The Brexiteers’ magical thinking on global trade

Those advocating Britain’s exit from the EU, the world’s largest exporter and importer, would have you believe a number of magical things.

First, some claim a post-Brexit UK would miraculously maintain all the rights and opportunities the European Commission has negotiated for it over the years in EU trade agreements. That is simply untrue.

The EU is at the heart of the global trade system — and the UK, as its primary advocate of free trade, has played a leading role in establishing that position. But EU trade agreements apply in the territory of its member states. If the UK leaves, it ceases to enjoy the benefits of those agreements, including the 22 the EU has concluded with the UK’s Commonwealth partners. It would no longer be covered by the negotiations with the US, Japan and other leaders in world trade now heading towards conclusion. Trade negotiations with every country and regional organisation in the world would need to start from scratch.

No matter, say the Leavers: the UK could quickly negotiate its own set of trade agreements. This, judging from my long experience of trade negotiations, is highly unlikely. The trends are towards bloc-to-bloc negotiations. The US has confirmed that it would prefer to negotiate with the EU (with the UK in the EU, by the way).

The last in this catalogue of claims is that if all else failed, the UK could rapidly negotiate its own trade agreement with the EU and somehow thereby replicate all the benefits of the single market. This would include “passporting” in financial services — the system, crucial to the health of the City of London, by which a company based in one member state can trade throughout the single market. Never mind that even the recently agreed EU-Canada trade deal, the most comprehensive the union has ever agreed, does not give the Canadians passporting rights. And all of this, the Leavers claim, without having to contribute anything to the EU budget or accept free movement of people.

The reality is that losing access to the EU single market would be a big setback for the UK. Negotiating equivalent access appears in effect impossible. And, even if Leavers believe in miracles, they come at a price. This would have to be negotiated, word by word, with 27 member states that would be unhappy with the UK’s departure and keen to discourage further exits.

Some on the Leave side — though it rather depends on whom you ask — have finally begun to admit that the intention would indeed be to leave the single market and to try to negotiate trade deals with the rest of the world. This is at least intellectually honest, however unwise a strategy it might be.

There is one thing on which I can agree with the Leave campaign. If all else failed the UK would remain a World Trade Organisation member, and could indeed then be gloriously independent, free from the constraints of having to act in co-operation with other EU members. But other WTO members would be similarly free — to raise tariffs and other trade barriers to the UK to the maximum levels allowed.

Those who deny the likelihood of this have not seen the reality of how business is done in the WTO. It has become an increasingly chilly place for those outside big regional trading blocs. Indeed, to gain influence for negotiations, the UK might have to respond by raising its own tariffs and trade barriers. All of this, of course, would be anathema to the trade liberalisation ethos that prevails in London, and which the UK has successfully exported across the Channel.

The Leavers know that EU trade policy, heavily influenced by London, has become one of the jewels in the crown. They are simply trying to turn a significant negative for the Brexit campaign into a positive.

Indeed, one of the saddest ironies about a possible British exit is that London has had such success in creating a free trading EU in its own image. So forgive those of us who count themselves as friends of Britain for our inability to stand aside and watch such a barrage of misinformation from the Leave campaign masquerading as fact.