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Politicians are desperate to end Brexit uncertainty, but this is just the start

Posted by Warwick Business School at 14 March 2019, 14:55 CET |
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Expert comment from Nigel Driffield, professor of international business at Warwick Business School.

"Clearly our politicians on all sides are desperate for this to be over, but what is often ignored is that, in terms of trade and investment, this is just the start of 5-10 years of negotiations and uncertainty.

"Meanwhile businesses have to delay investment, or look elsewhere.

"Two options seem likely. The first is that the government seeks to extend article 50, and the second is that the government ignores last night's vote and we leave with no deal.

"The government has already published an intended tariff schedule for no deal, which is almost beyond belief. While it has been championed by some as "free trade", one cannot have "unilateral free trade", and in some sectors, such as automotive parts, it is little other than announcing a trade war with the EU.

"The UK will for example impose a zero tariff on car components, irrespective of their origin. Then, when the car is completed, it will seek to export those components to the EU.

"At this point the EU would rightly assert that this breaks rules of origin requirements, and would not permit those exports tariff free, so we would have a stand-off.

"Equally, these tariff schedules appear to have been arrived at with no cost-benefit analysis. The fundamental principle of trade policy is that the gains should outweigh the losses. Nowhere can I see that such calculations have been done."

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