A ‘bare bones’ Brexit where we trade with the EU under WTO rules is no Hallowe’en nightmare

A ‘bare bones’ Brexit where we trade with the EU under WTO rules is no Hallowe’en nightmare

Hallowe’en may not be the most auspicious time to be talking about what happens if the Brexit negotiations break up without a deal. But there are plenty of scare stories to dispel – including ‘planes no longer flying’, ‘cancer patients denied life-saving medicines’, and ‘criminals running amok’.

Discussions about the prospect of ‘no deal’ frequently generate more heat than light. Often this is because the participants aren’t talking about the same thing.

At one extreme, some people interpret ‘no deal’ to mean the UK leaving the EU in 2019 without any agreements on the future relationship. This is the ‘chaotic’ Brexit dreaded by many. However, no-one is seriously arguing that this outcome would be desirable, or even likely.

An alternative vision of ‘no deal’ would involve quitting the Single Market and Customs Union in 2019, but still allow for ongoing cooperation in areas which do not require EU membership. This has been called ‘no deal plus’, or, perhaps more appropriately for Hallowe’en, a ‘bare bones’ Brexit.

This would put the UK in essentially the same position as the US or China, which both trade extensively with the EU under WTO rules. The EU would presumably impose tariffs on goods it imports from the UK. But these are likely to average out at around 5%, which would not be a game-changer.

UK exports to the EU would also face enhanced customs checks. These non-tariff barriers could be more costly, especially if they disrupt vital supply chains. Fortunately, both sides would have a strong economic interest in keeping trade running smoothly.

For its part, the UK could choose between imposing new tariffs on imports from the EU, or removing existing tariffs on imports from the rest of the world, or some mix of the two. Removing tariffs would be preferable and put the interests of consumers first.

A clean break in 2019 would also allow the UK to crack on with its own trade deals with the rest of the world, start to roll back EU regulations, and save straightaway on contributions to the EU budget.

There could be some tricks among the treats, especially in areas, including financial services and aviation, which are not covered by the WTO. But the UK and the EU could simply agree to continue the current arrangements. This isn’t as fanciful as it might sound, for four reasons.

First, the UK and EU would not be starting from scratch. In most cases it would simply be a question of agreeing that the existing arrangements are satisfactory and that they should be continued, with whatever technical tweaks are necessary following Brexit.

Second, the EU already cooperates closely with many countries that are not even in Europe. Just look at the overseas participants in programmes run by Euratom, or the wide variety of airlines from all over the world that somehow manage to fly to Paris or Frankfurt.

Third, both sides would surely want to make this work. Take the supply of medical isotopes. In principle, Euratom could block this trade once the UK leaves the EU. But does anyone believe for a single moment that this would actually happen? Similarly, would EU politicians really be willing to forego the rights of their airlines to fly to the UK?

Fourth, there are some crucial areas where a formal deal may not actually be necessary. In particular, the UK could simply implement its proposals on citizens’ rights unilaterally. This would put the onus on the EU to reciprocate, but why on earth wouldn’t they?

A ‘bare bones’ Brexit may not be the dream scenario, but it shouldn’t be so feared either.