TL;DR - we can't simply "fall back onto WTO rules", and no deal is certainly worse than a bad deal.
Huge post that no-one will ever read:
This isn't directly in response to the ericbee123's post, but as it's been mentioned; one of the most depressing things about Brexit is the complete lack of understanding of what "WTO Rules" mean. It's not the fault of those who support leave. Who in their right mind has the time or inclination to get into this stuff if they don't have to? But it's a failure of the news organisations and our leaders to properly explain to us what they are.
Once again, this isn't me launching an argument or an opinion against Brexit, it is just a fact. One the Brexiteers will have to face at some point if we leave the EU in a "no deal" scenario. Our leaders should have given us the information a long time ago, rather than some more nonsense "no deal is better than a bad deal" which means the sum total of bugger all.
By the way, we're all in it for the ride now. Legally speaking, there is very little that can be done to revoke the triggering of Article 50. The clock is ticking, for better or worse. I personally don't think there ever was, but regardless, there is certainly no "project fear" anymore. The run-down has commenced, and there are very very few legal mechanisms to stop it.
Brexiteers have long hailed the prospect of "no deal" not being a problem, because we can "fall back onto WTO rules". It seems very few people actually look at what WTO rules mean. The first point, is that WTO is not an escape from the EU if our attempted deal with them goes awry. Successful membership of the WTO is directly related to how successful we are in our negotiation with the EU.
I'm paraphrasing a concise summary. The reality is even more complicated.
The WTO has a terrible (but fair) rule called "most favoured nation". It's the opposite of what it says. It means as a nation you cannot discriminate your tariffs (you have to get a trade deal to do that). A good example would be that if we wanted to drop our tariffs on beef to zero with the EU, we would have to drop it with everyone else. We could, theoretically, drop our tariffs with the EU to zero, but we would become a tariff free nation. Cheap knock-offs would flood the market, hundreds of thousands would lose their jobs, and most importantly, we become the least attractive nation to ever trade with. We would have no way of negotiating trade deals. We already have our tariffs at zero, and so we'd be trying to haggle a deal on something we already give away for free.
Likewise, the EU cannot ignore the "most favoured nation" rule, either. It has to apply the same tariffs upon us as it does the rest of the world. That's not Junker being a revengeful little twerp, it's simply a legal mechanism. If they didn't the entire trading bloc will be inundated with successful WTO disputes from other nations. Without a deal, we would get the same tariffs applied to us as, say, Uzbekistan. Given that the UK and the EU have had decades and decades of close cooperation, and businesses built upon the principle that things are easier in the EU than they are with the rest of the world, a vast number of businesses will be subjected to tariffs that would be no different than the rest of the world.
That's the easy part. That's just the basic rule of how the WTO works and how that would apply to Britain. The hard part follows.
Each member of the 163(? -IIRC) member WTO has two of what are known as "schedules". One for services, one for goods. These are vast impenetrable documents that set out exactly how you as a nation, or a trading body, act economically with the rest of the world. They're like that Apple user agreement you ignore but agree to, but on steroids. They set out everything, right down to the tariff price of beef, or how much of your financial system foreign banks are allowed to become involved with.
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.
And all the while, any one of the 163 member states can raise a protest against Britain if it thinks things are unfair. This includes both EU states, and the EU itself. If we come out of EU trade deal discussions with a bitter taste in the mouth and no deal, and we try to extract our schedules deciding on a percentage tariff rate to Australia, but Germany is unhappy with that percentage because it manufactures most of the parts for those electronic goods, and we only do final assembly, Germany can lodge a protest. And the way the WTO works is that protests beget protests. A sudden compromise with Germany may then annoy Australians, or even another nation where the raw materials come from, so *they* lodge a protest, and on and on and on.
This leaves the UK vulnerable. The entire WTO membership has to be happy with our schedules. Any one of 163 trading entities, each with their own agendas, may trigger a dispute. No matter how spurious. And don't be under any doubt that these member states, with their established WTO membership and trade deals in place, will squeeze the UK's vulnerability. It's how trade works. It is predatory. Each nation is prowling around looking out for their own interests. If there's a crack they can stick a screwdriver into and open up, you can be guaranteed that is exactly what they will do. It's not a back-slapping affair the news portrays it. It's razor-sharp negotiation. All that "history of friendship" and "special relationship" guff falls by the wayside and is left outside of the door. Especially so given a man like Trump who is obsessed with deals exists in the White House. To assume an easy ride would be a grave mistake.
"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.
And that's not even talking about the myriad of other issues. Spain could lodge a pretty dastardly dispute against us for fishing rights. Hell, that could open up other diplomatic problems. They lodge a crippling protest against us in the WTO arena, and only agree to our terms if we agree to give them Gibraltar. Or Argentina, with their beef and wine, could put a strangle-hold on the UK's trade, in return for concessions on The Falklands?
So, ok, we're going into the realms of the hypothetical, but not outlandishly so. The moment we triggered Article 50 Spain started posturing about Gibraltar (and then some stupid Tory MP mentioned war). So this is not project fear anymore. Article 50 clock is ticking. There's very little we can do to revoke it. It is happening. I have nothing to gain from inciting fear into people. These are just hard facts, and dangers associated with these facts.
We won't be the only ones. The EU will also be doing the same thing, and it'll be just as difficult for them. It needs the WTO to approve its schedules once we have extracted ours. From a very simple numbers point of view, Britain wont even be at the front of the queue. The EU is much, much larger, and were the ones to present schedules to the WTO in the '90s anyway, and are therefore more likely to be ahead in the queue than little old us.
IF we left with failed trade deal negotiations, the EU could at the very same time also be a hostile actor towards us in the WTO schedules presentation. True, we could also be a hostile actor to them, but again, the numbers speak for themselves. There are simply more of them. There is more money, and there are more goods and services traded.
So, the only way to survive this would be to extract our schedules, and change precisely dick. We can't. The EU has a 10% tariff rate on cars, so we will have it. The slightest tinkering will likely set off an immensely volatile dispute/protest process. 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.
This summary, and it is just that, barely scratches the surface. And that's even before tariff-rate quotas, but I think I've punished whomever is still reading this enough for one day.
This is the point of Brexit. It's complex. It's boring. It's a legal and regulatory nightmare. Simply waving your little Union Flag and saying "they need us more than we need them!" shows a complete, lack of understanding of the whole process.
This is understandable. As I started this post, who in their right mind even cares about this sort of boring guff if they don't have to? Well, given the pointless patriotism like Farage, boris, JRM, Gove, IDS and the rest farted into the wind, and the BBC lapped up because people loved it, we now all have to. They've forced us to have to research and care and know about this stuff now.
I've always said it; always, always, always, beware men and women with simple solutions to very complex problems. We can't just "fall back" onto WTO rules. And no amount of "you lost, get over it!" rhetoric will change that.
The government is not yet even preparing for this. They are working towards trying to secure some deal from the EU so we don't have to use the WTO as a safety net. Preparation for this sort of stuff, for trading entities as economically massive and influential as ours and the EU, takes years. We haven't even started it yet, and we've only got nine months on the unstoppable clock. And Boris and David Davies now see it as a good time to play politics.