Understanding the Impact of WTO Terms on UK-EU Trade After the Brexit Impasse
The ongoing EU-UK trade talks have reached an impasse, leading to uncertainty about the future of UK-EU trade relations. The scenario of the UK trading on World Trade Organization (WTO) terms from January 2021 is being considered. This article delves into the differences between the anticipated UK-EU trade deal and the WTO terms to help understand the implications for businesses and consumers.
The Difference Between UK-EU and WTO Terms
The UK-EU deal is designed to eliminate all tariffs and quotas, which provide a more favorable trade environment compared to WTO terms. Meanwhile, WTO terms feature automatic non-discriminatory tariffs and quotas, which often hinder cross-border services. The UK-EU deal also addresses professional qualifications, data adequacy, and financial equivalence, areas that are not covered under WTO rules.
The proposed deal includes specific provisions for government procurement, enhancing market access. It also focuses on security cooperation, an aspect not covered by WTO agreements. The comprehensive nature of this deal is clear, though it will introduce new administrative challenges to existing UK-EU trade.
WTO Terms and Trade Impact
Despite the anticipated UK-EU trade deal, there are concerns that the UK may have to revert to WTO terms. It is important to note that the difference in tariffs averages to around 3% for goods exports to the EU, with the UK facing slightly higher tariffs than the EU. This is a marginal difference, especially when considering that only 8% of the UK economy relies on goods exports to the EU.
Furthermore, evidence from the UK's non-EU trade shows that most of its trade is already conducted under WTO terms. This trade earns a surplus and is growing faster than EU trade, demonstrating the adaptability of UK businesses. In fact, it is anticipated that 90% of world trade growth in the next few years will come from outside the EU.
Potential Disruptions Post-Brexit
The main change brought by Brexit is the exit from the customs union, which is inevitable regardless of the post-transition period outcome. This will necessitate the creation of new customs rules, declarations, checks, and clearances, causing initial delays for goods passing through these new customs arrangements.
Since a significant portion of the UK's non-EU trade already operates across customs borders, the core disruption will not be due to the post-transition negotiations but the exit from the customs union. Initial challenges will likely include long queues and delays for lorries, leading to substantial inconvenience for businesses and consumers.
It is expected that these initial disruptions will be the most visible result of exiting the transition period. While these issues will be mitigated over time, the immediate upheaval is inevitable. Businesses and consumers should prepare for a period of adjustment and potential complexities in supply chains and logistics.
In conclusion, while there are legitimate concerns about the impact of WTO terms, the broader context of the UK's existing non-EU trade and the inevitability of customs union exit means that the transition period will bring significant challenges. However, these issues are not unique to the current negotiations but are more a result of the UK's decision to leave the EU.