Divorcing the European Union
By: Gary Neal
Tags: Trading, Europe, UK Politics, Trade Deals, European Union

Where is King Solomon when you need him?

Andrey Popov www.dreamstime.com

December 2020 looks like being the year the UK left the European Union(EU) without any trade deal whatsoever. The EU referendum took place in 2016, four years ago. Now with only weeks to go before the UK is finally out of the EU, we don’t know whether we are trading with them or not, or on what basis.

Gerard Batten, a former leader of the United Kingdom Independence Party(UKIP) thought that in February 2017, trade relations with the EU could be sorted out in an afternoon over a cup of tea. They would have needed a cup of tea as big as the North Sea. Were these politicians naïve; we are English so they will do as we say. Arrogant to say the least and no doubt believing that “the public will believe what we tell them.”

Which reminds me of a quote of Joseph Goebbel’s: “if you tell a lie big enough and keep repeating it, people will eventually come to believe it. “ Paraphrasing the next section: “provided that the people can be shielded from the consequences of the lie, and the state can use all of its powers to repress dissent, for the truth is the mortal enemy of the lie and the greatest enemy of the state.”

Liam Fox, who was Secretary of State for International Trade at the time was quoted as saying that “The free trade agreement that we will do with the European Union should be one of the easiest in human history. “ So if four years for the easiest of deals and still not settled, thank goodness it wasn’t a hard deal.

Michael Gove, Minister for the Cabinet Office, said that, the day after we vote and leave we hold all the cards, and we can choose the path we want. John Redwood, a Conservative Party politician has also expressed the sentiment that we hold all the cards. What were we holding-a Yarborough? (the Yarborough is a hand in whist or bridge that contains no card higher than a nine)

There has been a distinct lack of direction from the government regarding import or export procedures with the EU. Ports were recently gridlocked because retailers were, in effect, panic buying goods before the December 31 deadline. On January 1st 2021, without a deal, all UK goods coming into or going out of the country could be subject to customs checks. Previously there was free flow to and from Europe. A huge lorry park has been constructed in Kent in case of delays and is designed to hold 1700 lorries. A trial of the border checks by the French authorities at the Euro tunnel caused a 5 mile lorry queue in Kent. The port of Dover handles in the region of 10,000 lorries per day. Honda UK alone relies on 350 trucks a day to supply its Swindon factory.

The main areas of concern over a no deal are agriculture, industry, National Security and general regulations.

Agriculture

A no deal will hit the UK agricultural sector hard, due to the tariffs likely to be imposed. 30% of the lamb production is exported to the EU and is worth £350M($460M) per year. Without a deal could result in an imposition of 65% tariff. Beef exports to the EU are worth £375M($500M) but could be subject to an 85% tariff. The imposition of tariffs would make these exports noncompetitive.

The export of live animals and plants will also cause problems. Export health certificates will need to be produced and there is a massive shortage of vets in the UK to sign the certificates. On World Trade Organization (WTO) terms, food prices are likely to rise 4%

Industry

Without a deal, there will be tariffs on cars and parts going to and from the EU; 2–4% on components, 10% on cars. 80% of Toyota’s UK production goes to the European market. Other products, such as pharmaceuticals, may need shipping to and from Europe before the final product is produced. Industries may find it easier to trade within the EU rather than ship backwards and forwards to the UK.

National Security

With a no deal, the UK will be disconnected from European information networks and databases. And nationally held security information connected to the EU will need to be deleted. Officially, that will be the procedure, unofficially, I suspect that a lot of these networks will exist informally.

General regulations

There has been a lot of discussion regarding the level playing field. What the EU does not want is for the UK to employ anti-competitive practices by the use of subsidies. If the UK want to trade with the EU, then any subsidies on UK industry need to be agreed by the EU. The UK maintain they are a sovereign nation and they will judge what level of subsidies can be applied. This has proved one of the major stumbling blocks to a deal.

There are numerous other areas of concern, but too many to go into at the moment.

Time is running out, the deadline is 31st December, 2020. At the moment it is looking like there will not be a trading agreement between the UK and EU. The theory which now seems to be developing is that from the 1st of January, 2021, trade will be to WTO rules. A trading agreement between the UK and the EU can then be developed at a more leisurely pace over the next 12 months, which does make more sense than rushing out a hashed-up, cobbled-together deal now.

Rushing never saved the time that planning did. Ben Parris

In a case like this, he who hesitates will not necessarily be lost.