Very quietly, Liam Fox admits the Brexit lie

"Liam Fox released a very revealing statement yesterday."
"Liam Fox released a very revealing statement yesterday."
Ian Dunt By

Liam Fox released a very revealing written statement yesterday. His department has started to do the preliminary work at the World Trade Organisation (WTO) required for when Britain leaves the EU.

Members of the WTO have things called schedules, these are basically a description of your trading relationship with the world. They list things like your tariffs and your services commitments. Britain's are currently held under an EU umbrella and they'll need to be extracted ahead of leaving.

This should be the chance to create that confident, independent, global trading nation Fox and the other Brexiters are always talking about. Finally Britain can construct a trading arrangement which suits it, not the continent.

For instance, we can get rid of the special rule on oranges, which we don't grow but have to labour under because of the Mediterranean states in the EU which do. We can prioritise the sugar cane that Tate & Lyle uses in their sugar, rather than the sugar beet which is used in Europe. We can finally create a customised trading arrangement for this country, rather than one for a continent with which we sometimes share very few economic interests. This is exactly what Brexit was all about.


Except Fox isn't going to do any of that.

"In order to minimise disruption to global trade as we leave the EU, over the coming period the government will prepare the necessary draft schedules which replicate as far as possible our current obligations.[italics added]

It is a startling admission. The UK's extracted WTO schedules will "replicate as far as possible" it's current status. So we'll keep the special rule for oranges, even though we don't grow them. We will continue to protect a sugar process designed for Europe and continue failing to protect one used by one of our major companies, despite its years of lobbying to change the system.

In short, despite all the sound and the fury, despite all the attacks against immigrants and the threats against EU citizens in the UK, despite all the Brexit votes and the Richmond rebellions and the sudden change in this country's political dynamic, the government is not aiming to change anything of any substance. Britain will keep the exact EU tariff system which Brexiters for so long said was strangling it.

Why? Because to do otherwise would be suicide. The WTO has been presented by Brexiters as a safety net, a place to go if no deal is possible with the EU. They keep on saying that they have no concern about falling back on their rules. This is because they don't know what they are.

Any member state at the WTO can trigger a trade dispute with the UK if they feel they have been unfairly treated by a change in its arrangements. And Britain is about to change its arrangement with everyone. It is a major economy extracting itself from a massive trading block. Those disputes are likely to either be resolved by sanctions or concessions on tariffs. If Britain were to lose several of them it would basically be trading under the conditions of injured foreign parties.

So instead Britain will try to rock the boat as little as possible. It will copy and paste all the EU tariffs, whether they suit us or not. It will protect produce it has no intention of making and leave many it does make without protections.

Then it will have to figure out what it'll do with tariff rate quotas, which can't be replicated like tariffs are. Quotas mean that importers pay one tariff for a set amount of a product - say 100,000 tonnes of chicken - and then another tariff for anything above that amount. But this is calculated across the EU, so when Britain takes its tariff rate quota out, it is calculating what slice of the pie it is entitled to. You can't replicate quotas, you have to calculate them.

Tariff rate quotas are so devilishly complicated that they are almost never touched. The EU still operates under quotas from two expansions ago. But Britain is pressed for time, so it will probably take the last three years' trade flows and claim that as the basis for them going forward.

This is as close to a tolerable solution as the UK is likely to find, but look at the incentives on the other side. Brazil exports 480,000 tonnes of chicken to the EU a year, of which about 40,000 goes to Britain. Let's say the British deal on these tariff quotas is unfair. They will trigger a trade dispute. Fine, that's to be expected.

But now imagine the British deal is perfectly fair. What is their incentive? They have the opportunity to open up further market access for their poultry exporters. So they may wish to trigger a trade dispute anyway. Britain will be walking a tightrope, hoping thousands of these disputes don't erupt at a uniquely vulnerable time for it economically. That makes it open to making the changes the other side demands.

This is the case not just for Brazil, but for every single country on earth which exports to the UK. Failure at the WTO level can trigger a global avalanche of trade disputes against us, just as we cut ourselves off from our largest market.

And all of this doesn't even include the EU, which is an independent actor at the WTO, as well as the representative body for 27 of its other member states. They get to present their schedules to the WTO first, because they are much larger. If they disagree with anything we've done, they have a stronger voice in winning that battle. Britain’s extracted schedules will need to be accepted by the EU for it to have any hope of making a seamless transition.

None of this will be mentioned by the Brexiters, of course. In public they puff out their chests and accuse critics of not believing in Britain and thumb their nose at their European counterparts. But in private, well away from prying eyes, they delicately and loyally replicate all of the EU's trading arrangements, just so they stand a chance of setting themselves up in a viable manner at the WTO.

Ian Dunt is the editor of Politics.co.uk. His book - Brexit: What The Hell Happens Now? - is out this week from Canbury Press.

The opinions in politics.co.uk's Comment and Analysis section are those of the author and are no reflection of the views of the website or its owners.

Comments

Load in comments
Politics @ Lunch

Friday lunchtime. Your Inbox. It's a date.

Newsletter update
wa