Former WTO chief warns of ‘costly and complex’ Brexit

17 Mar 17

Brexit will not be the “apocalypse” but it will be unavoidably “complex and costly”, the former director of the World Trade Organisation has said.

Pascal Lamy, who headed the WTO from 2005 to 2013, discussed the UK’s exit from the European Union at the Institute for Government on 16 March.

He said the suggestion, upheld by some Brexiteers, that leaving the EU could result in savings was misguided.

“In trade terms – just to take this example – there is no way switching from the internal market to any other regime, [won’t] be costly.

“If you need a passport for your goods, you need a person to rubber stamp that passport – this has a cost.”

He stressed that even the “greatest” deal – in his view, the most “open, efficient, pragmatic” – would be “horribly complex” and have financial implications for the UK.

As a “no brainer” for both sides, he predicted that securing a new free trade agreement would be a relatively simple part of the process.

Still, it would take “five to six” years to hammer out a comprehensive deal even in this area, Lamy predicted, lending his voice to doubts that the entire process can be completed within just two.

The strict time frame is stipulated in Article 50, which sets out the formal process for leaving the EU.

As soon as prime minister Theresa May invokes the article, notifying the bloc of the UK’s desire to exit, that two-year clock will start ticking.

Negotiators will then have to embark on the huge and daunting tax of detangling the UK’s formal links to the trading bloc – hopefully, leaving a functioning relationship intact afterwards.

According to Lamy, some of the trickiest areas are likely to include: trade defences, such as anti-dumping measures; the scope of restrictions – if any – to open public procurement; and the UK’s participation in the EU’s €80bn (£69.8bn) research and innovation programme.

Even more complex and sensitive, he continued, is if or how the UK will comply with the EU’s lengthy catalogue of standards for goods and services, which will prove a “major problem”, along with issues related to corporate taxation or VAT.

At this stage, Lamy observed, the costs of this complexity are “not visible”.

He asked: “Given the time it will take, the big question is... if or when these costs appear, whether this triggers a new balance between reason and passion.”

 

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