Leaving the Brexit negotiations with no deal and defaulting onto World Trade Organisation (WTO) rules would leave the UK trading with the EU on less generous terms than any other country in the G20, new research shows.
Research from the House of Commons Library reveals that the EU does not trade with any member of the G20 without some sort of preferential trade arrangement in place.
The deals range from full Free Trade Agreements (FTAs) to those with less market access, such as Mutual Recognition Agreements and equivalence agreements.
However the research found that the value of an FTA can be seen in the fact that some countries which already have restricted agreements in place, such as Australia, New Zealand and the United States, are seeking formal FTAs with the EU to improve their market access and reduce trade barriers.
The research contradicts claims by leading hard Brexiters in the Tory party that defaulting onto WTO rules would be fine for the UK and their assertion that this is the model favoured by other leading economies, like the United States.
Labour’s Pat McFadden MP, who conducted the research on behalf of the Open Britain campaign, said:
“To default to WTO rules alone would be to adopt an extreme position not adopted by any other major economy when trading with the EU.
“The Government’s threat to walk away from negotiations betrays a dangerous complacency about how countries outside the EU currently trade with the EU.
“This research shows that no major economy trades with the EU on the basis of WTO rules alone. All have some kind of agreement or mutual recognition process with the EU in place, even if it falls short of a fully-fledged Free Trade Agreement.
“The Government is flirting, as a negotiating tactic, with an option that poses huge dangers to UK industry, services and agriculture. This is why it is vital for Parliament to have a meaningful say in the negotiations to come, and to have a say on both a Free Trade Agreement and what should happen in the event of no deal being agreed.”
A leak treasury report, published by the Independent on Sunday, also warned that falling back on WTO rules would cause a “major economic shock”.