November 3, 2017

Different forms of a ‘No Deal’

Different forms of a ‘No Deal’

The dichotomy between a ‘Deal’ and a ‘No Deal’ outcome from Brexit negotiations is a false one. A ‘No Deal’ can come in a multitude of different shapes and sizes many of which are satisfactory to the UK, says Jack Tagholm-Child.

The narrative about Brexit being portrayed in the media is of a dichotomy between either a deal or a ‘No Deal’ scenario.

But less discussed are the various forms a No Deal can take. Some better, some worse. As such, there are of course types of No Deal which are better than types of deal.

What has a real effect on the economy is not simply whether we reach some sort of arbitrarily defined deal/agreement with the EU. It is the terms we actually trade on – how easy it will be to do business with other countries inside the EU.

A ‘deal’ could be reached whereby we pay a huge sum of money to the EU, and in return we get limited access to the single markets. This outcome would not be good for our own economy in any real sense – but would be perceived by some to constitute a ‘deal’.

Likewise, we could find ourselves in a situation whereby an official comprehensive deal has not been struck, but a great many side agreements, which facilitate the continuing of trade with relative ease, have been made.

The EU has previously struck a spectrum of different types of trade agreement with the EU, which in themselves do not constitute a comprehensive trade deal. They would fall under the banner of a ‘No Deal’, but would still allow for significant levels of trade to take place. Some of these examples are explored below.

Dr Lee Rotherham recently explained in a paper for The Red Cell, the EU has, based on The European Commission’s own definitions, 42 different types of trade agreements with other states and regions.

These include an abundance of different levels of trade liberalisation and intergovernmental co-operation. The most comprehensive being the free trade agreement, signed in October 2016, between Canada and the EU known as CETA. CETA is what Michel Barnier has now suggested a Brexit trade deal would look like. An FTA like CETA for the UK should be far easier to conclude as our regulations are already at parity with the EU.

Examples of more modest agreements the EU has with other countries and trade blocs are those with Mexico and the Central American Integration System.

These agreements with Central America are of particular interest. Whilst not as comprehensive as CETA – they include ‘further development’ and ‘evolutionary’ clauses. These allow for further increases in trade liberalisation and co-operation, as the two consenting parties see fit in the future.

Other agreements the EU has, or has had historically, have simply been broad enabling treaties, which reduce tariffs and barriers to trade, but really just pave the way for future progress on these points. Examples include the deal the EU had with Canada pre-CETA, and the now suspended agreement with Syria.

These facilitate trade without necessarily being comprehensive trade deals. They also have the potential to become comprehensive trade deals in the future, revealing the grey area in the general portrayal of a ‘No Deal’ scenario.

All too often a No Deal arrangement is interpreted as one where talks have completely broken down and no agreements on any other matter relating to trade or governmental co-operation are made. They suggest a bitter dispute, whereby both sides give up completely on co-operating altogether.

This is, however, unlikely. In No Deal’s most severe form – in which the UK leaves the EU with no formal trade deal in place – we would still fall back onto the World Trade Organisation’s ‘Most Favoured Nation’ (MFN) rules. This would mean facing an average tariff on exports to the EU of just 5.3 per cent, while gaining all the freedoms of leaving the European Union.

Even this outcome does not entail the great economic crash many claim it would bring. The United States trades successfully with the EU on these terms. Indeed, in 2012 trade in goods alone between the US and EU stood at $650bn.

Even if Brexit talks fail to produce a comprehensive trade deal, it does not mean we would simply move onto WTO trade terms. As we’ve seen, EU trade relations with third party countries around the world are, in fact, very varied. And the EU is unlikely to favour no trade deal whatsoever, as this would hurt the EU 27 economies considerably.

There are many areas of trade in which it is detrimental for both sides to sign a reciprocal deal. What also seems to be forgotten is how much the EU itself fears a severe form of No Deal. No Deal would mean no British money. EU leaders and Angela Merkel’s worst nightmare.

No Deal does not mean No Deal per se. The conclusion of Brexit negotiations could engender a trade agreement, which, while not comprehensive, would facilitate the continuation of relatively frictionless trade between the EU and UK. A sort of ‘WTO Plus’ agreement. This might also include clauses – like those previously mention – to signify the intention for more trade liberalisation on certain sticky issues unresolved in the two-year negotiation period, in the future.

