Why the UK needs that BREXIT deal (Part 4)
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From the outset of the BREXIT campaign, there has been a dangerous mix of cooked numbers and half truths, which were further enhanced by a failing opposition to counter them. The notorious “350 million GBP per week” which were allegedly sent to the European Union were of course easily fact checked and debunked, but nobody seems to care much about reality.
The NHS is indeed receiving additional funding by not even remotely close to the statements made in the famous nonfactual campaign slogans. When compared to the budget cuts made by the same government, the actual budget increase isn’t even a tenth of what has been cut under the rule of the Conservative Party. None of that is new and none of that wasn’t known during the campaign. And like so many other slogans and promises by the “Brexit-Gang” around Boris Johnson and Nigel Farage, none of that has anything to do with what is in store for the United Kingdom after 2020.
A core message of the campaign was a promise of a prosperous Great Britain without the European Union and the wonderful prospects of growth without the “350 million GBP per week” to be paid to European Union. Although the United Kingdom was a net contributor to the EU’s budget, it was so at a significant discount compared to other net contributors. The famous Thatcher Discount was never mentioned by the Brexit-campaign and their slogan designers.
What was also not mentioned, and still is something the likes of Boris Johnson and Nigel Farage do not want to reflect on in public, is that entire economy of the United Kingdom is closely tied to the single market called the European Union. Almost 50% of the British economy is made up by trade with the EU, in which the UK imports significantly more than it exports. And from what it exports globally, it depends on 42% supplies of parts and services by companies from the EU.
The slogan should have said “we pay only 350 million GBP per week to the EU and get 12 billion GBP per week in trade in return” and anyone who would have fact-checked that would have immediately said “dude, it’s only 220 million GBP per week so well done”. But that would have not sold the fairy-tale of a prosperous United Kingdom without the European Union…
Here are some sobering facts on the British Economy and its dependence on the European Union:
- Trade contributes 63.5% to the total GDP of the United Kingdom.
- The European Union is the single largest trade partner of the United Kingdom and with 49.1% is (almost) larger than all other trade partners combined.
- This means that the European Union contributes to no less than 31.2% of the total GDP of the United Kingdom.
- Exports contribute 31.1% to the total GDP of the United Kingdom.
- Exports by the United Kingdom are based on 42.3% imports of parts, goods and services from the European Union.
- This means that the European Union contributes to no less than 13.2% of the total GDP from exports by the United Kingdom.
Some of that can indeed by handled by WTO rules in case of a no-deal outcome, which is becoming more likely with every single day passing by. However, anyone who would take a look at the reach and non-repudiability of the WTO rules would immediately identify that these are not the answer to the desperate need of a trading deal with the European Union as its single largest trading partner.
- WTO sets rules and rulings for governments, not companies.
- WTO hardly covers services, which is a significant contributor to the British economy and the trade volume with the European Union.
- WTO can not enforce passporting for non-EU members, on which a fast majority of the British services industry depends for doing business within the European Union.
As a member of the European Union, the United Kingdom has been dealing under WTO rules and EU treaties with most of its non-EU trade partners. Effective 2021, the United Kingdom will be dealing with those partners under WTO rules unless it strikes a trade agreement before the end of 2020. Indeed, you read that correctly. The United Kingdom has been dealing with most of its trading partners based on the existing trade agreements with the EU and now needs to either strike new deals with all partners in addition to striking a deal with the EU, or deal with their partners based on WTO rules including the EU… There is not much time left to do that!
A look at what Mr. Donald “trade war with everyone” Trump does and how he casually implements sanctions on anyone who doesn’t dance to his music in addition to stepping back from binding treaties just to dictate new condition, makes crystal clear that the reach and non-repudiability of the WTO rules only go as far as the partners involved are willing to let them go…
The COVID-19 crisis only accelerated what was already bound to happen. Mr. Boris Johnson intends to play once again his last-minute-deal strategy and come up with something improvised in the last minute. That worked for him as mayor of London, where he could do so from the upper hand position as “the man in charge” of London, the largest economical hub within the United Kingdom. He tried and failed to do so in his last-minute-deal attempt with the exit-agreement, bringing back a deal which was much worse than the deals his predecessor had negotiated.
He is trying to do the same routine again with waiting and obstructing every progress in negotiating a deal with the European Union. The window of opportunity to negotiate a comprehensive deal has gone by without any movement in 10 Downing Street. The final hours of a compromise which would decrease the negative impact on the British economy have come and according to same European leaders have also already gone.
What remains is a final opportunity to negotiate a deal with the European Union to keep at least some of the trade in goods going. This time, Boris Johnson will no be able to do that from the upper-hand-last-minute-deal perspective he prefers. Boris Johnson needs a deal and he needs it fast, for a hand in the game which he not only overplayed. He needs a deal to play the hand on which he wend all in with chips he never had.
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