Despite MPs voting to make it harder to shut down Parliament, No Deal remains the default. What would it look like?
We’ve all seen the headlines about how No Deal would plunge our economy into a recession. But what would it mean in practice – for Britain’s industry’s and our jobs?
After gathering evidence for months, a new report from the Commons’ Select Committee on Exiting the EU has now laid the facts out in stark detail – looking beyond the GDP figures to the industries millions of us rely on for jobs, medicines.
Johnson has moved even closer to backing No Deal in the past week, so findings like these are no longer academic.
We know this cornerstone of our manufacturing base would be hit hard by No Deal (investment has already slumped at the very prospect, the report notes). The sector employs 850,000 people, and makes up 12% of our exports. But how would it be affected in practice?
Tariffs: “Leaving the EU without a deal would mean that the UK automotive sector would be subject to the EU’s Common External Tariff on its exports to the EU27, its largest market, adding costs estimated at around £2,700 for [each] UK car. These costs would undermine [our] competitiveness.”
Turkey: “Turkey is currently a major supplier of components to the UK’s automotive sector. As a member of a customs union with the EU, a no deal exit would also require Turkey to erect new barriers and checks in its bilateral trade with the UK, placing further costs on the UK automotive sector.”
While only accounting for a small amount of our GDP, agriculture employs nearly 500,000 people in 150,000 businesses – and is truly UK-wide. Just a snapshot of what No Deal would mean:
Sheep exports destroyed: While the Government’s provisional no deal tariff schedules would allow many agricultural products to enter the UK tariff-free, “UK producers would face high tariffs exporting to the EU, currently the market for over two-thirds of UK agri-food exports. Sheep meat would face a tariff approaching 50%, bringing the viability of that sector into question”
Disruptive checks and price rises: “Requirements for customs and sanitary and phyto-sanitary checks at the border are expected to create delays in agri-food supply chains, 40% of which currently pass through the short straits crossings to Dover and Folkestone…Delays at the short straits are likely to lead to selective and unpredictable shortages in certain foodstuffs, as well as price increases.”
The pharmaceutical and chemical sectors have been a major strong point for the UK as we’ve shifted to a more ‘modern’ economy. It’s also an area of our economy that relies heavily on science investment, international cooperation, and – rightly – strong regulation.
We’re already losing out: “The UK is losing out on high profile research projects as funding uncertainty is leading to more projects being EU based,” the Committee found.
No Deal will mean…
Supply chains disrupted: “The success of the UK’s chemical and pharmaceutical sectors rests on highly-integrated just-in-time supply chains. A disorderly no deal would disrupt these supply chains overnight, and, according to the Government’s own figures, would reduce GVA for the pharmaceutical and chemical sectors by over 20% over 15 years, compared to what it would have been had the UK not left the EU…
“Pharmaceutical industry representatives were clear in evidence to us that no deal is a leap into the unknown, but that it would likely harm the life sciences sector and increase risks to patient safety, affect the supply of medicines and could lead to price rises for the NHS.”
Bureaucracy: “Under no deal, chemical and pharmaceutical companies operating in the UK will be cut off from EU regulatory systems and databases, which protect the environment and patient safety. Companies operating in both markets will need to register chemicals or seek marketing approvals for drugs twice, in the UK and the EU, an expensive and bureaucratic process that will reduce the attractiveness of doing business in the UK.”
Data denied: “The EU has said that in the event of no deal, the UK will be treated as a third country and there would be no provisions in place on the exchange of data between the two entities. This carries harmful consequences for the life sciences sector which relies on the exchange of data for clinical trials, pharmacovigilance and the detection of unsafe or counterfeit medicines.”
Border barriers: “The manufacturing process for pharmaceuticals and chemicals often entails components crossing borders multiple times. The sudden introduction of tariffs would therefore seriously challenge the viability of the two industries’ supply chains.
“While the Pharmaceutical Tariff Elimination Agreement would soften the impact of a no deal based on WTO terms, it has not been updated for nine years and does not cover a wide range of finished pharmaceuticals, components and equipment, meaning tariff barriers would be imposed on the newest, most innovative medicines and components that are traded between the UK and the EU.”
GATT gambit debunked
This is just a snapshot of some of the problems the Committee highlight. Crucially however, they also dismantle the hard Brexiteers’ argument – espoused by Boris Johnson among others – that we can rely on Article 24 of the WTO’s General Agreement on Tariffs and Trade to maintain zero-tariff trade between the UK and EU in event of No Deal:
“Article XXIV is the GATT provision that allows for an interim agreement between two parties in anticipation of a free trade agreement or customs union. It requires an agreement between the two parties, a plan as to how the end state will be reached, and for this agreement to be notified to all parties to the WTO. By definition, leaving without a deal means there is no agreement.
“Article XXIV does not provide a means to mitigate the risks to EU-UK trade in the event of a no deal exit.” In other words, Brexiteers are telling porkies.
The damning conclusion? “Some have argued that a no deal exit would bring the EU ‘back to the table’ and that the UK would secure a better deal as a result. This is, at best, a gamble. At worst, it could lead to severe disruption of the economy, pose a fundamental risk to the competitiveness of key sectors of the UK economy, and put many jobs and livelihoods at risk.”
Read the full report.
Josiah Mortimer is Editor of Left Foot Forward. Follow him on Twitter.
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