The dichotomy between a ‘Deal’ and a ‘No Deal’ outcome from Brexit negotiations is a false one. In seeking to Get Britain Out of the EU on the best possible terms, we must be aware of all the various shapes and sizes of possible deals, and use them as a guide by which to secure Britain’s own bespoke agreement. It’s not simply a matter of Deal or No Deal.

 

3.13 avg. rating (64% score) - 15 votes
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Jack Tagholm-Child

Jack Tagholm-Child is a Senior Research Executive at Get Britain Out. He graduated in Politics, Philosophy and Economics from the University of Exeter. A Eurosceptic from a young age, he is also interested in all matters relating to the maximising of human flourishing.

  • chump23

    No deal means no deal. It means customs checks. It means no financial services passporting. It means friction and delays for just-in-time supply chains. This really is seriously thin stuff from the lunatic fringe of oligarch-funded right.

  • r3d3

    Has everybody signed this?

    https://petition.parliament.uk/petitions/204098

    “Stop the Common Fisheries Policy being adopted into UK law post-Brexit.”

  • Ian Walker

    Not to mention annihilation when the expansionist, unelected government that has just got itself an army, takes the logical next step on its Eastern border.

  • Dr Evil

    I said the same on the day after the referendum. Any price is worth paying to leave the EU re our economy. Not so sure about giving them billions on top of this though. That’s where a no deal scenario holds out the opportunity of not giving a penny unless we get a very favourable compromise.

  • Bosanova

    While we’re here, let’s remind us how much the Canadians ponyed up to sign CETA ? That’s right – nothing! How so? Because it’s a blinking trade deal you EU numpties, everyone benefits from it and usually thr deal is designed for both sides to benefit equally.
    Now can we stop talking about divorce payments? We’ve propped up this rotten regime for long enough, and we voted out.

  • ClickBait

    All articles in MSM or elsewhere address only the economics of Brexit.
    This is because the facts and arguments are easier to manage.
    But Brexit is far more about independence, democracy and accountability

    Why should we be ashamed to talk about this ?

    If there is to be a ‘cost’ for Brexit then it is worth it.
    There. Iv’e said it.

  • fred finger

    Yesterday I wrote something similar. One area that is not mentioned, is the projected path and consequences of the EU in following the EU project. What would the effect on the UK be if we stayed on being in the EU. I would expect such a report would cover the loss of sovereignty, taxation centralisation, largesse of the Commission, loss of Democracy, regionalisation, etc, etc.

  • Michael McDermott

    No one talks about assessing the [gigantic] risk to the UK if we were to remain in the EU, do they?

  • fred finger

    The fact that the EU has a whole range of trade agreements is not the main point. Those who advocate the EU political project MUST see that the leaver, i.e. the UK, is punished. They worry that if the UK is seen to get anything that they perceive as a good deal, others will be encouraged to leave.

    Therefore, without saying they will not agree to a main trade deal, they will stall until it fails. There will not be a real deal with the EU. We do not have common interests, the UK wants a trade deal with no political entanglement, the EU wants to protect the EU political project and would take the trading hit to protect it. DD should progress on that basis.

  • Jolly Radical

    And yet, under the shambling and duplicitous incompetence of the so-called Conservative government, what we’ll end up with is a ramshackle arrangement even more expensive, restrictive and pointless than the mayhem we currently have to endure!

    I can’t be the only person to notice that we’re fast approaching the 18 month point since the referendum. 18 months of idleness and delays which only plays into the trembling, sweaty hands of Juncker and his furtive, alcoholic colleagues.

  • ethanedwards2002

    I’d like the third kind of No deal from the left please.
    The one where we Leave. Leave Now and keep on Leaving. Do not pass any money to the EU and just Go. No Hokey Cokey In out in out of the Single, Married or LGBQSTYZ££T market.
    Just quit. Clean break. Rock hard diamond coated Brexit. No 50 shades of Grey area just out and now.
    That Okay with you there sport!

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