What does “No Deal” mean with the EU?

 

  • ‘No deal’ simply means no withdrawal agreement, so no free trade agreement (FTA) with the EU, now. It does not mean no deal on anything.
  • No deal does mean the opportunity to do numerous more straightforward deals with the EU, after Brexit, from the normal foundation of ‘WTO terms’.
  • It also means that we can seize the big opportunities, immediately:
  • To control our own laws, money and borders
  • To negotiate free trade agreements with others, including our most important allies like the United States, Australia and Canada.
  • Of course an FTA with the EU would be desirable, but if the EU does not cooperate – and if our government continues to pursue the Brexit-in-name-only White Paper deal, then the UK should prepare for this no trade deal scenario.
  • In leaving the EU, the UK is leaving a political union, which is taking over more and more areas of law and regulations. That is why we have to leave. It also means doing so will allow all areas of our national life to improve, including our trade.

 

No deal and WTO terms do not mean a crisis, but an opportunity.

 

Should no deal be agreed with the EU before we leave, it has been suggested that the UK would be ‘crashing out’, and that it would have to ‘fall back on the WTO’ as a kind of last resort.

This suggests that we are currently in a good trade arrangement, and if we leave with no deal, this will be some kind of outer darkness. This is wrong. ‘No deal’ does not mean ‘no deals’ of any kind. No deal will mean the immediate opportunity to regain our democracy and increase our trade.

Even with no FTA with the EU when we leave, there will still be the opportunity to agree one in the future.

Leaving the EU with no deal – then trading with the EU under ordinary WTO terms – would mean the opportunity to immediately negotiate and sign our own free trade agreements with partners like the United States, and would give us the chance to join other trade agreements that already exist, like the Trans-Pacific Partnership, improving our trade opportunities with the fastest growing regions on earth. Even before an FTA, it would also mean a perfectly normal trading relationship with the EU, albeit one that is on less preferential terms than we enjoy now.

Moving to WTO terms would also allow us to take control of our laws, borders, and regulations – unlike in the plan set out by the Government’s White Paper, for example. This does not mean some kind of crisis at customs or ports. The opportunities WTO terms would allow in this ‘no trade deal’ scenario would outweigh any obstacles (like the cost of upgrading customs, for example).

In fact, it is not at all clear that the UK’s trade with the EU-27 has been significantly improved from being inside the EU. From 1993 to 2015, countries trading with the EU under WTO rules grew exports to the EU four times faster than the UK (excluding China this was still nearly double our growth). So the countries with the highest levels of trade growth with the EU have operated under WTO rules. Meanwhile, countries trading with the EU on WTO terms saw 135% real terms economic growth, still above the 107% among countries with bilateral or bespoke arrangements with the EU.[1]

The UK would fully govern itself and improve how its economy is regulated, relieving burdens on small firms that hold back our innovation and cause low growth. We can lower barriers to our services exports in fast-growing markets, fast, without the constraint of EU FTA negotiations.

Stories have appeared in the press suggesting that WTO terms after no deal would mean economic catastrophe, even shortages of goods like foods and medicines. This is a new Project Fear, like before the British people voted to leave the EU, and is far from the truth.

Indeed, the no deal situation we describe is likely to allow the import of a greater range of goods, more cheaply, into the UK. Of course, this requires action from government to prepare and support businesses for the transition between free circulation of goods to an arm’s length trading relationship on WTO terms, with customs borders, and, in time, different regulatory requirements.

Moving to WTO terms would also not be some kind of failure. In negotiations, the EU has tried what it often does: to use a timetable to push another party into an unacceptable position. So far, the government has responded the wrong way, caving in over more and more areas, like legal harmonisation and ECJ oversight. We could stop this and finally take back control. We can then return to make all sorts of separate deals after we leave. Until then, WTO terms will protect our trade with the EU and elsewhere.