During discussions in a
seminar on ‘ Navigating Global Trade in Turbulent Times’, economists warned UK that
if it fails to negotiate with the European Union while leaving for a deal, it
is likely that UK will have no trade. And UK is not in a position to compare
itself with US and go to WTO as US did.
Contrary to Theresa May’s
campaign claim that ‘ no deal is better than a bad deal’, the chief economist and director of policy at ADS
Group, Jeegar Kakkad, said no deal would be the “worst” option, warning that
trade is likely to come to a halt if the UK fails to negotiate a deal in
leaving the European Union.
“A bad deal is one with regulatory and economic
divergence,” he said. “It may require more forms be filled out, more
bureaucracy, but we will still be able to trade – no deal means no trade.”
Senior economist at Dun & Bradstreet Markus Kuger
said his firm was working on the premise that negotiations would throw up three
Scenario A, deemed both the most likely and best,
would result in an amicable divorce, “parting as friends”, with firm
agreements, including on free trade.
Scenario B, somewhat likely and considered the worst
case, would be characterised by a breakdown in talks, leading to no deal and a
return to World Trade Organisation (WTO) rules.
Scenario C, considered highly unlikely and best
described as the “bad deal”. Here, there would be Brexit with transition but no
free-trade agreements (FTA).
This, said Mr Kuger, was likely if disagreements arose
over Irish borders, Gibraltar, or if a far-right party in power somewhere in
the EU decided to object to a deal for political gain.
While no FTAs would have been agreed, the transitional
window in Scenario C would provide more time for negotiations.
“Theresa May claims Scenario B trumps Scenario C, as
the country could go straight to WTO rules and trade with the same level of
success the US has had using WTO rules with Germany,” said Mr Kuger.
“The problem with this line of thinking is that the US
has so many deals with Germany that, while it may be using WTO framework, it
has supplemented this with a multitude of modifications.
“The UK would not have these modifications in place –
and would need to negotiate them. So, for instance, Welsh farmers would face a
40% tariff trading with Europe; deal with that.”
Furthermore, Mr Kakkad said, leaving with no deal in
place would also pull the UK from numerous international agencies that
facilitate trade not only within Europe but at a wider level.
“Take for instance, the European Aviation Safety
Agency (EASA): if we leave with no deal we will have renegotiate entrance to
this regulatory body for aircraft compliance.”
Not only does EASA allow UK manufacturers to sell
aircraft parts to the EU, EASA also has a bilateral agreement with the US,
which allows EASA-compliant parts to be sold there.
“If we are not part of EASA, not only can we not sell
to Europe, we cannot sell to the US,” he added. “Being part of EASA is vital
for UK aerospace, and that requires reaching a deal with the EU.”
The value of UK aerospace to the country cannot be
overlooked, he said. It is the second largest in the world, with a 17% share,
and last year reported sales of £31.1bn – up £2bn on the previous year.
Mr Kuger and Mr Kukkad were both speaking at a seminar
on ‘Navigating Global Trade in Turbulent Times’ organised by SEKO Logistics, to
discuss the challenges and opportunities presented by changing times for the
British aerospace, aviation, defence and security industries with the impact of
Brexit and the new U.S. Administration.