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Brexit

Free trade agreement.

177 replies

Corcory · 14/09/2016 21:03

People keep going on about the fact that we can't be in the single market without agreeing to freedom of movement but why can't we negotiate a free trade agreement like the other countries in the world that are not in the EU?

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missmoon · 14/09/2016 21:09

We can, but it will take many years, and the terms will be less favourable than what we have now.

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STIDW · 14/09/2016 21:27

Trade agreements with non EU countries aren't as good as the one we have with EU because they are limited. They don't include financial services ( a particular strength of the UK) & there are tariffs on certain products.

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AntiqueSinger · 14/09/2016 21:44

They don't include financial services? Fuck!

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ManonLescaut · 15/09/2016 16:52

Free trade agreement and membership of the single market are not the same thing.

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Nightofthetentacle · 15/09/2016 16:56

We can, of course, but it will certainly be worse than the deal we currently have, and will take quite some time.

Nick Clegg (former EC trade negotiator among other things) has drafted a note which is very very worth reading on this:

d3n8a8pro7vhmx.cloudfront.net/libdems/mailings/4093/attachments/original/International_trade.pdf?1473331526

Summary here:

www.libdems.org.uk/clegg_free_trade_deal_with_the_eu_isn_t_possible_in_two_years

The whole thing is good - particularly the part on FTAs with the EU and why we can't just do a quick and dirty solution.

David Davis (and many others) have stated a preference for the Canada CETA model, but that does not include financial services (at least not in the way we would need) and happily allows corporations to sue government. I haven't yet read the CETA text on this but under other trade agreements legal action can be taken if there is (for instance) legislation in place which reduces corporate profits, even if that legislation is in the public interest.

This is obviously an interesting "sovereignty" point. The EU seem to hate terms like this, but worth remembering (if you are reading David) when the UK starts to negotiate trade agreements with the rest of the world.

Investor-state legal action sources if you're interested www.nytimes.com/2014/12/04/opinion/when-corporations-sue-governments.html?_r=0
www.theguardian.com/world/2016/aug/15/brexit-canada-trade-deal-eu-model-next-steps
and bonus CETA info:
www.ft.com/content/d97a5d06-42aa-11e6-b22f-79eb4891c97d

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topsy777 · 15/09/2016 18:24

Single market is obviously the ultimate 'free trade'. However, it comes at a cost that many find unacceptable. Further, the single market is limited to the EU28 which then apply a common custom tariff against the rest of the world.

If they have stuck with EEC. There would be little resentment.

However, if we negotiate a 1 item free trade with the US, China, canada, it is still better than the deal that we have with them (i.e. no agreement whatsoever and fall back to WTO rules).

So, Free trade with EU cannot be on better terms than it is now, but any free trade with many outside the EU/EEA would be better than it is now.

EU ex UK account for about 15% of the World GDP. UK account for about 3%. The remaining 82% are up for grasp.

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Corcory · 15/09/2016 18:46

I think we should concentrate on getting a free trade deal with the EU and abandon any thought of remaining in the Single Market as it would seem to me that the EU are adamant that we can not be in the single market without accepting freedom of movement so lets just go for the very best free trade agreement we can get.

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ManonLescaut · 15/09/2016 19:22

The EU still accounts for 45% of our exports, the US 16.6% and China 4.5%.

Sir Andrew Cahn, fomer chief executive of UK Trade and Investment, told the Times that it was 'completely unrealistic' to think that the UK could negotiate free trade agreements with other countries to make up for lost access to the single market. 'At the very best the very best of the promised network of trade agreements would not be remotely on the scale of current trade through the single market'.

He also warned that deals with the US and China would take at least a decade. And highlighted that the US has not ratified a single trade deal in the last 5 years, and that China would extract a high price for access to its markets.

Hosuk Lee-Makiyama, director of ECIPE, gave evidence to a Treasury Select Committee on similar lines:

'Unfortunately, the realities are such that in a world where the UK trades 50:50 with the EU and the rest of the world, whatever trade we lose with Europe cannot be recreated with the rest of the world'.

'It is just not in the balance. The market access we would obtain from the free trade agreements would not equal the trade loss we would have with Europe. It is just a different scale. All in all, we need to do both'.

Bear in mind neither CETA nor TTIP cover financial services.

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ManonLescaut · 15/09/2016 19:26

Cory - how do you propose to remedy the devastating impact that leaving the single market would have on financial services and the car industry in particular?

Japan has already warned that doing so will force Japanese car manufacturers, pharmacuticals and technology firms to relocate within the EU. How will you compensate for the loss of the investment and jobs?

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whatwouldrondo · 15/09/2016 21:08

How many times and in how many ways do posters have to spell out the consequences for the UK economy of damaging its two major sources of competitive advantages in global markets , the financial passport and our capability in Science and Technology both of which arise from our close relationship with the EU, and which if we succeed in negotiating a deal that protects them will probably mean conceding free movement (why wouldn't the EU flex that source of power). You can make all the trade agreements you want with the rest of the world but if you lose the ability to compete with other economies for business then you won't get the business and make money. Trade agreements are about the arrangements for trade but they do not entitle you to trade.

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caroldecker · 15/09/2016 21:37

Average tariffs are less than currency fluctuations. We had the same noise about joining the Euro, particularly about the finance sector and automotive.

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topsy777 · 15/09/2016 21:38

Let's not forget that economy is not all about external trade.

