If the last phase of the Brexit talks proved anything, it is that a ‘no trade deal’ outcome is perfectly possible.
Whether it be fish, or state aid, or Northern Ireland that prompts it, a breakdown in the negotiations cannot be ruled out.
Were that to happen, trade between the UK and the EU would be carried out ‘on WTO terms’. So, what exactly would this mean? The simple answer is that trade with the EU will become more difficult and more expensive.
Tariffs will be charged, checks carried out, and service exports potentially rendered unviable.
UK exports to the EU would be liable to tariffs. In accordance with the WTO’s ‘most favoured nation’ (MFN) principle, these must be the same as those charged on goods from any state with which the EU does not have a free trade agreement. The average duty is 3.2 per cent.
However, tariffs are higher for agricultural goods—8.7 per cent on average. In fact, duties exceed 25 per cent for more than one in ten agricultural products.
The highest EU MFN tariffs are the equivalent of 189% for some dairy products and 116 per cent for some animal products.
The UK, of course, could decide not to charge tariffs, but under MFN would have to do the same for all WTO members.
And then there will be checks. Currently, goods entering the UK from the rest of the EU are assumed to be safe because of common standards and checks in the EU’s internal market.
They are therefore not normally inspected at the border. This will no longer be the case once the UK is outside this market.