23 March 2016

It’s not a “fact” that the UK will find trade deals hard to cut post-Brexit


By the nature of the process, it is impossible to state definitively what kinds of new trade deals the UK might get with the EU or the rest of the world post-Brexit. It’s also, incidentally, impossible to state definitively what remaining in the EU will mean. No-one at the time of the 1975 knew that over the next forty years being a member of the EU would mean bonding with Spain (then still ruled by Franco), Poland (then Communist) and Greece (then in the process of a coup). Almost no-one knew it would mean common citizenship. No-one at all could have guessed that nuclear war would have become less of a threat than Islamic terrorism or that combatting global warming would be seen as a key purpose for European cooperation.

Be that as it may, it is nonetheless not certain what kinds of trade deal the UK might get. No government from outside the EU is going to risk damaging its existing relationships either with the EU itself or with other partners (e.g. in NAFTA) by saying in advance that it would do a deal with the UK.

That means it is open to each side in the referendum debate to speculate. Pro-Brexit advocates can argue that they would get this or that deal, and their opponents can say that there would not be such deals or that they would not happen quickly.

Speculation can of course be supported by arguments. Just because something is uncertain doesn’t mean it’s purely a matter of “he thinks; she thinks”. But a reasoned speculation should not be presented as if it were a “fact”, and a bald assertion certain should not.

Yet that is exactly what the pro-Remain website infacts.org repeatedly does. Let’s consider it’s recent article “8 reasons the UK won’t get better trade deals outside EU”. It begins:

Eurosceptics blithely say that one of the advantages of quitting the EU is that Britain could negotiate free trade deals with the rest of the world. But a cool examination of the interests of our main potential trading partners suggests it wouldn’t be easy to nail down new deals. In fact, we’ d be worse off in each case.

Actually, that’s not a “fact” at all. Perhaps we might excuse the use of “In fact” in this case as just a loose version of “Actually” or “In practice” if it weren’t on a website called “In Facts” which purports to correct factual errors on both sides in the referendum debate.

Considering just a few examples of the claims made (I could make similar objections on every item, but I’ll stick to the most egregious), we can see how little reasoning there is, either — on top of the lack of any “fact”.

Item 1: The US is currently negotiating the TTIP with the EU. Its trade representative has said it wouldn’t be keen on pursuing a separate free trade deal with Britain if we quit the EU.

So what? No-one serious would regard pronouncements by some trade representative as meaning anything under these circumstances. That’s the best they can do? Of course there’d be a trade deal with the US post-Brexit. The UK is the US’ seventh largest trading partner, and bigger than any other EU Member State apart from Germany. And obviously it would be much quicker for the US and UK to agree that the US and EU, given (a) the much closer similarity in US legal systems and business cultures; and (b) that each of us would only have to agree with each other, without the deal being stymied by objections from other parties (EU trade deals are frequently delayed because of objections specific to one or two EU Member States). Assertions to the contrary are simply silly.

Item 3: Canada, South Korea and Mexico. The EU has free trade deals here, so the UK would have to play catch-up, which could take many years.

This is simply nonsense. There would not be the slightest need for the UK to play “catch-up”. There are deals already agreed with these countries. They and the UK could simply agree to continue the current agreement. Now they might not do that, and there might be complexities with the interaction of the rest of the EU. But none of that is anything to do with “catch-up”. Neither is there the slightest objective reason to believe the process would take “many years”. If the UK had a holding agreement in place with the EU, post-Brexit, pending a fuller agreement to be worked out in due course, trade agreements with Canada, Korea and Mexico need amount to little more than: “I’m happy to carry on as we are. Are you happy too? Yes. Cool. Let’s have a beer to celebrate.”

Item 4: India and Japan. The EU is negotiating with them already. An independent UK would have to play catch-up here too, to get nothing more, possibly less.

Focus on Japan. The UK would probably already have done a deal with Japan by now (likely, as it happens, decades ago, but even in terms of the current negotiations we’d probably have done the deal) if it were just us! As things stand, the current thinking is that the EU and Japan are a long way from doing any deal yet, bogged down in issues such as EU demands for a public international investment court and Japanese demands for TTIP-style regulatory cooperation on standardisation.

Item 6: Australia and New Zealand. Both are negotiating with the EU. This would be their priority rather than a UK solo deal. So another catch-up prospect.

Simply ludicrous. Taking NZ as an example, in the year to mid-2015 it exported about NZ$3.1bn to the UK and NZ$4.7bn to the rest of the EU combined. There’s not the slightest reason to believe NZ would regard a deal with the UK as irrelevant compared with the only marginally larger exporting it does to the rest of the EU. The NZ government has said it wants the UK to remain in the EU, but as an advocate for NZ within the EU!

To repeat: one can’t demonstrate absolutely that that infacts.org article’s claims about how hard it will be for the UK to make new trade deals is false. There’s a judgement call to be made about the risk of these things not turning out as one would hope — any negotiation can break down or become drawn out. But it is by no means a “fact” that the UK could not do trade deals with these countries post-Brexit, and the infacts.org claims about how hard it will be are nothing more than unsubstantiated (and, frankly, implausible) assertions.

Andrew Lilico is Chairman of Europe Economics.