Reply to post: Re: Brexit just gets better?

Re: Brexit just gets better?

@Phil O'Sophical

I'll assume you're now being deliberately obtuse just for the sheer bloody minded stubbornness of it.

Everything entering and leaving the UK will now be subject to WTO rules on trade. That means duty to be paid at either end. On everything. So straight away everything we buy is more expensive, and everything we sell is more expensive.

Now there are options here, we could unilaterally drop all import tariffs and quotas. That wouldn't help much though as that just makes the UK the dumping ground of every cheap manufacturing country in the world. You can't say "well let's drop tariffs just for goods from the EU" due to most favoured nation status, you drop a tariff for one country you drop them for all, unless you've negotiated a trade deal with them that grants you most favoured nation status. And this cuts both ways, without that deal no other country can drop their tariffs without dropping them for every country.

So let's look at an industry where we both import and export. Cars.

The EU is without doubt our biggest buyer of British made cars. WTO rules state duty on imports of cars is 10%. Because of this every car sold in the EU overnight becomes 10% more expensive. However, most of the components that go into making a car come from the EU. These will need to have duty paid on them, so that gets added to our 10% as well.

This could be offset by producing more components in the UK, but it's actually more expensive to make them here, which is why they get made abroad in the first place.

So say you're BMW, with proven manufacturing capabilities elsewhere in the EU, what are you going to do? If I was them I'd start ramping up capabilities in Poland, it gets around the issues of import duty and will also put money into Poland's economy while simultaneously lowering the cost of production given the cheaper manufacturing costs in Eastern Europe. It's an easy win.

Now look at the other side of this coin. We're a large part of the EU's trade, a significant amount of the cars made in the EU are also sold in the UK. But due to WTO there's still that 10% duty to pay. Now the UK government isn't going to be too bothered about this, it is after all just an import tax and so will go to the Treasury. But all of a sudden every car that's imported becomes 10% more expensive to the consumer. BMW doesn't care that you now have to pay more, after all you're just paying the same as before to their bottom line, it's not their fault you now pay the same price that the USA have to pay for an EU produced car.

So taking just car manufacturing you've lowered your GDP and increased inflation overnight. This is generally seen as a Very Bad Thing.

Of course you could keep manufacturing here in the UK. You just need to break the £ by enough that even with 10% import duty the car made here is cheaper than the one made in the EU. But that will mean everything else that's imported is more expensive, which will increase inflation and lower GDP. Which as we've seen above is generally seen as a Very Bad Thing.

Now multiply that across every industry that is reliant on import or export.

This is why a Deal is so important. Without it we lose access not just to the EU on Free Trade terms, but also to every single other country that has a deal with the EU. We lose access to Canada, Japan, European countries that aren't part of the EU but are part of the EEA. None of these countries will be allowed to unilaterally trade with the UK.

Sure we can sign a deal with the USA. But at what price? They've already stated that in order to have a deal we have to give them our food standards, renegotiate drug prices for the NHS, and give them full access to every government project going, including the NHS. We are NOT in a good negotiating position. Especially when it's countries like Moldova that are holding the knife to our throat.