The UK will not be paying any “exit fee” to the EU if we leave without a trade deal

The UK will not be paying any “exit fee” to the EU if we leave without a trade deal

The Prime Minister has shown extraordinary patience, tact, diplomacy and determination in her negotiations with the EU.

There has been some progress at this week’s summit but it is painfully slow. The EU is still refusing to negotiate with the UK about our future long term relationship, which so hinges on a trade deal. This does not give the impression that the EU attaches much importance to doing a free trade deal with the UK.

The UK government has been 100 per cent right to start preparing for a no-trade deal scenario, because EU refusal to discuss trade is making it more inevitable that we will leave the EU without one.

If that happens, the UK will not be offering to pay any “exit fee” to the EU, because Article 50 is perfectly clear that all our obligations to the EU end the day we leave, including any financial obligations.

It’s going to be hard enough to agree a trade deal with plenty of time, but the clock is ticking and unless it is clear that we will obtain a cast iron commitment to a sensible trade deal at the end of any implementation period, Mrs May says she will not sign up to any open-ended transition.

It would be mad to pay tens of billions for a transition lasting years, but with no guarantees about what happens at the end. That would just extend the uncertainty for years and to allow the EU to continue controlling our laws, or the EU Court to bind our own Parliament and Courts after we leave would be politically toxic. It is untenable.

The people voted Leave. Parliament voted to leave by March 2019. WTO terms start to look a whole lot more attractive, than a trade deal which is too protracted, too expensive and leaves us tied to trading on present terms for too long.

The cost of paying tariffs British exports to the EU is less than half what we pay each year in net contributions to the EU. So the cost of a trade deal has got to be reasonable, and the terms have got to be right, to be worth it.

Finally, the time to agree all this is much shorter than it looks. If we cannot be sure of a good trade deal within a year of leaving, business will have to make the decisions necessary in case we leave without a trade deal a year from then. Getting a deal to have an implementation period at the last moment is worthless. Businesses will not wait until next autumn or later, in the hope that everything will turn out alright. So the value of any agreement for an implementation period is less and less as March 2019 approaches.

Let’s still hope we all agree by March 2018 the guts of a free trade deal and the implementation period. If not, we had better just get ready to leave on WTO terms. This will be less good than a trade deal, but still far better than continuing membership of the EU. There will no “exit fee”, contributions to the EU budget will end immediately, the UK will be free from day one to set our own tariff and trade policy, and to control our own laws.