Brexit supporters living on hope
Discussions about the effects of leaving the European Union rarely mention the practical problems that would ensue.
Because the UK is a member of international trade agreements as a member of the EU, its membership of all such agreements would cease.
These agreements cover most countries in the world, because they include the
World Trade Agreement, which has 161 members apart from the UK, and 36 agreements between the EU and 58 other countries. Such a situation has never existed
before, and the director-general of the WTO has suggested that the UK’s position would resemble that of a new applicant for membership.
Such negotiations typically take years; negotiating a trade agreement typically takes four to nine years.
These negotiations might well take longer: the UK’s government service is not staffed to negotiate trade agreements, because such work has been done by the European Commission for the past 30 years; and renegotiating so many agreements simultaneously
would create unprecedented pressure. It has recently been estimated that the task could
occupy 500 expert negotiators for 10 years.
As the UK government has no negotiators on its staff, the expertise would have to be learned on the job – reducing the chance of successful outcomes.
These negotiations would be additional to those with the EU, which would be difficult and therefore likely to be prolonged. The outcome, however long it takes to reach it, is likely be less favourable to UK business than the present position: if we wish to opt out of the European Single Market, the new agreement we reach with the EU will provide less freedom to trade; and if we renegotiate bilateral trade agreements, we are likely to get less favourable terms than the EU had negotiated before. Such deals are reciprocal, and the UK can offer fewer benefits than the EU because it has a tenth of the population.
The outcome of all these negotiations, lasting many years, is therefore likely to be less good for UK business than its present situation.
That is why all forecasts of the result of Bexit suggest that the UK’s economy would be smaller than it otherwise would have been.
But they may not allow enough for the depressing effect on economic activity of the long period of uncertainty while new agreements are negotiated. If businesses do not know what conditions they will be trading under, they will hold back investment. If many firms postpone investment, they will cause a recession.
People are right to be worried about the consequences of Brexit. The “Leave” campaigners are truly whistling in the dark. Their belief that better deals than the existing ones can speedily be negotiated is just a hope.
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