The Bank of England governor, Mark Carney, has said that the UK would be hit automatically by tariffs on exports to the EU in a no-deal Brexit, contradicting Boris Johnson’s claim that such costs could be avoided with a so-called “no-deal Brexit”.
Earlier this week Johnson said the UK could avoid tariffs and trade friction with the European Union after a no-deal Brexit because it could rely on the terms set out in Article 24 of the General Agreement on Tariffs and Trade (GATT). A number of Brexiteers have made the same argument in recent weeks, where they claim the treaty allows for a 10-year “standstill” where tariffs can be avoided without any official trade deal in place.
However, Carney rejected the idea in an interview with the BBC, where he makes clear that the treaty would only apply if an agreement was in place, and leaving without a deal would prevent such an outcome. He explained: “Gatt 24 applies if you have an agreement, not if you’ve decided not to have an agreement or have been unable to come to an agreement.
“Not having an agreement with the EU means that there are tariffs automatically because the Europeans have to apply the same rules to us as they apply to everyone else. If they were to decide not to put in place tariffs they also have to lower their tariffs with the United States, with the rest of the world. And the same would hold for us.”
He continued: “No deal means no deal. It means there is a substantial change in the trading relationship with the European Union.”
It is worrying that the frontrunner to become the UK’s next prime minister is so ill-informed about trade, when it was his vision of a buccaneering free trading Britain that convinced 52 per cent of the population to vote to leave the European Union. It appears that it may have finally dawned on Johnson that the UK already enjoys some of the best trade deals possible around the world as a member of the EU, but true to form he will never admit his mistakes and instead still talks up the idea of a no-deal Brexit as a positive for the country.
Carney has served as the governor of the bank of England since 2013, and will remain in his post until 31 January 2020, serving whoever becomes the next prime minister. Around 150,000 Conservative party members will choose whether Johnson or Jeremy Hunt will lead the country in a vote next month.
The UK is due to leave the EU by 31 October after seeking an extension to leave the bloc back in March. However, with the delay of the Tory leadership race and parliament on recess throughout August it is difficult to see how the UK could find a new deal and ratify it before the October deadline, and many commentators expect the new prime minister to ask for a further extension. Johnson has refused to rule out leaving in October without a deal in place, but Hunt has proposed a more pragmatic approach, telling Andrew Marr: “I’m not committing to a 31 October hard-stop, at-any-cost because I don’t think you can make that guarantee.
“And if you do make that guarantee and if you go with the wrong approach… then you are committing us to nothing other than a hard Brexit, a no-deal Brexit.”
If an extension is to be granted, the EU may ask the UK to hold either a general election or a second referendum to break the deadlock and show progress towards resolving Brexit once and for all. Neither Hunt nor Johnson have admitted that such another vote is likely, but with any deal unlikely to find a majority in parliament and no-deal already rejected multiple times, something will soon have to change.