Preparing for the possibility of trading with the EU under WTO rules is a no-brainer

Preparing for the possibility of trading with the EU under WTO rules is a no-brainer

Of course there should be a clear focus on what UK business needs to do for when the UK leaves the EU. But for all the complexity, and the different opinions, the choices are relatively straightforward.

Either business should prepare for a new trade deal, which will allow relations to continue more or less as now with similar mutually-beneficial relationships – these would reward businesses and the people on both sides of the Channel.

Alternatively, business should prepare for the same WTO rules under which the UK currently conducts most of its trade, which would reward businesses and people living all over the world.

In view of this simple choice, it makes sense that the UK should have a team looking at the details of how things would work under WTO rules, should it come to it.

That way, at the eleventh hour, the UK Government could make a clear choice between the two. Either the EU27 will have agreed a route which will be better for everyone than WTO rules, or it will still be trying to punish the UK for having the temerity to choose its own path.

Given the simplicity of the choice, it seems hard to understand why some wouldn’t want that second route to be properly explored. What have they got to lose? Unless, of course, they are fearful that under inspection the WTO route will not look so bad. Perhaps instead they crave a self-inflicted punishment deal to fulfil their doom prophecies?

The reality, as Policy Exchange’s debate “Who’s afraid of no deal? Trade policy post-Brexit” so clearly illustrates is that there will be no cliff edge. The vast majority of the world’s trade is conducted under WTO rules.

Clearly these issues will continue to be kicked about. And many in the EU, and many Remainers, may think that delaying the trade talks serves their particular goals.

Fixating on a punishment bill which has no rational or legal basis, as Lawyers for Britain have helpfully explained, will run down the clock on trade talks. This, they may hope, will increase the pressure on the UK to agree to something harmful.

The difficulty with that analysis, however, is that it does not add up. Moving to WTO rules will cost the EU27 much more than it would cost the UK. More accurately, it would cost the businesses and people in the EU27 more than it would cost the UK.

It will cost them in terms of straight-up tariff payments; it will cost them in terms of markets they have access to – and that is likely to cost them in terms of profits and jobs.

In particular, those parts of the EU economy that export most to the UK will suffer the most. These include the powerful French agriculture and German car-making sectors: they are at risk of losing their largest export markets.

It remains valid to ask whether British business is preparing well for all Brexit eventualities.

There may also be a role for the UK to encourage its business partners in the EU27 to prepare themselves.

As things stand, instead of trying to punish the UK, it might be time for unelected Eurocrats like Barnier and Juncker (whose appointment we should not forget David Cameron was unable to block) to encourage their constituencies to start looking for new export markets, or preparing to shed jobs.