Brexit: A Zero Tariff Free Trade Relationship Removes Need for ‘the Irish Backstop’

Q: Why do EU negotiators feel the need to have an Irish Backstop?

A: The simple answer is that the EU has one set of tariffs (a tariff regime that’s part of the EU’s Single Market) and it’s expected that the UK would enact their own tariff structure after Brexit (as part of the UK’s modern industrial strategy) that might conflict with the EU’s tariff structure.


In Business for the EU or the UK?

European Union leaders feel the UK should remain in the Single Market to make life easier for the EU by ensuring that all tariffs are duly collected and remitted to the proper EU department and once you consider the serious budgetary pressures of Brussels-based politicians it’s understandable why they feel that way.

The question though is; Should the UK give up some amount of sovereignty (the ability to sign its own trade deals) so that another country or bloc can ease their budgetary pressures? What kind of logic is that?

Keep in mind that the day after Brexit, the EU becomes a competitor trade bloc and why should the UK help their competitors? Do other countries do that for the EU? (No) For that matter, do other countries do that for the UK? (Also; No)

The simple answer, of course, is that no countries do that. Ever.

The exception is where countries have reciprocal free trade deals with each other.

In the NAFTA countries (NAFTA remains in force until USMCA supersedes it) those countries collect and remit tariffs, levies, and fees on behalf of the others all the time, and nobody thinks a thing about it because it’s just normal business. That’s what valued trading partners do for each other.

See the problem here? The UK and the EU need a reciprocal free trade deal to solve any remaining Brexit issues — and more importantly — to prevent future problems in the relationship.

The UK and the EU have taken each other for granted for so long, that both sides think that taking each other for granted should remain the default mode even after Brexit.

Which is completely unreasonable — and such liberty-taking will eventually result in messy, unpredictable, and ultimately, disastrous results for business on both sides.

Living in each other’s back pocket since 1973 has been fun, hasn’t it? (Depends upon whom you ask, but for a time there were benefits for both sides) But that part of the relationship has ended and it’s time to create an honest relationship, one based on mutual respect, formal lines of communication, and healthy self-interest.


A Zero Tariff Free Trade Agreement with Equivalence Standards Solves All Remaining Brexit & Future Relationship Issues

So get on it!

Waiting and hoping isn’t going to get the job done, nor is each side trying to out-bluff the other going to get the job done, as we’ve seen over the past 2 1/2 years. Someone needs to grab the bull by the horns now before the official Brexit date of March 29, 2019 and do what needs to be done.

Playing the eternal political blame-game as each side waits for political support in the other country to collapse isn’t what clear vision and leadership excellence is all about.

So, instead of defaulting to the failed Us vs. Them problem solving modality of the 20th-century, today’s leaders must move boldly towards a Win-Win problem solving modality, especially between Europeans sharing a hemisphere and as fellow NATO allies. And there’s no excuse good enough to do otherwise.

When you begin with a clear vision and add great leadership to carry out that vision, the results can only be good. Europe’s people on both sides of the English Channel deserve that good/better/best future!

Written by John Brian Shannon


How Many Days Until Brexit?

zero tariff trade agreement - How many days until Brexit
Click the image to view the latest How Many Days Until Brexit? statistic.

Is Growth Possible in a Post-Brexit Economy?

“KPMG predicts economic growth of 1.4 per cent next year, but cuts this to 0.6 per cent if Britain leaves the EU without a deal.”The Times

While some firms predict slower than normal growth for the UK economy in the post-Brexit timeframe, it’s always good to reflect on the assumptions that forecasters employ in creating their reports and why such forecasts can cause more harm than good.

  1. If you tell your employees that, ‘the chips are down, the economy is sinking, and corporate belt-tightening isn’t far off’ they are likely to respond in a negative way. Some may look for other employment, some will opt for early retirement, while others spend more time in the staff room talking with their coworkers about their employment concerns than getting their work done. Which means such reports can actually cause the negative outcome they’re warning about. It’s human nature to perform to a predicted level instead of trying to exceed expectations. There are few exceptions to this behavior and they are called names like; Olympic athlete, Pulitzer Prize Winner, President, or Astronaut who have the innate ability to ‘power through’ the negative times without losing momentum.
  2. Such reports deal with known inputs only. For example, a zero-tariff trade deal with the Americans may seem far off today, but by 2020 it may already be signed. And not only the U.S., other political and trade blocs are likely to sign trade deals with the UK following Brexit. The AU (Africa), MERCOSUR (the South American trade bloc), the Pacific Alliance (several Pacific nations), the CPTPP (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership) nations, ASEAN (the Association of Southeast Asian Nations), The Commonwealth (Commonwealth of Nations), and China, are likely to expand their trade links with the UK after it departs the European Union. America and those seven trading areas will have a combined total of 7.0 billion people by 2020. That’s a lot of potential consumers, and the massive opportunities presented by signing zero-tariff trade deals post-Brexit are absent in most economic projections by design. Even if the UK were to sign only one free trade deal (with the U.S., for example) it could improve UK growth by a full 2 per cent or more. Presto! A shiny new UK economy!
  3. “Now we’ve got them!” While economic forecasting provides vital information for policymakers, Brexit negotiators aren’t helped by the news that growth will slow even in the face of a ‘good Brexit deal’ and will slow moreso in a ‘no Brexit deal’ scenario. It’s the kind of report that makes Michel Barnier’s day! KPMG is certainly one of the most respected firms around, but if you’re a Brexiteer and a report like this has been released to the public instead of it remaining in the hands of policymakers it plays with your mind; “Are they working for the UK’s best interests or are they working for the EU’s best interests?” (and) “Who commissioned (who paid for) this report and what parameters were used?”

So, while the good people of KPMG do their best to provide policymakers with the best near-term assessment of the UK economy, making such reports public can actually cause the negative things to occur about which the report warns.

That’s why policymakers everywhere must be ahead of the curve and treat all such documents as ‘the worst-case scenario’ without exception.

Now that UK Prime Minister Theresa May has been reliably informed that the worst the UK can do is 0.6 per cent growth between now and 2020, it should be an easy matter to arrange a number of free trade deals and blow the doors off that projection by 3 or 4 per cent by 2020.

Looking at this in the proper context means accepting that exiting the European Union is merely a necessary stepping stone to get the UK to 4 per cent growth by 2020 — which should result in Theresa May keeping the PM’s chair for at least one more term and with all past ‘political sins’ forgiven.

Not a bad deal Theresa, if you’re up for it! 🙂

Written by John Brian Shannon