Walking away from the Brexit negotiations with no deal and defaulting onto World Trade Organisation (WTO) rules would leave the UK trading with the EU on less generous terms than any other country in the G20, an investigation by the Open Britain campaign has discovered.
Research from the House of Commons Library reveals that that the EU does not trade with any member of the G20 without some sort of preferential trade arrangement in place. These range from full Free Trade Agreements (FTAs) to those with less market access, such as Mutual Recognition Agreements and equivalence agreements, for example in financial services. The added value of an FTA can be seen in the fact that some countries which already have preferential agreements in place, such as Australia, New Zealand and the United States, are seeking formal FTAs with the EU to improve their market access and reduce trade barriers.
This new research fundamentally undermines the claims by leading Brexiters that defaulting onto WTO rules would be fine for the UK and their assertion that this is the model favoured by other leading economies, like the United States.
Pat McFadden MP, leading supporter of the Open Britain campaign, said:
“To default to WTO rules alone would be to adopt an extreme position not adopted by any other major economy when trading with the EU.
“The Government's threat to walk away from negotiations betrays a dangerous complacency about how countries outside the EU currently trade with the EU.
“This research shows that no major economy trades with the EU on the basis of WTO rules alone. All have some kind of agreement or mutual recognition process with the EU in place, even if it falls short of a fully-fledged Free Trade Agreement.
“The Government is flirting, as a negotiating tactic, with an option that poses huge dangers to UK industry, services and agriculture. This is why it is vital for Parliament to have a meaningful say in the negotiations to come, and to have a say on both a Free Trade Agreement and what should happen in the event of no deal being agreed.”
Notes to editors
A full background briefing on the EU’s trading relationship with the other economies of the G20 can be seen here: http://openbrita.in/m4e3jo
- Leading Brexiters have consistently claimed that defaulting onto WTO rules would be fine for an economy like the UK’s.
Nigel Lawson: “Far from jumping off a non-existent cliff into the unknown, trading under WTO rules is the very satisfactory basis of most of the trade that we do throughout the world today.”
Hansard, 07 March 2017, link.
John Redwood: “When it comes to trade we know trading under the most favoured nation status at the WTO works just fine, as that is what we do for the rest of the world at the moment.”
John Redwood’s website, 12 January 2017, link.
- They have also claimed that this is the arrangement favoured by other major economies.
Norman Lamont: “The non-EU members that have no particular trade agreements with the EU such as Australia, Japan and the US, have benefited from the Single Market more than those like Switzerland, Norway and Iceland, who have negotiated special trade agreements … Many of the non-EU members who exploit the EU single market successfully do have one distinct advantage over us. Those who do not have any special trade arrangement with the EU, like the United States or Australia, do not pay any contribution to the EU budget.”
Daily Telegraph, 13 June 2016, link.
Peter Lilley: “So there are only two realistic outcomes for the future trading relationship between the UK and the EU. Either the UK and the EU27 agree to continue to trade freely with each other without tariffs. Or the UK and the EU27 apply to imports from each other the WTO tariffs which we currently apply to the EUs biggest trading partners – USA, Russia, China.”
ConservativeHome, 19 September 2016, link.