A new report by a prestigious polling firm says that a so-called ‘No-Deal’ WTO-style Brexit will cost one EU country €5.5 billion over the next two years, as opposed to a Brexit with a trade agreement where losses for that country would likely total €1.5 billion over the next two years.
That country is the Republic of Ireland.
“A hard Brexit could cost the Irish economy more than €5.5 billion over the next two years, a government-commissioned report has said.
A “soft” Brexit including a transition arrangement would cost less than €1.5 billion over the period, highlighting the importance to Ireland of the UK’s withdrawal talks with the EU.
The study by Copenhagen Economics, which examined four possible scenarios, also warns that the UK will probably take at least five years to implement new trade agreements, complicating Irish efforts at contingency planning.
[Ireland’s ‘Taoiseach’ which is the official title of the Irish Prime Minister] Leo Varadkar said last night that a comprehensive free-trade deal with the UK would be the best way to avoid a hard border. After a meeting with Theresa May, the UK prime minister, he said: “We both prefer [the option] by which we can avoid a hard border in Ireland, and that is through a comprehensive free trade and customs arrangement.
“That is the best way we can avoid any new barriers — north and south, and also east and west.”” — The Times
Other EU Nations Take a Hit in the ‘No-Deal’ Scenario
We can extrapolate that other EU countries would also take an economic hit in a ‘No-Deal’ scenario, but due to their much larger economies when compared to Ireland, such losses would amount to tens or even hundreds of billions over the same two-year period. Just think of all those German cars that wouldn’t be sold in the UK due to the higher tariffs that would automatically be imposed on EU countries in a ‘No-Deal’ Brexit!
Almost every country in the world uses WTO rules as the foundation of their trading relationship with other countries (but important to note) those same countries also diligently pursue bilateral trade deals with their important trading partners that allow both sides to legally sidestep the more costly WTO tariff ruleset in favour of something that works better for both partners. (And that trading relationship/tariff structure can be anything the two sides want in regards to any trade that happens between them)
So if country A and country B decide they want to trade, they’re completely free to build a better tariff structure than the comparatively expensive WTO ruleset, and that agreement will thenceforth supercede the WTO tariff structure. However, it only applies on trade between those two countries — the rest of their trade with the world would still be conducted under the auspices of the WTO.
It’s a pretty basic thing. Countries that do anything more than a smattering of trade between them negotiate bilateral free trade agreements to bypass the more onerous WTO trade rules and tariff regime.
Still Time to Negotiate a Trade Deal with the EU
As of this writing there are 409 days remaining until Brexit and either we will have a trade agreement with the EU, or we won’t. If not, it will be costly for both sides, but more costly for the EU by one order of magnitude!
However, saying that there are 409 days remaining ’til Brexit — isn’t the same as saying there are 409 days left to negotiate a free trade agreement. Far from it!
The two sides have 258 days to arrange a free trade agreement. Let’s hope our politicians (and theirs) are up to the job (and if not, why are we paying them?) otherwise almost everything that citizens and businesses purchase will become much more expensive on both sides of the English Channel in the post-Brexit timeframe.
UK Prime Minister Theresa May has said repeatedly that October 29, 2018 is the latest both sides can agree a trade and customs deal before they must begin to get ready to implement WTO trade rules. And on that point both sides agree. In fact, even a preparation time of five months (during the period from October 29, 2018 to March 29, 2019) would barely suffice to put in place the necessary measures and standards to allow industry to prepare for life after Brexit.
Both UK and EU voters should remember who did, and who didn’t, get a free trade agreement signed when they head to the polling booth at the next election.