It is also about domestic demand. Take car for example - UK makes about 1.5 million cars, exports about 1 million and import about 800k or so from Germany and probably a few hundred k from elsewhere.

Some people may feel incredibly hard done by if they could not get their Volkswagen or benz, but Nissan/Toyota/JLR will take you where you want to go equally well.

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whatwouldrondo · 15/09/2016 21:46

But internationally we are already living beyond our means, we import more than we export. The main things we export to pay for our standard of living, from our iPads and iPhones to our Kenyan beans out of season, are already only paid for in part by the financial services and gas turbine industries (the only sectors in surplus). If we shoot those industries by stepping out of the single market how do you propose UK Plc earns its money. The view we can maintain our standard of living without the single market is like a spoilt adolescent who thinks its iPhone is a right, not a privilege that it has to earn.

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Bearbehind · 15/09/2016 21:47

But the Japanese government have pretty much stated Nissan and Toyota would leave the UK if Brexit terms mean they can no longer trade freely in the EU and JLR are prestige brands most can't afford so that plan falls pretty flat topsy

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MrsWobble3 · 15/09/2016 21:48

Although interestingly none of Nissan, Toyota or JLR are British owned so let's hope the Japanese were bluffing.

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whatwouldrondo · 15/09/2016 21:50

Nissan / Toyota - the Japanese don't lose face and beg that we understand they need the single market without good reason.

Plus when the voters lose their iPhones and have to make do with a crap Nokia - alike you will lose their hearts and minds

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topsy777 · 15/09/2016 22:06

Bearbehind
If eveyone is being silly than we put a tax to make sure imported cars are a lot less attractive. Simple. That will also cut ouf trade deficit.

So they find they have a million unit market domestically and will be happy.

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ManonLescaut · 15/09/2016 22:36

Ford are considering closing its UK plants, they've struggled in Europe since the financial crisis. GM's (Vauxhall) European division is struggling too. Brexit has hit them both badly due to the fall in Sterling.

If we leave the single market and they shut up shop, plus Japanese car firms relocate to within the EU, we won't have much of a domestic car market left.

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STIDW · 15/09/2016 22:54

"If eveyone is being silly than we put a tax to make sure imported cars are a lot less attractive."

History shows protectionism doesn't work. Countries retaliate & put tax on products & services they export to each other so trade becomes stuck in an ever increasingly negative downwards spiral.

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whatwouldrondo · 15/09/2016 23:17

Topsy please answer at least one question I have raised. We are a dependent economy, our chance to be independent sailed in the 17th century (and we did rather well out of that but had a competitive advantage that came from the barrel of a gun ) our success as the sixth (pre Brexit, fifth) economy rests on the way Maggie built up our post empire competitive advantage.how do you propose to deliver that if we lose that EU dependent come tube advantage?

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whatwouldrondo · 15/09/2016 23:20

Grr at autocorrect "competitive" advantage

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caroldecker · 16/09/2016 00:59

Toyota comments about UK and the Euro.
Nissan comment about the UK and the Euro
Ford has been closing factories in the UK for years, only makes engines now.

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Bearbehind · 16/09/2016 06:35

carol the jist of both of those articles is that both Nissan and Toyota said they'd leave the UK if the UK, by not joining the Euro, lost its attractiveness to stay.

Even though we didn't join the Euro, they can still trade freely in the EU so their concerns didn't come to pass.

If we leave the single market the very reason those companies are here disappears so the incentive to leave is much greater and is much more likely to happen.

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topsy777 · 16/09/2016 08:33

Bearbehind

No. The very reason there are here is to make money, not to be part of EU or part of anything.

There are of course barriers if there is no tariff free free trade for motors and its components, but the barrier is not insurmountable.

Toyota/Nissan etc set up plants all around the world based on what they can get out of the country in term of taxes, human capital, energy cost, transport infrastructure etc.

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topsy777 · 16/09/2016 08:48

whatwouldrondo

Actually, despite the inefficiencies we see in our daily life, many parts of the world are even harder to do business.

UK has been the 4/5/6 largest economy since WW2 before and after Mrs Thatcher. Even in the dark days of the 70s, she was still more efficient that many parts of the world (such as Mao's China Grin ).

Our economy is broken down as 72% domestic and 28% export (goods+services). 44% of the 28% = 12.3% (of the GDP) of the is EU dependent.

Out of the 12.3%, some of those can be consumed locally in replacement of other EU imports, some will find other markets, some are not price sensitive enough etc. I would say even if we trade under WTO rules, what is 'at risk' is probably about 5% of the GDP - a very large number, but not life and death.

Now, we need to look at what barrier EU-WTO tariffs imposes. For manufactured goods, it is less than 10% (and many 2-4%). Currency depreciation and a little bit of state aid should sort that out if necessary.

Fisheries, Agriculture and textiles face very high barrier - those will suffer.

Financial services will be somewhat affected and will need to route their activities through EU subsidiaries and remit their profits via dividends back to the UK shareholders. Many bigger institutions such as Goldman, HSBC etc already have multiple license, so it is a matter of internal restructuring of their activities.

Educational services - we will just sell more to full fees paying international students (not EU rate). The research funding side needs to be replaced and more collaboration with the US will occur. The Belgium Professor (Peter Piot) who discovered Ebola said if UK was not in the EU, he would have further his career in the US - note - not France, Germany or elsewhere - so our competitor is the US.

Free from EU state aid restriction, we will be free to strategically 'help' our industries during the transition period.

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