ericbee123 wrote:Tommy. Not being funny, can you please explain to me how world trade works then.
No for two reasons. The first is that whatever explanation I provide, regardless that it is based in fact, seems unlikely to be good enough. I've already explained, in soul-crushing boredom, what "falling back on WTO rules" actually means. The second reason, is that just asking for an explanation of "how world trade works" is such a huge and nebulous umbrella, we would be here for days. You might as well ask the meaning of life.
But I respect your posts, and it appears to come from a place of genuinely attempting to understand, so I can do my best to re-explain the relevant bits.
ericbee123 wrote:As I read it, we should be able to roughly use the EU trade rules as a starting point. As the U.K. was a signatory of the WTO , long before the EU, and since joining the EU has been signing WTO deals twice , once as part of the EU and secondly as the U.K. in its own right.
Of the things you said there, most are wrong. There is no "roughly". We will have to use the EU tariffs exactly as they are now. To tinker with any of them without a trade deal will likely trigger a trade dispute under the WTO "most favoured nation" rule.
The UK is indeed a member of the WTO, but "long before the EU" is false. Both the UK and EU became members of WTO on the same day. The first day of its operation - 1st January 1995. So I don't know where you got the idea that we were WTO members before the EU was.
And, no, the UK has not been signing deals twice. I explained about each member of the WTO having a pair of "schedules":
No-one really knows the situation, but it's likely that Britain has a pair of schedules, as opposed to doesn't, which is good. What Britain needs to do is extract its pair of Schedules, and present them to the WTO as their own documents, rather than (as they always have been, and as they were originally drafted) under the umbrella of the EU. However, the WTO was set up in 1995. The UK's schedules were originally drafted, and have always been, inextricably linked with those of other EU member states, and the EU as an entity itself. We have to pick through these painstakingly working out what applies to us, and what applies to the EU and other EU member states. This will take years. Imagine everything we do with the EU, and everything the EU does with the rest of the world involving us. We will have to split more hairs than there are on the heads of all of the lawyers in the negotiating room. And we only have 9 months left to do it.
Furthermore, the WTO has zero rules for how a country can extract its schedules from an existing trading union. There has never been any need. No nation has been stupid enough to try it. It's uncharted water. Legally and regulatory-speaking, that means that it will take time. So much time. So much backwards and forwards-ing. This isn't a simple, streamlined process.
ericbee123 wrote:So are you saying we can’t do this ?
Yes. But not for why you think. We can't "roughly" use the EU trade deal tariffs as a starting point. We must use them *exactly*. That's a crucial difference.
ericbee123 wrote:We can’t then start with the worst case WTO deals and assume we have no trade deals with anyone and charge the WTO max on all our imports and the ROW has to charge WTO max on all our exports.
Can we do that ?
Yeah, we can. But, as I've said numerous times in this post, other than good will we are no more appealing than anyone else charging the WTO maximum rates. So how much trade will we really get? And a lot of countries using the WTO rules have had over 20 years to sort out deals amongst themselves. This is still an ongoing process. I'm open to persuasion, but I don't know of a country as populace as ours (or comparably so) that simply applies the WTO max-rate on everything.
But you're missing the point. The point is, as part of the EU, we paid less tariffs for certain things under the trade deals we, as part of the EU negotiated. To leave that means to suddenly hike everything up for us. And the rest of the world. There are no winners there.
But WTO maximum rates are not as big a problem for us as some remainers insist. We can use the tariff-rates we currently get as part of the EU, because we played a hand in negotiating them. But we must use them exactly as we do as part of the EU. Which makes the whole act of leaving pointless. Worse than pointless. Because, as I said, we become a slave to a trading bloc that we are no-longer a member of.
ericbee123 wrote:You’ve kind of implied we can’t use the EU as a starting point and we can’t use the WTO maximums for “No Deal” deals.
Incorrect. I've said very clearly that we have to use the EU tariff rates as an exact starting point. Here:
The only way for Britain to just survive, not even prosper, just survive, is to keep everything exactly the same as it was under the EU. Which tanks the entire point of Brexit. But even worse, it means Britain will still be a slave to a trading bloc of countries to which it no longer belongs. Once the UK starts tinkering with the EU tariffs and quotas and existing deals, it tips dominoes that start falling everywhere.
