Contrary to the coverage of major media outlets, the United Kingdom (UK) will do better with a “hard Brexit” — leaving the European Union (EU) with no deal — than the centrist solution negotiated by UK Chancellor Theresa May or the “remain” option (staying in the EU) advocated by the British left.
The institution that will save the UK in the case of a “hard Brexit” is the same one that will protect US-Mexico trade if House Democrats refuse to ratify the US-Mexico-Canada Agreement (USMCA, a.k.a. NAFTA 2.0). That institution is the World Trade Organization (WTO).
Ironically, President Trump and his leading trade advisors have to date been on a non-stop mission to undercut the WTO.
A superb article by John O’Sullivan in the National Review underlines the case for the UK taking a “hard Brexit.” He writes:
No Deal [“hard Brexit”] is a misnomer. Britain would trade with Europe on terms supervised internationally by the World Trade Organization. And the WTO is a very big deal indeed. The rest of the world (RoW for short), including the U.S., trades with the EU on WTO terms. Not incidentally, 56 percent of Britain’s trade today is with the RoW on WTO terms. And that trade is rising 16 times faster than the U.K.’s trade with the EU. One might reasonably suppose that a Brexit on WTO terms, maybe after a short period of disruption as the rules changed, would be a confidence-building solution.
A WTO benefit for the US
The USMCA pact recently signed at Buenos Aires by the chief executives of the three member countries has to be ratified by the legislatures of each country. That is not expected to be a problem for Canada and Mexico. But in the US the pact will have to be ratified by the new Congress seated in January, whose House will be dominated by Nancy Pelosi’s Democrats. The USMCA could die there if it can’t secure a majority vote. If that is the case, US-Mexico trade will revert to the WTO’s Most Favored Nation (MFN) rules, which provide equality of trade relations between MFN nations, preventing trade discrimination.
This suggests that the Trump administration would be well advised to support and reform the WTO — especially against China’s trade abuses — rather than trying to scuttle it. And to remind the UK that a “hard Brexit” would prevent the EU from standing in the way of President Trump offering a mutually beneficial US-UK free trade deal.
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