Anyhoo, here begineth the lesson.
Around half Britain's trade and investment is with the EU, and we currently implement almost the same standards for products and services.
This works
really well. It's why we are (sorry,
were...) one of the fastest growing economies in the EU and the world.
The Gov's white paper on Brexit makes few concrete announcements, but one is that - should we 'crash out' of the EU - we'd establish a new UK trading schedule with the WTO that would try and follow the same regime as we currently have with the EU as much as possible; similar tariffs, quotas etc.
But, if we don't make a trade deal with the EU after Brexit, the EU and UK would would need to charge eachother the tariffs we charge other WTO members.
The average tariff rate is low - around 1.5% - but some products attract higher tariffs - cars at 10%. The head of European marketing at Nissan described this as a 'disaster' for the UK industry. (Of course, we recall that the Gov has made a 'promise' to Nissan - I wonder how long that can be financed? And what will all the other companies hit by WTO tariffs have to say?)
Tariffs also affect food prices. Food price inflation (which had been
negative pre-vote) has alreadly hit its highest level in 4 years at 2.9% - and that's without added WTO tariffs.
Aggie products imported in to the EU have very high tariffs - meat can be as high as 84%, dairy produce up to 74%, grains up to 63%. Since 71% of the UK's aggie imports currently come from the EU, if no new deal is reached food prices can be expected to rise even further.
UK's farmers will will also suffer since the current figure of E16.1billion of aggie exports
from the UK
to the EU is bound to drop as our new WTO-based tariffs are added.
Hard Brexies might see Leaving as a chance to drop tariffs completely so would reduce the costs to British consumers, but tariff levels are one of the main bargaining chips in any trade negotiation - if we drop our import tariffs without getting a reciprocal deal with new foreign markets, it would be hard for prices to fall enough to make up for the job losses in industries that would face competition from these imports. And since tariffs are higher in manufacturing industries, that would be the area (already struggling in the UK) most hard hit with job losses in this country.
The Customs Union binds all members to charge the same common external tariffs (ie with countries outwith the EU). This is so that members don't import goods at a reduced tariff from outside and then 'export' them to the rest of the EU, by-passing other member's tariffs. That is a sensible deal that works both ways for all members. Countries like Iceland and Norway - which are members of the single market but NOT the customs union - have to go through customs checks to ensure their goods
were largely manufactured in their countries. The cost of complying with these custom checks is around 8% of the value of the goods, almost all in additional paperwork.
8% Eight per cent.
Is the Norwegian system a good one we could copy? Well, a recent survey by the Swedish National Board of Trade found that Norway ranked
top along with the likes of Russia as a 'problematic' trading partner, singling out the 'incredibly cumbersome' customs handling rules.
Such 'Norwegian' rules would have \ severe effect on the car industry since 56% of the cars made in the UK go to the EU. The supply chain is highly integrated with some parts crossing borders around 40 times! Because of this, the car manufacturing sector would like their own specific deal that would keep these tariffs at zero, but the UK and EU cannot can't sign the sort of deal that would remove tariffs from the car sector and no other. To prevent such 'cherry-picking' and discriminating against other WTO members, the WTO only recognises bilateral trade deals that cover almost
all forms of trade between the countries involved; a zero tariff arrangement for
just the car industry is therefore unrealistic is we join the WTO.
You have heard of 'just in time' component supply chains as used by Nissan & Jaguar and many other car manufacturers? Even a very brief customs disruption could effectively halt car production.
I guess the UK could improve it's customs control, increasing the number of officers it employs? Sadly the HMRC is woefully understaffed and completely unprepared - the UK has around 5,000 customs staff, whereas Germany employs more than 35,000.
The UK would also need to open British versions of the EU regulatory agencies - setting up such an organisation for just the aviation industry (the UK equivalent of the European Aviation Safety Agency) is estimated at £400m over a decade.
And that is only one of around 40 such agencies that would be required.
I guess we could just continue to use some of the EU regulators for the UK as now, but that would mean by implication that we'd also be answerable to the EU court of Justice - expressively ruled out in the white paper.
Many of the loonier Brexiteers saw the move as a chance to cut such 'red tape' - TAKING BACK CONTROL! But signing ANY trade deal involves 'give and take' - and that means GIVING UP SOME ELEMENT OF SOVEREIGNTY. A phrase that make some ejit's ears bleed. As a WTO member, we'd have to abide by their rules too - OH NO! Giving up sovereignty to the WORLD!
Oh the
hollowness of the 'Taking Back Control!' and 'Oor Sovereignty!' chants.
The UK gives up part of its 'sovereignty' when it applies the EU Safety Directive for TOYS.
On that note, we'd either need to STAY with the EU directive - lose some sovereignty... - or else devise our own. Mind you, if we were then to diverge from the EU standards, British businesses would likely have to manufacture two product lines...
Studies based on detailed customs data estimates that the UK-EU trade will fall by between 13 and 40% post Brexit, depending on the level of market access that is negotiated. Loony Brexiteers are banking on us cushioning this shortfall with new trade deals with the rest of the world.
But such deals take time and diplomatic resources to negotiate, even if only between 2 countries. How do we prioritise? There's China, India, the US.
The sensible first move is with... the EU (GDP similar to the US). Countries have always traded most with their biggest & closest neighbours
Still reading? Good - 'cos I'm nowhere near half-way there.
Still to come:
* The reality of striking direct trade deals with other countries.
* Trade with the UK's services sector, and foreign investment there (Clue - that's 80% of the UK economy - don't light the blue touch paper...)