Fact/Fiction: Is moving to WTO trade terms after a no deal Brexit bad?

How it was told

As Theresa May and co dither, delay and debate in Westminster, the prospect of a no-deal Brexit is becoming increasingly likely.

That would mean that instead of her deal governing how much the UK pays and sells goods for with the European Union, existing trade ties would be severed and the only remaining connection would be under the default World Trade Organisation (WTO) terms. Read the papers and other media outlets and you’ll see a sliding scale ranging from hard Brexiteers hailing how this will open Britain up to the world to prophecies of doom that it will cost us millions.

The Daily Express painted the picture that it would be no bad thing in articles like: “Let’s go WTO! Brexiteer Jenkyns urges MPs to EMBRACE no deal Brexit – ‘the EU fear us’” and “Brexit SHOCK: No deal Brexit fears SHUT DOWN as UK escapes EU ‘monopoly’”.

Richard Tice penned a similarly spirited column in The Telegraph, titled “Time for the Prime Minister to pursue a ‘World Trade’ Brexit”, insisting that WTO terms would be “far from the panto-dramatics language of no deals and cliff edges used by the anti-Brexit gang”.

On the other side of the fence, Labour peer Peter Hain wrote in the New Statesman insisting that “No deal is a dangerous fantasy”. Other left-leaning titles like The Guardian shared the same view, with Kojo Koram penning a column entitled “The Brexiteers’ idea of how WTO rules would work is pure fantasy”.

But who is right?

Facts. Checked

It’s hard to see many positives in trading on WTO terms – but it is hardly the death knell for Britain just yet.

If you have enjoyed the protracted negotiations with the EU there is potentially plenty more where that came from. Talks and a mountain of paperwork will be needed with each individual country to disentangle the UK from these WTO treaties.

The UK is already a part of the WTO and would join 135 non-EU members, 78 of which currently trade with the EU under WTO trade terms, according to Full Fact.

The WTO terms are like an agreed rate for world trade but most of the UK’s trade (57 per cent of exports and 66 per cent of imports in 2016) currently goes through EU trade agreements.

As part of its EU membership, the UK benefits from around 70 additional free-trade agreements with Japan, Canada and more which would be lost once Article 50 is triggered.

These will need to be renegotiated for those that won’t just adopt the same terms. So from an optimist’s view, yes, Brexit would open the UK up to global trade but the strength of its hand when haggling
is debatable.

At the moment, goods flow into the UK from the EU without border checks – but this is not the case for other non-EU countries. Defaulting to WTO terms would see more goods checked at the border, costing time, money and resources and discouraging trade.

Full Fact’s assessment places more emphasis on local deals, concluding that the EU deal-less USA and Singapore are not suffering while trading with the EU on WTO terms. But they do avoid the terms with many other countries – tailoring the deal to get the best benefits they can.

And ultimately, this is the reason why the UK doesn’t use WTO terms with its nearest neighbours in the EU – the goal with trade deals is to make it as easy and cheap as possible to trade your goods.

As the UK in a Changing Europe’s report on the subject concludes: “Falling back on WTO terms would be, to say the least, suboptimal politically, economically and socially.”