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Prospect of WTO terms remains a concern for business after PM's speech

Posted by Warwick Business School at 03 February 2020, 23:36 CET |
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Nigel Driffield, Professor of International Business at Warwick Business School, said:

"The prospect of a trade deal including zero tariffs and zero quotas, raised by Mr Barnier, will be welcomed by business. However, we are still a long way short of the certainty companies require.

"The fact that the UK could still revert to World Trade Organisation (WTO) terms is a particular concern.

"People assume that WTO terms provides some sort of multilateral agreement that in replaces our existing trade deal. Instead, it simply offers a baseline of anti-competitive behaviour countries cannot stoop below while retaining membership.

"As with all matters to do with trade, large countries and large trading blocks use the WTO as they see fit. America for example loses roughly half of the cases that it brings to the WTO, and then, when it has lost, largely carries on as before.

"Another key challenge is 'rules of origin'. It is shocking how little attention this has received. At the moment UK goods need to meet the requirements as "made in the EU", but a much higher proportion of goods will have to be produced here.

Brexiteers argue that this will lead to activities being brought back to the UK, but if we can produce these as efficiently as foreign producers, why are we not already doing so?

"Quality assurance for exporting is also likely to hit sectors such as food and drink. At the moment, we just about meet the quality assurance threshold and get some leeway due to our market size and contribution.

"As a third country, we would need to do roughly three times as much checking. At present we do not have sufficient trained people. This can be addressed over time, but it will cause significant difficulties in the medium term, especially if other countries, such as Canada and Australia, demand the same."

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