Failing to agree free trade terms with the UK post-Brexit and reverting to WTO rules would cost EU exporters £13 billion

Failing to agree free trade terms with the UK post-Brexit and reverting to WTO rules would cost EU exporters £13 billion

Justin Protts the author of the briefing Potential post-Brexit tariff costs for EU-UK trade which is published today.

Months have passed since the referendum and we are still at a point where EU leaders and political commentators are either so incensed or so bewildered by the UK’s vote to leave the EU that they still cannot engage in honest or productive discussions.

The constant stream of warnings emanating from EU leaders reflects a dogmatic determination to either impose free movement on the UK or to punish the UK by restricting market access. Martin Schulz, President of the European Parliament, class=”qowt-stl-Hyperlink”>reiterated the position on free movement, as has German Chancellor class=”qowt-stl-Hyperlink”>Angela Merkel. But the French President, François Hollande, made the EU’s negotiating position absolutely clear. class=”qowt-stl-Hyperlink”>He said: “There must be a threat, there must be a risk, there must be a price.”

As Theresa May prepares to invoke Article 50 and negotiate the UK’s independence, the message from Europe would appear to be clear: Britain must be punished.

But if the 27 countries of the EU insist on putting up barriers to trade, the punishment will not be limited to the UK. The EU is going to hurt, too.

At Civitas we recently explored class=”qowt-stl-Hyperlink”>the impact on jobs that reduced trade would have on the UK and EU economies, showing that EU countries had more to lose than Britain.

In a new study, which we class=”qowt-stl-Hyperlink”>publish today, we look at the cost of tariff barriers for exporters on both sides of the English Channel.

Our estimates show that if UK-EU trade reverted to World Trade Organisation tariff barriers, EU exporters would be liable to pay as much as £12.9 billion a year on goods sold to Britain – more than twice the £5.2 billion in tariff costs that the UK could face on EU-bound exports.

German businesses exporting to the UK could face as much as £3.4 billion in tariff costs compared to just £0.9 billion for UK businesses exporting to Germany. Looking at this on a sector-by-sector basis, car manufacturers in Europe would suffer the most, facing the cost of £3.9 billion in tariffs on goods exported to the UK – three times the £1.3 billion in tariffs that could hit UK car manufacturers.

On a country-by-country basis, exporters in 22 EU countries benefit more from bilateral free trade with the UK than UK exporters’ benefits from free trade with each of those countries.

The introduction of tariffs, and the failure to secure a trade deal, could have significant negative consequences for businesses across the entire European Union, not just the UK.

The UK government has made it clear that it wants to keep trade as open as possible, that it wants to do the best by the people of the UK and of Europe. But the people of the UK voted to leave the European Union. That result must be respected and so the UK must be allowed to govern itself in all areas, including trade and migration.

But there is no good reason why this should come at the cost of co-operation on trade, on security, or on any of the international and global challenges the world faces today. The EU and the 27 remaining countries must accept the result of the referendum and refrain from retaliating in a manner that will inflict economic damage across the entire continent.

If the EU decides to turn its back on its neighbours and to turn its back on free trade, it will be turning its back on democracy and on the economic interests of the people of Europe.