WTO rules after Brexit would unleash ‘Pandora’s Box’ warns CBI

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The UK government’s failure to secure a trade deal with the EU after its Brexit talks would unleash a “Pandora’s Box” on the economy, the head of one the UK’s biggest business lobbies has said.

Paul Drechsler, president of the Confederation for British Industry, said the prospect of the UK falling back on World Trade Organisation rules to manage its international trade after 2019, would have a host of adverse effects on domestic and continental businesses facing higher tariffs.

“Wherever I go across Europe, I hear concerns about the UK leaving without a deal and falling into World Trade Organisation rules”, Mr Drechsler is expected to say in a speech in London later today, adding:

We should be under no illusions about what this would really mean. A ‘no deal’ scenario would open a Pandora’s Box of economic consequences.

The UK would face tariffs on 90% of its EU exports by value and a raft of new regulatory hurdles. Let’s remember these barriers would hurt firms on both sides of the Channel.

The British government is hoping to carry out its EU divorce talks in parallel with negotiations over an ambitious trade arrangement during the two-year exit talks.

EU officials however, led by the European Commission, are demanding Britain first give assurances that it will make good on its financial obligations which it calculates as around €60bn.

Without a trade arrangement after 2019, the UK would have to default to the WTO’s rules and apply tariffs on imports from the EU.

The WTO option has been described as a “fall back” options that would guarantee UK firms still have access to European markets, but Mr Drechsler warned it would have far-ranging consequences for companies across all sectors of the economy:

Imagine you’re a small cosmetics firm in Stockport and shops in France sell your products. No deal? Without an EU office it’s illegal for those French shops to sell your products. A loss for you and for them.

Imagine you’re a German tourist in Edinburgh and you use a credit card to pay for a hotel. No deal? The German bank may not be able to make that payment, disrupting business in both countries.

Or imagine you’re a chemicals company in Leeds and you have systems that track your ingredients from Poland. No deal? You’ll face delays and higher costs getting supplies. Hurting your Polish customers too.

Ahead of the expected triggering of Article 50 this month, Mr Drechsler warned businesses would soon feel the effects of uncertainty generated by the exit process.

“Any minute now, maybe next week, maybe the week after that we’ll suddenly drop into the twists and turns of negotiations.”

The CBI has been in contact with politicians in Belgium, France, and Germany to voice the interest of its members, added Mr Drechsler.

Read more: Brexit and the issue of the WTO schedules

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