WTO: Brexit Would Leave Consumers £9bn per Year Worse Off
The head of the World Trade Organisation has claimed that if Britain were to leave the EU, additional import tariffs would cost the country around £9 billion per year.
Those in favour of leaving the European Union have argued that exiting the single market would not be as damaging as remain campaigners suggest, since the UK could still rely on agreements with the WTO.
The issue, according to the organisation’s chief, Robert Azevêdo, is that the nature of Britain’s membership of the WTO was initially predicated on its membership of the European Union.
As such, he told the Financial Times, the UK could not simply “cut and paste” the terms of its existing arrangements and instead would have to go through negotiations with each of the WTO’s 161 member states.
This level of renegotiation is as yet unprecedented, and Azevêdo has said that it would be similar to the long and arduous process that a country has to go through to join the organisation in the first place.
“Pretty much all of the UK’s trade would have to be renegotiated” Azevêdo said, including tariff lines, subsidies and export quotas.
He went on: “It is extremely difficult and complex to negotiate these trade agreements. And slow as well. Even if you are in a position to negotiate quickly with all these other members it doesn’t mean that they will be in a position to negotiate with you because they have their own priorities.”
Azevêdo described the decision on whether to stay in or leave the EU as one that is no doubt multi-faceted, involving issues of political sovereignty as well as issues of finance, but that it is crucial that people are informed about the potential economic fallout of a vote to leave.
He said: “It is a very important decision for the British people. It is a sovereign decision and they will decide what they want to decide. But it is very important, particularly with regard to trade, which is something very important for the British economy, that people have the facts and that they don’t underestimate the challenges.”
The preferential status that the UK enjoys with several countries within the WTO, based on EU membership, would have to be renegotiated, for example.
With the necessary increases to import tariffs, this would, according to the WTO’s calculations, add a cost of some £9 billion a year – a bill that would be passed down to consumers.
Azevêdo told the FT: “The consumer in the UK will have to pay those duties. The UK is not in a position to decide ‘I’m not charging duties here’, That is impossible. That is illegal.”
Further, another £5.5 billion would be added to export tariffs, increasing the cost of trade.
The only option that would remove the need to renegotiate to this financially damaging extent would be to turn the UK into a duty-free state, and to remove any and all trade barriers for WTO member states. Though Azevêdo described this situations as “very unlikely”.
Former business secretary Vince Cable commented on the WTO’s statements, as well as on the recent announcement from Standard and Poor, who claim that leaving the EU would “put sterling’s reserve state at risk by deterring foreign direct investment”.
He said: “The head of the WTO has warned leaving the EU could cost the UK billions in trade and lead to years of damaging uncertainty. The comments from the WTO are especially important as Boris Johnson has made clear that his vision of a ‘Brexit future’ lies within a WTO framework. Standard & Poor’s warning over sterling would mean higher prices, higher mortgage rates and more government debt.”
The chief executive of the Vote Leave campaign, Matthew Elliot, responded to the WTO’s claims that the UK would be worse off outside of the EU by arguing that our current arrangement with the WTO is dictated more by the supranational body than it is by our own national interest, implying that any arrangements we could come to on our own would leave us better off.
He said: “At the moment our trade relations are dictated by the EU, and this means British businesses are subject to unnecessary constraints. For example, we are forbidden from making free-trade agreements with India and other emerging economies, and we are bound by rules and regulations that we have no say over. Not only that, we currently have no seat at the WTO but are just one of 28 countries represented by the EU. If we vote leave, we can take back control of our our own trade relations, and look forward to a more secure and more prosperous future.”