How Britain Will React to a WTO-Based Brexit

• Published in: The Economists' voice 2019-01, Vol.16 (1)
• Main Author: Minford, Patrick
• Format: Article
• Language: English
• Subjects: Brexit; trade; World Trade Organisation
• ISSN: 2194-6167; 1553-3832
• DOI: 10.1515/ev-2019-0027

The government of Boris Johnson has restarted negotiations with the EU over the proposed Withdrawal Agreement. If these fail the UK will exit without an agreed trade deal. This exit would not however be ‘lawless’, with unknown and chaotic consequences. Trade is governed in both the UK and the EU by WTO rules and these are highly prescriptive, preventing both sides from imposing border hold-ups and imposing arbitrary new standards on exporters whose products have long satisfied existing standards. Chaos produced by such state behaviour would be illegal and so is highly unlikely. Consequently such a ‘no deal’ would lead to the speediest Brexit, and avoid any UK financial contribution. It would also allow the rapid conclusion of FTAs with the US and other major trading partners, driving UK prices to world levels rapidly. Without an EU FTA tariffs would have to be imposed by both sides; their incidence would fall on EU traders who would have to match the world prices now prevailing in the UK market. Technically therefore no deal is the UK’s best option while it is damaging to the EU. However undoubtedly the UK would welcome a deal for reasons of good neighbourliness.