Prof on Likely No-Deal Brexit: Supply Chains to Be Severely Disrupted Overnight

© REUTERS / Peter NichollsEU and Union flags fly above Parliament Square during a Unite for Europe march, in central London, Britain
EU and Union flags fly above Parliament Square during a Unite for Europe march, in central London, Britain - Sputnik International
Radio Sputnik discussed the negotiations between London and Brussels with Robert Ackrill, professor of European economics and policy at Nottingham Trent University.

UK Prime Minister Theresa May has defended her Brexit plan and urged for stepping up negotiations with the EU. She said that the white paper sets out a proposal for an unprecedented economic and security partnership that is in the mutual interests of the UK and the EU. May called for the pace of negotiations to be stepped up, saying “we both know the clock is ticking, let's get on with it.” The news comes as the UK’s new Brexit secretary said that Britain will refuse to pay its 39 billion divorce bill if the EU fails to agree on a new trade deal.

Sputnik: When it comes to legal matters, is the UK obliged to pay billions of dollars to the EU for Brexit, or is this part of a deal between the two sides that would include a free trade agreement with the bloc in return? What’s your feeling about it?

Robert Ackrill: The basic approach to the negotiations that is very much framing all debate is that nothing is agreed until everything is agreed. So in a sense, it’s slightly disingenuous to highlight just two elements, but I think this is partly Dominic Raab speaking to his particular constituency back in the UK to try and give the impression as the new Brexit secretary that he’s taking a strong line. The truth is that the legal status of the Article 50 obligations over the divorce bill are a little bit ambiguous, but there seems to be general agreement that some money is due, but the ambiguity results in these very widely ranging suggestions as to what this divorce bill might actually be. But those are effectively just part of the negotiations.

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Sputnik: When is this actual money due to be paid? Is it due to be paid on the day that the UK exits, the end of March 2019, or when the actual negotiation has been finalized, when a trade agreement has been finalized? Do you know when it should be paid?

Robert Ackrill: I think the answer to that is it will probably have to be paid in stages, because a key part of the obligations of the money due relate to the European Union’s financial plan that runs until the end of 2020. So I would expect payments to be made in tranches over that period, possibly even beyond then, but certainly I would expect that up to the end of 2020, in accordance with what Theresa May said in her Florence speech.

Sputnik: Does this mean that the UK’s reluctance to pay the divorce bill could signal that the free trade agreement with the EU is also under threat?

Robert Ackrill: I think these things need to be seen in their wider context, that Dominic Raab in his interview to the Weekend linked those two key elements. And they are absolutely central to the overall process, but they are two parts of a much wider negotiation; and I think the two should be kept separate in terms of how we understand the negotiations going forward.

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Sputnik: Explain to us and our listeners what the consequences could be if a failed deal does come out of this in terms of the short-term and long-term. Many economists I’ve spoken to on this program have said: “what’s the problem with a no-deal? We’ll get on with it; we’ll abide by and they’ll abide by WTO rules and everything will be fine.” Is your opinion the same?

Robert Ackrill: I think that when politicians on the Brexit side talk about no deal is better than a bad deal, frankly, the worst deal possible is no deal. As you said in your lead-up, the leaving without any kind of agreement in place would more or less halt trade straight away. If we leave the EU with some kind of agreement, trade will be affected; but if we leave with no agreement, then the consequences for monitoring goods and tracking goods at the border will be absolutely mind boggling. That is something that cannot be overstated. In a longer term, one could say that “yes we can look to develop new trade agreements with other countries, but they will be much more limited than we have with the EU, they will have a long time.” That will do nothing for the British companies, the many British companies that are embedded in supply chains which span the whole of the European Union. Those will be severely disrupted pretty much overnight without an agreement.

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Sputnik: If we get to that date and nothing’s happened, it’s going to have an immediate effect on trade and the economy: you’re looking at 5, 10, 50% of the UK’s economy just being lost. This is a key thing that’s not being explained properly to the electorate. Would you agree with that?

Robert Ackrill: I would agree completely and I think this goes back to the referendum question. The country doesn’t face the choice “remain or leave,” because “leave” can mean different things to different people. When the Brexiteers say “let’s get on with it;” well, get on with what? Because, as we now know, that could mean staying in the single European market, it could mean creating a customs union, a free trade agreement, a bespoke sectoral deal; all of these different options may all take time to decide what the government wants to do, let alone then actually begin the negotiations. I think therein lies the fundamental problem.

The views expressed in this article are those of the speaker, and do not necessarily reflect those of Sputnik.

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