WTO rules risk opening Pandora’s Box, warns CBI

Leaving the EU without a deal and reverting to World Trade Organisation (WTO) rules would open a Pandora’s Box of economic consequences, hurting firms on both sides of the Channel, the CBI has warned.

In a speech yesterday evening (Thursday 2 March) to the Lord Mayor’s Business and Investment dinner at Mansion House, CBI President Paul Drechsler argued that while business supports the government in securing an ambitious agreement with the EU, leaving without a deal and reverting to WTO rules would bring significant tariff and regulatory barriers to trade.

Paul-Drechsler, president, CBI
Paul-Drechsler, president, CBI

Commenting on the triggering of Article 50, Drechsler said: “Right now, it feels like we’re just reaching the top of the Article 50 rollercoaster. Any minute now, maybe next week, maybe the week after that we’ll suddenly drop into the twists and turns of negotiations.”

He continued: “Wherever I go across Europe, I hear concerns about the UK leaving without a deal and falling into World Trade Organisation rules. 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.”

Adding: “Here in the UK and across the continent firms are worried about this ‘worst-case scenario’. Some are getting ready for it to reduce economic damage. Some won’t prepare because they’re hoping for a deal. But in reality many firms can’t prepare because the cost of change is simply too high to even consider it.

“The Prime Minister is confident that a deal can be achieved – and we agree. But to those whose first and only choice is for Britain to walk away without a deal, I say you’re not only wrong but irresponsible.”

Drechsler offered three potential real-world hurdles to trade under WTO rule, for example a UK-based cosmetics manufacturer which sold its products via French shops would legally be required to open an EU office in order to continue to sell across the Channel.

The importance of securing an ambitious deal that works in everyone’s interest cannot be overstated, he concluded, noting: “Just as European countries benefit from a thriving UK, British business needs a strong European Union. A strong single market with which our companies can trade easily is in everyone’s interest.

“An ambitious, comprehensive deal covering every sector is what’s best for Britain, it’s what’s best for Europe and we’ll do everything we can to get it.”