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Analysis

Brexiter fantasies being trampled by Trump

by Nick Kent | 31.07.2018

I think we are heading to WTO and I think WTO is nothing to be frightened of,” says arch-Brexiter Jacob Rees-Mogg. He claims the UK can leave the EU and then trade with its members under World Trade Organisation (WTO) rules.

The trouble is that the WTO is under threat as never before, just when the Leavers want the UK to break out of the EU and launch a global free trade agenda. And the biggest threat is from none other than the Leavers’ hero, Donald Trump, who doesn’t want to boost the WTO, but to wreck it.  Trump claims free trade is bad for the US and wants bilateral trade deals instead.

Trump has found a clever way to sabotage the WTO while keeping the US a member. He is blocking the appointment of judges to the final arbitration body for trade disputes between WTO members. As a result, the appellate court only has three members, the minimum needed; by the end of 2019 it will cease to function as retirements will reduce it to one judge.

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Disrupting the WTO is only part of Trump’s strategy. He has pulled America out of the Trans-Pacific Partnership, he is trying to renegotiate the North American Free Trade Area and has started trade wars with the EU and China. Trump has even gone so far as to describe the EU as “a foe” in trade.

This risks leaving the UK isolated after Brexit, economically and politically. Unlike the EU, the WTO provides little protection from non-tariff barriers to trade. It is mostly about trade in goods and not services – but services account for 80% of the UK economy.

Nor is it true that the trade the UK carries out with the rest of the world is thanks to WTO rules alone. The EU has trade agreements with 68 other countries – these would lapse if we left without a deal.

Leaving without a deal would mean having to make up for a huge shortfall in lost trade with the EU. But non-EU countries would prioritise their trading relationship with the larger EU market over trade with an isolated UK.

Politically, the UK would be promoting a global free trade agenda when the very concept of free trade is under attack from its supposed closest ally. The global trading system was created after 1945 with US leadership; can it survive without it?

Is Trump that bad? After all, he reached agreement with the EU last week. But that just demonstrates the UK’s weakness after Brexit. Trump did a deal with the EU Commission president because the EU is a market of 500 million people and a major rule-setter in global trade. Outside the EU, the UK would not have been represented at those talks. Don’t forget that pro-Brexit Trump has put a 25% tariff on UK steel exports to the US on grounds of “national security”.

A weakened WTO might survive the Trump presidency, but in the big game of global trade politics it will be the EU and China that are on the pitch with the UK left on the bench.

Edited by Luke Lythgoe

Tags: , , Categories: Brexit, EU Politics