Explainer: Huge consequences loom over EU-UK trade talks

[Crtcl Rice Theory 2,432]

Here are some of the potential pressure points of a no-trade deal after five years of Brexit crisis.

STERLING

Investors and banks have predicted that a deal will eventually be done, so a no-deal would hit sterling, according to major foreign exchange traders.

The shock referendum result on June 24, 2016 sent the pound down 8% against the U.S. dollar, its biggest one-day fall since the era of free-floating exchange rates began in the 1970s.

That was nearly double the 4.3% drop on Sept. 16, 1992, when financier George Soros “broke the Bank of England” after his bets against the pound were instrumental in the currency’s exit from the European Exchange Rate Mechanism.

TRADE

Overnight Britain would lose zero-tariff and zero-quota access to the European Single Market of 450 million consumers.

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Britain would default to World Trade Organization (WTO) terms in its trade with the 27-state bloc, making it in effect as distant to its biggest trading partner as Australia.

Britain would impose its new UK global tariff (UKGT) on EU imports while the EU would impose its common external tariff on UK imports. Non-tariff barriers could hinder trade, with prices predicted to rise for consumers and businesses.

Borders risk disruption, especially the main crossing points, with shortages of certain foods possible as Britain imports 60% of its fresh food.

Any disruption would be felt most keenly by sectors that rely on just-in-time supply chains, including autos, food and beverages. Other sectors likely to be affected would include textiles, pharmaceuticals, and chemical and petroleum products.

The EU is Britain’s biggest trading partner, accounting for 47% of its trade in 2019. It had a trade deficit of 79 billion pounds ($106 billion) with the EU, a surplus of 18 billion in services outweighed by a deficit of 97 billion pounds in goods.

Even with a deal, Britain’s reasonable worst-case scenario is that 7,000 trucks bound for the continent could stack up in the southern English county of Kent.

 

 

https://www.reuters.com/article/us-britain-eu-nodeal-explainer-idUSKBN28G0D4