“Well, it was an astonishing admission at the Select Committee this week, from the Secretary of State for Exiting the European Union, that he's done absolutely no analytical work on the costs of the fallback position - which is exiting the European Union without any kind of deal - that they haven't done any work to see what that would actually cost and what the implications of that would be for our economy.”
Angela Eagle MP, 16 March 2017
David Davis did tell the Brexit Commons Select Committee this week that the government has not (since he became Brexit Secretary) undertaken an economic assessment of what will happen if there is no deal with the EU over Brexit.
The Brexit secretary says there have been discussions throughout different government departments of what would happen in the case of no deal being reached with the EU—and how the government could mitigate the impact of that.
His reasoning for not having done an economic assessment yet was that no agreement has yet been reached within government on exactly what their plan for mitigation would be if negotiations failed. He said it was unwise to attempt to predict the future of the British economy (and in particular the effects of falling back to default World Trade Organisation arrangements) without knowing what that strategy would be.
Mr Davis talked about implementation of electronic, speedy border checks for “trusted traders” to encourage easy cross border trade as an example of what he meant by mitigation.
He also said, “I have a fairly clear view of how it will work out. I just do not quantify it yet. We will give a quantification later on, but it is quite plain how it will work out.”
“We have a huge trade deficit with the European Union”
Jacob Rees-Mogg MP, 16 March 2017
Another way of putting this is that the EU sells more to us than we sell to it. That’s correct.
But that doesn’t necessarily mean that “they need us more than we need them”, as it was often put during the referendum campaign. There are other ways to look at this.
For example, UK exports to those other EU countries are worth around 13% of the value of our economy, whereas for the EU it’s only 3-4%.
And while domestic producers might be happy, it wouldn’t necessarily be in the interests of consumers or businesses to make imports more expensive. We buy EU imports because we want them, not to do French wine producers or Irish beef farmers a favour.
The value of the trade deficit was about £60 billion in the 12 months to September 2016. The UK imported £302 billion worth of goods and services from the EU, and exported £242 billion worth, according to the Office for National Statistics. (Figures from the EU statistics agency are different but still show a deficit.)
That deficit is because of goods; we actually have a trade surplus with the rest of the EU in services.
The Question Time discussion was mostly concerned with tariffs (import taxes) on goods. But services are a far bigger part of the UK economy than goods, and tariffs aren’t considered the biggest issue in international trade these days.
“With the exception of a few sensitive products where tariffs remain high, it is non-tariff barriers that are the real impediment to international trade today”, as the Institute for Government puts it.
“Would we need to apply tariffs on goods coming into this country if we were out of the [EU] customs union? No we would not – that would be a voluntary choice for us, there is no need for tariffs.”
Jacob Rees-Mogg MP, 16 March 2017
It’s correct that the UK would be able to choose what tariffs it put on imports from other countries, after it left the EU customs union.
The UK wouldn’t have a completely free hand to do this. It would have to apply the same rates to all other WTO members, except where it has a free trade agreement or is giving preferences to developing countries.
It would also have to keep those tariffs within limits agreed in the World Trade Organisation (WTO).
And we wouldn’t have a choice about what tariffs were put on our exports.
World Trade Organisation membership
Mr Rees-Mogg went some way to making the same point about exports when he added:
“We would be in a very strong position to retaliate if vicious tariffs were imposed on us.”
Whether or not we’d be in a “strong position” to respond is a more complicated and speculative question than we can confirm or deny in a factcheck.
We can say that any tariffs would have to conform with limits agreed in the World Trade Organisation, and also that other countries wouldn’t be able to pick on the UK and impose specific tariffs on UK-made goods or services (or vice versa).
The UK will still be a member of the WTO after it leaves the EU (there will be negotiations about the details of the UK’s membership status outside the EU, although there’s some debate about how difficult these will be). Members of the WTO have to put the same tariffs on every trading partner worldwide, unless they are part of a customs union or have some kind of free trade agreement.
The EU customs union is one such agreement. That’s why there’s often disagreement about whether to think of the EU as essentially pro-free trade or protectionist. It removes tariff barriers between its members, negotiates Free Trade deals on behalf of all of them, and imposes a Common External Tariff on anyone it doesn't have a trade deal with.
The EU also tries to eliminate other barriers to free trade among its members, like non-tariff barriers, and there’s a question about whether the UK will have the same influence over these things once it leaves the customs union.
“No other EU member state has said that it would veto an independent Scotland’s membership... The Spanish have not said that. Go home and Google this evening, the Spanish government have not said that they would veto.”
Joanna Cherry MP, 16 March 2017
We’ve done some Googling so you don’t have to. Long story short: Ms Cherry has a point.
The independence movement in Catalonia, a region of Spain, means that Madrid doesn’t like encouraging nationalist movements in other countries. That’s why it’s often assumed that the Spanish government is committed to vetoing an independent Scotland’s EU membership.
But there’s a possible misunderstanding here. There’s a difference between staying in the EU and rejoining it.
Essentially, Spain says that Scotland would have to exit the EU in the event of an independence vote, and then apply to join as a new member. (That’s also what the central EU bodies say.)
“Were Scotland to become independent... the country would be treated as a third state and would have to get in line to join the EU.” That’s from Spanish newspaper El País, summarising the position taken by the country’s foreign minister this week.
That’s not, however, a threat to veto an independent Scotland’s membership application. Spain’s Prime Minister, Mariano Rajoy, refused to get into that when pressed on it shortly after the referendum last summer. Various analysts say that Mr Rajoy would cross that bridge when he comes to it.
And other senior figures in Spain are positively ruling out a knee-jerk veto. Ms Cherry mentioned Esteban Pons, a Member of the European Parliament representing Spain’s ruling party. Asked about a Spanish veto last week, he told the BBC:
“No because if you are thinking about Catalonia the situation is very very very different to the Scottish situation."
Other political figures in Spain say the same: while Spain wouldn’t allow Scotland to simply remain in, an application to rejoin would be considered.
And we should note that there’s no “queue” or “line” for entering the EU as such. An independent Scotland could in theory join ahead of countries like Serbia that are in negotiations at the moment, if the process went smoothly. Iceland overtook Turkey when both were negotiating at the same time.