And I've said above that for a no-deal scenario, we can use the WTO maximums. Just that we wouldn't be a very appealing trading partner.
If you think I have implied anything, I haven't. Stick to what I say, not what you think a hidden meaning is.
ericbee123 wrote:So you are saying without a trade deal we can’t trade with anyone ?
No. Vastly incorrect. We can trade with whomever we like using WTO-set tariffs. It's just that we would be no more attractive than any one of the 164 other members of the WTO using their standard tariffs. Other than what we negotiated as part of the EU, we can't offer Australia a preferential trade tariff on, say, automobiles, in exchange for something preferential from Australia without a trade deal. If we lower our tariff with Australia for said automobiles, without a trade deal, we would have to lower it for everyone. And Australia, whatever they say they would lower for us in exchange for lower-tariff-automobiles, they would have to lower it for everyone else. That's what the "Most Favoured Nation" rule is.
We can trade with whomever we like on the WTO, but only on WTO standard tariffs. Which mean that there is literally zero difference between us and anyone else in the world. That seems fine, but it means that the rest of the world has to trade with us on the same rates that they would trade with a third world country.
ericbee123 wrote:We can’t use the ones we have signed up for as the U.K. ( as well as the EU ) and we can’t just fall back on WTO rules ?
The UK hasn't exclusively signed up for anything. We have always done so as part of the EU. The UK has been included by default. We need to extract our own schedules (if we have them) from the EU, pick out the bits that don't apply to us, and them present them to the WTO as their own separate entity.
Take, for instance, the government procurement agreement. An agreement that allows UK companies, as part of an EU member state, to compete for world government contracts exceeding 10 million euros. This is a huge money-maker for UK industry. The EU signed up to the agreement. The UK did nothing. It was just included by default. Will we still be a member when we leave? no-one knows. Everyone just worked on the basis that the UK was included as part of the EU sign-up. If we leave the EU, will UK companies still be able to compete for a procurement contract issued by, say, the USA? Not a clue. This is what the problem is. It's uncertainty. Businesses are starting to get nervous. On the one hand, the above niche situation could be fine. On the other, the rest of the world might seek to push out the UK companies and make the market bigger/reduce the competition so that they are more likely to be awarded the contract. What could the UK do? There's nothing expressly saying that we're a member. The sensible thing would be to apply to re-join, or apply for an agreement from everyone involved to say that the UK is still recognised as a member, apart from the EU. But how? How would that work? As said, the market is about to get smaller for everyone else, so why would they just do it from the bottom of their hearts? That's what negotiation is about.
That's just one example. There are thousands like it. That's not directly trade, but is on the back of it.
ericbee123 wrote:How did countries like Croatia survive, they aren’t in the EU, weren’t signatories of the WTO, but managed to survive a split from a larger entity , carry on trading with ROW — and beat us in the World Cup Semi Final , they are doing so well !!!
I’d just like to know where I am going wrong in my assumption that we can do trade with people and set our own import duties within WTO rules at the worst case.
Bit of classic "whataboutery" going on there. But I'll indulge. Again, as I said in my previous post (a lot of repeating myself here):
"So how did all the WTO member states manage it, then?" Good question. They sorted out their schedules a long, long, long time before joining. So that when they presented them, they knew that the schedules would be accepted, or had done as much as possible to reduce the risk of protest. And they drafted them (mostly) from scratch. As said, no-one has ever extracted schedules from a trading bloc like the EU and then re-presented them to the WTO. We don't have a clean slate.
We can set our own import duties within WTO standards. That's fine. It's just that every single other WTO member can do the same. So, outside of trade deals, trading in a particular thing with the UK has zero benefits to, say, trading the same thing with India, or Japan, or Azerbaijan instead. That's, in part, where geography comes into play. If both India and the UK offer the same product for the same tariff as each other to, say, New Zealand, then New Zealand will trade with India, because the only defining factor is that India is geographically closer than the UK, and therefore shipment/transportation costs and time will be less. So yeah, that also advantages the UK, too. But then our closest major trading partner is the EU, which, as members, we had preferential deals with. So now we leave, we're offering the same product as we did. Just a lot more expensive.
