would cost 500 pounds per person a year more than a soft Brexit.
The impact on Britain’s economy could be bigger still if business investment falls, aggravating slow productivity growth, or a fall in migration causes labour shortages.
What’s the upside to a no-deal Brexit?
Brexit supporters argue that WTO rules would help Britain’s economy by making it easier for London to strike its own trade deals with faster-growing countries and regions beyond Europe.
However, this would take years and Britain on its own might struggle to secure favourable terms from the likes of the United States and China.
Ruth Lea, a pro-Brexit economist, said the concerns about border delays were overblown, because countries outside the EU typically declare their exports online to speed their passage.
Brexit backers also say Britain could save its estimated EU divorce bill of around 39 billion pounds and spend this on public services instead.
Will a no-deal Brexit mean chaos?
With less than eight months until Britain leaves the EU, time is short to negotiate an agreement or prepare both sides for the possibility of no deal.
Any disorderly Brexit risks delays at borders as officials struggle with a sudden introduction of new customs rules.
Britain’s government is drawing up plans to stockpile medicines and blood products before a possible no-deal Brexit.
In the worst-case scenario, Britain would fall out of EU arrangements such as the U.S.-EU aviation Open Skies agreement, possibly causing transport chaos. Financial derivatives trading would face legal uncertainty.
EU citizens in Britain and British citizens in the EU would risk losing residency and other rights.
Given the potential for disruption, the EU might offer to extend the Brexit negotiation period if there were some prospect of a deal, Malcolm Barr, a JP Morgan economist, said.
“The EU knows that a no-deal Brexit would hurt all involved and would be an enormously complex problem to manage,” he said.
Link to article: Reuters: No-Deal Brexit