Wednesday 23 January
The liberal consensus is slandering the WTO option as it becomes an increasingly likely prospect. Good! The global trade body is exactly the type of trading framework Britain needs.
As March 29 approaches, and the prime minister’s desperate deal with Brussels remains as unpopular as ever the prospect of real independence, courtesy of a no deal Brexit becomes ever greater. In spite of the many dark period Brexiteers have had to endure over the past two and bit years, there is reason to be optimistic.
Good for leavers, bad for Remainers, which is why the 48 percenters and their overly represented cheerleaders in the media have directed their artillery at the World Trade Organisation.
In the event of a no deal British importers and exporters will interact with European partners in the same way they do with the ever-expanding rest of world. The World Trade Organisation rather than the European Commission will become the pivotal actor, guaranteeing limits on tariffs and providing legal restraints on anti-competitive behaviour.
How the WTO works
The WTO comprises of 164 countries, accounting for all of the world’s top 50 economies – Kazakhstan is the highest ranked non-member at 56, not exactly a big player. Like the EU, the WTO is rules-based with a powerful court to keep offenders in line. Given its size, lack of political baggage, and the fact that most nation-states view their sovereignty as sacred, there’s little to no appetite for aligning regulations. A stark contrast with the EU’s apparent destiny towards federalisation, with economic rules now accompanied by social policies on the way to a common budget made necessary by a common currency. Such a movement at the global level would be wholly unrealistic, and that’s the WTO in a nutshell, it focuses on what can and should be achieved: more trade, more prosperity.
The organisation’s priority is to maintain a balanced commercial playing field, where goods and services are widely available; bought and sold under the fairest conditions possible. In this capacity, the WTO acts as a constant negotiating forum to reduce tariff and non-tariff barriers the world over. It’s one thing getting tariff-free access to Slovenia or Portugal’s markets, but they are meaningless compared to incremental tariff reductions to mega markets like Japan and the United States.
Crucially, the WTO possesses the ability to levy sanctions on countries if they violate trade agreements. The WTO is a robust organisation designed to be fearless in applying the law. If that means slapping heavy sanctions on powerful trading nations, so be it. The deal-orientated European Commission, in spite of the millions of rules it spurts out, behaves differently, it is a political animal, sensitive to the preferences of national players inside and outside of Europe.
As touched upon in previous editions of this blog, the European Union is a declining economic zone. The 2018 recovery is over, Germany is panicking about a No Deal Brexit and the recession its export-dependent economy will most likely incur. France grew by just 0.1% in the last quarter of 2018. Italy’s banking crisis is yet turn into a full-blown collapse, but it most surely will.
India has recently pipped China to the title of the world’s fastest-growing economy and will soon overtake Britain as the world’s fifth biggest economy. The electric growth of nations such as India underpins the need to pursue WTO trade deals with nations in the East. Trading on WTO lines would enable us to think bigger.
Trading on WTO terms will also mean Britain is free to negotiate its own tariff-free trade deals. As a member of the EU, Brussels currently performs this function on the United Kingdom’s behalf. Owing to protectionist tendencies of powerful member states like France, the bloc’s performance in these talks is typically sluggish.
As a full member of the WTO, rather than trying (and failing) to maximise trade with the EU27, Britain can trade on a level playing field with 164 sovereign nations. Rather than crying over a European project that never gave enough consideration to prosperity and is thus, destined to fail, we should instead should embrace the possibilities of trading globally under the WTO.