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The difficulty is that the UK will effectively be a new WTO member without any detailed schedules of Tariffs agreed with other WTO members. Thus, in the absence of any bilateral agreement to the contrary, there is nothing to prevent the EU applying the maximum tariffs permissible under WTO rules, even if it has given much greater concessions to other trading partners as part of bilateral trade deals.

The UK would then be trading with the EU at a disadvantage when compared to other nations which do have bilateral trade deals with the EU. Similarly there is no reason why other third countries like (say) India must give the UK the same concessions they have given the EU and every reason why they might not (size of market, history, geopolitical tensions etc.).

To get an idea of the effect of this I refer you to this paper.

Abstract: The UK exit from the European Union (Brexit) is likely to have a range of impacts, with trade flows likely to be most affected.  One possible outcome of Brexit is a situation where WTO tariffs apply to merchandise trade between  the  UK  and  the  EU.  By  examining detailed  trade  flows  between the UK and all other EU members, matching over  5200  products  to  the  WTO  tariff  applicable to  external  EU  trade this paper shows that such an outcome would result in significantly different impacts across countries. Our estimates of exposure at the country level show an extremely wide range with reductions in trade to the UK falling by 5% (Finland) to 43% (Bulgaria) taking into account the new tariffs and the elasticity of the trade response to this price increase.  Food and textiles trade are the hardest hit, with trade in these sectors reducing by up to 90%

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Aug 21st, 2017 at 05:36:12 PM EST
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It is worth noting that the paper above assumes the EU and UK would apply minimum, not maximum WTO Tariff rates. Assuming these tariffs feed directly into prices results in the following impacts on EU UK trade depending on which assumptions for price elasticity are made for each sector:

Median elasticity assumption results in a  fall  in  EU  to UK trade by  30% and a 22% reduction in UK to EU trade. The mean elasticities  are  slightly  higher  and  would  generate falls of 37% in EU-UK trade and 27% in UK-EU trade. The upper and lower bounds of the estimates are  given by the maximum elasticity estimates which would generate trade falls of 56% and 45% in EU-UK and UK-EU  trade respectively  and  the minimum  estimates  would result in trade declines of  17% and 12% respectively.

These are massive reductions in trade and are based on Minimum WTO tariffs.

And non of the above takes into account the effect of devaluation, which will devastate EU-UK trade much further.

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Aug 21st, 2017 at 06:33:15 PM EST
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Again. I think it prudent to examine tables in the WTO's 2017 publication in order to obtain at least a more accurate understanding of bound and applied rates in effect AND ratio of premia >15% (applied to scheduled G&S) by signatory.

EU's ratio is extremely low --AS IS "free trade" commitment-- by comparison to that which so-called developing nations impose on imports from any and all trade "partners". And you can bet that 0.4 summarizes trade sanctions imposed on NATO's "adversaries."

Compare that benchmark to current costs of EU interstate tariffs which the UK loses as "third-country". Between member countries customs duties are forbidden. EU need not declare a new CCT regime in order for UK gov't to appreciate the "disadvantages" of out-group, international sovereignty ... unless the UK gov't declares itself a NATO adversary. Then you may expect a truly frosty welcome to the "special relationship."

But whichever cost the other 99.6% bear is sufficient to tip the UK into a permanent state of insanity or piracy. As it is, no one can say if the gov't has prepared for any EU demand for reimbursement of the cost of inspection and compliance (abrogated by UK in its retarded position paper) on to the balance of charges on EU budget outstanding.

For example in March OLAF slammed lax UK border controls and recommended the European Commission reclaim €2 billion the agency said was lost because Britain had failed to apply the correct EU duties on imports of Chinese clothes and footwear in recent years.

Then, there's the whole move of euro-denominated R&D and derivatives trading out of the City. ISDA shure as shinola isn't paying for that.

Diversity is the key to economic and political evolution.

by Cat on Mon Aug 21st, 2017 at 08:50:01 PM EST
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