Leaving the European Union without a Withdrawal Agreement under Article 50 is not a step into a legal vacuum. Still less does it amount to going over any kind of “cliff edge”.
What happens is that our international trade with the European Union will become subject to the same legal regime which currently governs the majority of our export trade to the rest of the world. That is trade under the World Trade Organisation rules-based system.
The three key elements of the WTO system that will affect our post-Brexit trade with the EU are its rules on tariffs, its rules on non-tariff regulatory barriers to trade and its rules on the facilitation of customs procedures.
The WTO’s rules on tariffs allow members to charge tariffs on imported goods up to certain limits, but, subject to limited exceptions, any tariffs must be imposed equally on goods from all countries – the so-called Most Favoured Nation (MFN) principle. The EU will therefore impose its standard external tariffs on goods imported from the UK, unless and until a future free trade agreement or interim agreement leading to an FTA is agreed.
This is not a big deal. These tariffs will come to £5-6 billion per year, less than half the UK’s current net budget contribution to the EU.
The UK will be obliged to charge the same level of tariffs on imports from the EU as it does on imports from the rest of the world. But, contrary to much ill-informed comment, the UK is not required to charge the same tariffs on its imports as it currently charges under the EU-mandated Common External Tariff. We will be free to charge lower tariffs, or zero tariffs, as we judge appropriate, so lowering the cost of basics in household budgets.
The WTO agreement on Technical Barriers to Trade will require the EU to recognise UK-based goods certification procedures and allow entry to the EU Single Market for UK goods which comply with UK rules until such time as they are changed to become different from the EU’s rules. At the same time, the Withdrawal Act mandates that the UK shall continue to recognise EU rules and EU certifications on goods unless and until this is changed by secondary legislation. This means for example that medicines made in the EU will continue to be recognised as conforming to the UK’s import rules and arguments that there will be shortages are pure mythology.
The WTO Trade Facilitation Agreement will apply to smooth customs procedures between the UK and the EU. It mandates for example electronic pre-clearance of imported goods, avoiding the need for physical inspections at the point of entry except in exceptional circumstances.
In an ideal world, we would progress forward to a full Free Trade Agreement with the EU. But there is no need to rush it – our trade relations with the EU will operate just fine under WTO rules for as long as necessary.
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