An email from Liz Truss to Rishi Sunak and Michael Gove outlining her concerns about what a no deal Brexit would entail has been leaked to the media. As expected, it was a big news story yesterday. Yet given all it reveals, it is amazing how relatively little attention it received. For it shines a light on just how unprepared it looks like Her Majesty’s Government is for almost any Brexit scenario that is realistic at this stage. And when I say unprepared, I mean that they aren’t even dealing with the most basic of basics.
Truss points out in the email that if the UK were to not apply any trade barriers to the EU during the six months following no deal Brexit – which seems to be the plan at present – then the government would be open to a challenge by the WTO. You see, the WTO operates this thing called Most Favoured Nation status, which is sort of the opposite of what it sounds like. It means that if you offer one nation or trading bloc certain trading terms, you must then apply them to every other nation in the WTO. For the record, every nation on Earth is in the WTO apart from several micronations, North Korea, Eritrea and Turkmenistan. Basically, this means that if the UK wants to offer the EU open trade on its side, even for six months, it has to offer this to what amounts to every other nation on Earth during the same period. There are exceptions to the MFN rule, of course. For instance, if you are in a customs union, the collective members of said customs union can offer collective trade arrangements with the rest of the world that do not apply to its own members.
That Truss is having to spell this out in an email at this stage of the game should deeply worry everyone, whatever your position on Brexit. It’s the equivalent of the government announcing it is going to build the largest tower in the world by the end of the year and then a member of the cabinet having to point out that if they want to do this then they’ll need to purchase some land to build the thing on. The fact senior members of the government have to be updated on the most basic facts about how the WTO works with less than six months to go until we are trading on their terms should be deeply worrying and be getting a lot more attention.
I could try and think of the best case scenario here. Perhaps it’s just Liz Truss who is confused on this stuff, with Sunak and Gove laughing at her lack of comprehension. I sort of hope this is the case, because all of the concerns Truss lays out in the email are trading 101. There’s nothing she brings up that you would assume the government not only doesn’t already know, but is several layers of technical understand beyond. I suppose time will tell.
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I have a book out now called “Politics is Murder”. It follows the tale of a woman named Charlotte working at a failing think tank who has got ahead in her career in a novel way – she is a serial killer. One day, the police turn up at her door and tell her she is a suspect in a murder – only thing is, it is one she had nothing to do with. There is also a plot against the Foreign Secretary and some gangsters thrown into the mix while Charlotte tries to find out who is trying to frame her for a murder she didn’t commit.
Also: there is a subplot around the government trying to built a stupid bridge, which now seems a charming echo of a more innocent time!
It’s here:
Truss points out in the email that if the UK were to not apply any trade barriers to the EU during the six months following no deal Brexit – which seems to be the plan at present – then the government would be open to a challenge by the WTO.
Not if we dropped trade barriers to the other countries in the WTO — something we will be free to do once the transition period is over.
Dropping trade barriers to the whole world basically means dropping the possibility to regulate the health, safety, employment and environmental conditions for economic activity. Do you really think that is a good idea?
Does he even work
Um, no it doesn’t? It just means domestic industries will have to focus on quality to avoid being undercut, which is surely a good thing.
If goods appear in the shops at attractive prices and without clearly visible faults, people will buy even if they have faults that are not clearly visible or were produced in conditions unacceptable in Britain. This will give domestic producers a choice: either lower their standards or go out of business.
If goods appear in the shops at attractive prices and without clearly visible faults, people will buy even if they have faults that are not clearly visible or were produced in conditions unacceptable in Britain. This will give domestic producers a choice: either lower their standards or go out of business.
If the faults are undetectable, then they don’t matter; if they are such as to make the goods unsuitable but evident only some time after purchase then people might start off buying the cheaper foreign goods but they will soon gain a reputation for shoddiness and people will switch to the domestic ones.
So either the foreign goods are defective in a way which matters, in which case they won’t sell, or they are adequate (for some customers at least), in which case British consumers get adequate goods at cheaper prices. How can that be bad?
Remember in all this it is the (British) consumer who is important: they are why industries exist, after all. The point of making something is only because somebody wants to use it, not to benefit the producers. Car factories exist for the benefit of drivers, not car-markers, so cheaper cars are an unalloyed good.
As for conditions, producers who have better conditions can advertise that in the same way we have free-range eggs on the shelves next to battery-farmed eggs and people can choose whether they care enough about the conditions to pay the extra. Enough people seem to care about the conditions of chickens that free-range eggs are a viable business despite costing more to make; why do you think the same would not be true in other areas?
“It just means domestic industries will have to focus on quality to avoid being undercut,” domestic industry couldn’t manage that back in the 1960s and 1970s, what makes you think they’ll do it now?
Plus unilateral free trade is only feasible if you are a economic superpower, which we have not been for some time.
“It just means domestic industries will have to focus on quality to avoid being undercut,” domestic industry couldn’t manage that back in the 1960s and 1970s, what makes you think they’ll do it now?
If they can’t — if they are can’t cover their costs and are fundamentally just a drag on the economy being kept alive only through government subsidies (which is what tariffs effectively are) — then they don’t deserve to survive, do they?
Looks like we will drop out of G7
Might scrape G20
Time to lower expectation