In World Economy News 17/03/2017
Britain’s departure from the European Union will be costly for both sides in trade terms, however good the exit deal reached, former head of the World Trade Organization Pascal Lamy said.
Prime Minister Theresa May has said Britain will be leaving the EU’s single market and will instead seek a “comprehensive, bold and ambitious” free trade agreement with the bloc.
“Whatever deal we succeed in making, and I am pitching for the best deal, the most open, the most simple, the most efficient and the most pragmatic, the greatest deal we can have, is going to be complex and costly,” said Lamy, a former European trade commissioner who headed the WTO from 2005 to 2013.
“In trade terms, there is no way switching from the internal market to any other arrangement, including the best, won’t be costly,” he told an audience at the Institute for Government think tank in London.
Lamy said that even though reaching a tariff-free agreement for trade in goods was a “no brainer”, regulations and customs procedures would add a layer of costs for both sides.
“Anything that has a cost for the UK has a cost for the continent because of the deep integration of our production systems,” he said.
May is due to trigger Article 50 of the EU’s Lisbon Treaty, beginning two years of divorce talks, by the end of this month.
Lamy said it would not be possible to reach a deal in this time, with just the trade agreement element likely to take five to six years, and that a transitional period would be needed.
May has also said she is prepared to walk away from negotiations without a deal if she doesn’t like what is on offer. In the absence of an agreement, trade between Britain and the other 27 EU members would default to WTO rules and tariffs.
Lamy, who was also chief of staff to former European Commission president Jacques Delors, rejected May’s suggestion that no deal could be better than a bad deal, saying trading on WTO terms “would be worse than a bilateral agreement”.
But he added that he believed both sides would strive to avoid this situation.
“For such a thing to happen this would have been mishandled on either one side or both sides. I cannot see this as a sort of likely scenario.”
Source: Reuters (By Kylie MacLellan, Editing by Stephen Addison)
