No-deal Brexit would relegate UK to ‘minor leagues’, says former WTO boss

Pascal Lamy, who was director general of the WTO, between 2005 and 2013, said there was a stark choice for the UK between ‘minor’ and ‘great’ trade relations with the country’s largest trading partner

The UK faces relegation to the lesser leagues of global trade if Boris Johnson’s government fails to conclude a free trade deal with the European Union by the end of the year, according to former World Trade Organisation boss Pascal Lamy.

Mr Lamy, who was director general of the World Trade Organisation (WTO) between 2005 and 2013, told Econ Films’ CoronaNomics show that the stark choice for the UK was between “minor” and “great” trade relations with the country’s largest trading partner.

“Is trading between UK and EU under WTO terms a good thing or not? It depends on which league you want to play soccer,” he said.

“If you like the game and if you like very good players you will go to the first league. If you have less money to spend or if you’re not such a big fan, you can watch the match of the second, third, fourth league. It’s still soccer, it still is trade, but it’s a minor version of what could be great.”

If the UK failed to agree a trade deal with the EU, the country would be compelled to trade with the bloc on so-called WTO-terms, which offers little benefits except protection from punitive and arbitrary tariffs. Last month Mr Johnson said last month that this would still be a “very good option” for the UK.

However, all credible trade modelling has shown that a WTO Brexit will hold back the UK economy, due to lower trade with the EU, relative to striking a free trade deal.

A study prepared by government economists in 2018 showed long term damage of between 7.5 and 9 per cent of GDP under a WTO Brexit, compared with 5-7 per cent under a free trade deal.

The government said last week that it is close to striking a new free trade deal with Japan, but expects say this only really replaces what the UK will lose when it falls out of the coverage of the current EU-Japan deal at the end of the year.

Negotiations between the EU and the UK on a free trade deal made no progress over the summer, despite Boris Johnson’s claim that a deal would be done by July, with the two sides failing to agree on the vexed questions of fishing rights and UK commitments on maintaining a “level playing field” for businesses.

Many businesses are also deeply concerned about the short-term damage from a no deal Brexit, which they fear could result in bottlenecks at UK ports and disruption of supplies as hauliers and firms would be forced to fill in mountains of new customs paperwork.

Mr Lamy, who was also previously an EU trade commissioner, warned that the lives of many UK businesses would be “terrible” if a no-deal Brexit resulted in major tariff and non-tariff barriers being thrown up overnight.

“It’s not governments that trade,” he said. “It’s businesses and that their lives will be terrible in case there is no serious transition between the nirvana of the internal EU market, which is where the EU-UK economy is for the moment, and anything which will be much worse than that. It shouldn’t be much worse than that, but it’s going to be much worse without a proper transition organised.”

The current director general of the WTO, Roberto Azevedo, is stepping down this year, amid a crisis for the organisation, which oversees and regulates global trade. The UK government has nominated the former trade secretary Liam Fox for the role, but other candidates such as Nigerian Ngozi Okonjo-Iweala and Kenyan Amina Mohamed are seen as much more likely to succeed.

“I’m quite optimistic that given the people who are there, given the fact that there are among them women and quite a large number of extremely good women,” he said.

“[That’s] I think, a good sign of the times.”

Link to the article and video of Mr Lamy’s interview