And sure, the UK sells and makes a lot of unique and interesting things. But the UK does far more in an inter-connected way. Globalism for better or worse has meant that we do and make things in partnership with others. We didn't make the Typhoon/EF2000 on our own. We did it as part of an international consortium.
As MiG_Eater says, this could pave the way for a more UK-first policy. Force us to make more of our own stuff. Maybe. But our society isn't set up like that, and hasn't been for half a century. It'll be a lot of very painful forced-adjustment. It will also lead to a monstrous brain-drain of skilled people from all over Europe, and even if we did make our own stuff, the rest of the world isn't just going to follow suit. The Germans and French are already talking about a new FCAS, the replacement for the Typhoon. The offer is open to Britain, depending on Brexit. They're not just going to stop if we drop out. They'll just do it alone. Without UK help, they may indeed end up with an inferior product. Or they may end up with a cheaper, more streamlined one because there's one less country in the agreement to worry about. No-one knows. That's the point. Uncertainty is a killer for business.
But that raises a plethora of other problems. The EU keeps and protects, due to historical influences, a geographical indication system. Under EU rules, champagne isn't allowed to be called champagne unless it's from the Champagne region in France. Americans hate that, preferring trademarks instead, and would lobby to remove stuff like that. This affects the UK, too. Traditional produce like west country cheddar, stilton cheese, Welsh lamb, cumberland sausages, Cornish pasties... If that protection were removed, and we were looking to do a trade deal with the US, they might lobby to remove all of that and flood the market with its own pasties, and forbid anyone from calling Cornish pasties Cornish pasties. That's part of their brand. That's how British consumers would be able to identify the produce that they want. Imagine how much of a hit the makers of cumberland sausages would take if they were forced to just call them sausages, and the British public couldn't distinguish them from some cheap horrible American guff instead? Millions would have to be spent an advertising to tell the public, which don't need to be paid now.
It's a domino effect. That will, I don't know, hit British farmers, which will hit someone else and so on and so on. Trade is a delicate web of agreements, promises, and obligations. Changes are made rarely, carefully, and over a long time. And the entire trading prowess of the UK is built on that. Remove a strand just like that, and you've got no idea where or what will collapse.
True, it may indeed present opportunities, I've no doubt. But no-one can predict that. Just as it may well all be "sunny uplands", it could also be regulatory, legal, and financial chaos.
ericbee123 wrote:You can’t say “we will be flooded with cheap imports” if we adopt a zero import duty model as well as say “we can’t trade with anyone unless we have a trade agreement”.
Because I never said the latter thing, and the former thing would only happen if we reduced all of our tariff rates to zero, which would be the only other way apart from keeping the EU rates exactly as they are (which is the opposite of all the "control" we were promised) to safeguard us from trade disputes on the WTO rules.
ericbee123 wrote:Just confused.
Clearly. It's a confusing situation, no doubt. No nation has ever been stupid enough to do this before. There are a lot of uncharted waters. But properly reading my posts would at least alleviate some of your confusion and stop you from thinking that I have said things that I haven't.
You're treating global trade as black and white. It's not. It's the very opposite. Trade forms part of the million combination of things known as diplomacy. Trade intermingles with defence, which intermingles with cultural and scientific exchange, which intermingles with the very fabric of global societies. As said, if the UK is subject to a WTO trade dispute by, say, Argentina, then that's a problem we have to face. It might be that said problem is only overcome by us agreeing with Argentina some form of concession on the Falklands, or whatever. It's a hypothetical, but the point is, you don't just stop with a blank-rate tariff. Trade is simply another mechanism of discussion in a forum of society where the world's nations interact with each other. That's the entire point of why we can't just "fall back onto WTO rules" and everything is merry and dandy. If that was the case, we wouldn't need to "fall back" on them. We would already be there.