Mandelson – Hard Brexit will lead to £1.2 billion bombshell for British businesses

New research for the Open Britain campaign shows the cost of the UK losing access to the European Union’s Free Trade Agreements (FTAs) with over 50 countries across the world. Importers in the UK would face an additional £1.2 billion in the costs of importing goods from these countries. The industries that would be hit worst would be clothing; transport equipment; fruit and vegetable; fish; chemicals; minerals and metals; petroleum; and textiles.

In addition, the competitiveness of UK exporters would be undermined, as importers from the same 50-plus countries with whom the EU has FTAs would face a tariff bill of almost £700 million when buying UK goods. Turkey and South Africa would be among the countries worst affected. The £500 million difference between the impact on imports and exports shows that UK businesses have more to lose than those in the countries we will have to renegotiate new deals with. 

The UK would have to renegotiate these deals with each of these countries individually after we leave the EU. It would be far more difficult to negotiate bilateral agreements of comparable scope if we pursue a hard Brexit. The UK would be better placed to negotiate to keep its current access to EU FTAs if it chose to remain a member of the Single Market and the Customs Union after leaving. 

Commenting for the Open Britain campaign, Lord Mandelson, the former EU Trade Commissioner, said:

“A hard Brexit could lead to a £1.2 billion bombshell for British businesses.

“The billion-pound bill for losing access to trade deals with over fifty countries would be footed by businesses and passed on to consumers with higher prices in the shops.

“Leave campaigners talk about all the free trade deals we can sign outside the EU but do not appreciate the value of those we already have. The EU is a leader in global free trade and we should seek to preserve its benefits, as far as is possible.

“The best way to keep these deals in place would be to negotiate for membership of the Single Market and the Customs Union. Doing so would be a big boost for British importers and exporters.”

Notes

The research was conducted by the Centre for Economics and Business Research. The two reports – one examining the impact on imports and the other on exports can be seen here:

https://d3n8a8pro7vhmx.cloudfront.net/in/pages/11414/attachments/original/1478799409/Open_Britain_Tariffs_Research_-_Imports_FINAL.pdf?1478799409

https://d3n8a8pro7vhmx.cloudfront.net/in/pages/11414/attachments/original/1478799406/Open_Britain_Tariffs_Research_-_Exports_FINAL.pdf?1478799406

The studies looked at the increased tariff costs that British importers and exporters would face if they were to trade with the countries the EU has Free Trade Agreements (FTA) with without access to FTAs we have today due to our EU Membership. The Government has said that outside of the EU the UK would lose access to these arrangements as they currently stand. The studies analyse the consequences of trading with these countries under the ‘Most Favoured Nation’ principle of the World Trade Organisation (WTO).

This research uses goods trade data from 2014, as data from 2015 is not yet fully available for each of the countries covered. The research does not cover Canada as it was conducted before CETA was recently signed.

As a member of the EU, the UK is party to more Free Trade Agreements than any of the G7 or BRICs, according to the WTO: http://rtais.wto.org/UI/publicPreDefRepByCountry.aspx 

House of Commons Library research has previously shown that taking together Britain’s trade with the EU, with countries with which the EU has already signed trade deals, and with countries with which the EU is currently negotiating deals, by staying in the Customs Union the UK would have free trade with countries that buy 90% of our exports, and which account for 69% of global wealth.

http://www.open-britain.co.uk/soubry_90_of_uk_trade_will_be_free_if_we_stay_in_the_single_market_and_the_customs_union

There is consensus that when the UK leaves the EU we will lose access to the EU’s Free Trade Agreements, which would need to be renegotiated as new, bilateral agreements.

  • This was a point made by the Treasury in its pre-referendum analysis in April 2016:

‘All the alternatives would also reduce the UK’s access to wider global markets. If the UK left the EU it would no longer have the right to benefit from the EU’s FTAs with third countries. While these FTAs fall short of the Single Market in terms of breadth and depth, they are some of the most advanced in the world. Just to maintain what the UK enjoys through the EU, would mean renegotiating new trade arrangements with the EU and over 50 other countries around the world.’

‘None of the alternatives discussed in this Section provide access to the EU’s FTAs around the world. Even Turkey which is in customs union with the EU must negotiate access to these markets separately, even while opening its own markets immediately to third countries who have signed an FTA with the EU. For example, Turkey is yet to conclude trade deals with Mexico and South Africa, while the EU reached trade deals with both of these countries in 2000.’

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/517415/treasury_analysis_economic_impact_of_eu_membership_web.pdf

  • The FCO also said in April 2016 that the Norway, WTO and FTA models would mean losing access to these EU FTAs:

‘We would lose our preferential access to 53 markets outside the EU with which the EU has Free Trade Agreements. This would take years to renegotiate, with no guarantee that the UK would obtain terms as good as those we enjoy today.’

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/504661/Alternatives_to_membership_possible_models_for_the_UK_outside_the_EU_Accessible.pdf

  • The factual accuracy of these documents has been underlined by the Cabinet Secretary, Sir Jeremy Heywood, in his recent blog about the referendum:

‘During the official referendum campaign, we were scrupulous in making sure that all documents issued were factually correct and objective. Our core values remain the best guide to how we conduct ourselves in all circumstances; and we produced work as we should, at pace and with accuracy.’

https://quarterly.blog.gov.uk/2016/11/01/brexit-rising-to-the-challenge/

  • Legal experts agree that this is the case:

‘Of course some existing international agreements that are exclusive to the EU (i.e. no Member States are parties to them) would no longer apply to the UK in the case of Brexit.’

Dr Markus W. Gehring, Lecturer in Law, University of Cambridgehttp://eulawanalysis.blogspot.co.uk/2016/03/brexit-and-eu-uk-trade-relations-with.html

‘Even where both the EU and the Member States (including the UK) are Parties to an agreement (like for the WTO or the majority of existing EU Free Trade Agreements (FTAs)) trade relations of the UK are very likely to change. In other words, it can be argued that mixed agreements concluded by the EU and its Member States could be subject to automatic termination as far as the UK is concerned.’ 

Dr Markus W. Gehring, Lecturer in Law, University of Cambridgehttp://eulawanalysis.blogspot.co.uk/2016/03/brexit-and-eu-uk-trade-relations-with.html

‘However, it would not be able to benefit from the 50 free trade agreements (FTAs) which the EU enjoys.’

Catherine Barnard, Professor in European Union law and employment law at the University of Cambridge and senior tutor and fellow of Trinity College. She advised the government over the balance of competences review, which is an audit of what the EU does and how it affects the UK.

https://www.theguardian.com/small-business-network/2016/apr/26/brexit-effect-on-trade-deals



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