Onshore Energy Conference — London Onshore Energy Conference — London | Page 49
THE P H REPORT
including the EU. In the period before these
agreements were put in place, the UK would
have to offer equal ‘most favoured nation’
status and equal tariffs to all countries
wishing to trade with it. UK exports to the
EU would also face the EU’s external tariff.
May will find that she has
to choose between five very
different optio ns for Brexit,
as the default option is
potentially no deal at all on exit
• A customs union. If the UK were to take this
path and agree a customs union with the EU,
it would not face tariffs in exporting goods to
the EU, but would be obliged to adopt existing
and future EU rules relating to the regulation
of goods. and apply a common external tariff
to all third parties (unlike an FTA, where
members can have their own tariff policy
with other countries). The EU operates an
advanced form of a customs union in that the
common tariff is then pooled across the EU.
• Membership of the World Trade
Organization (WTO). This would
offer the most complete break with
the EU. As a WTO member, Britain
would be able to negotiate free trade
agreements with other members,
Price USD
• A bilateral free trade agreement, such as
the Canadian or Singaporean models. Both
these bilateral agreements, if ratified, will
offer almost complete access to the Single
Market in goods, but less access to the market
in services, with some sectors excluded.
Neither agreement requires free movement
of people. Exporters must comply with EU
rules and regulations when exporting to the
Single Market, and have no influence over
these. Before the UK could sign an FTA with
the EU (or others), it will probably need to
have its WTO arrangements set
out – potential FTA partners need
1.50
to know what terms the UK is
1.47
offering the rest of the world, before
1.44
they can know what ‘preferential’
1.41
terms to seek for themselves.
1.38
Chart 8: The pound
is taking the strain
of the post-Brexit
world
The issue seems to be that May is focused
on the domestic politics of Brexit, which
suggests that a “hard Brexit” along the lines
of the final Option is becoming more likely.
Equally worrying is that her Chancellor, Philip
Hammond, seems to belong to an earlier
generation of Tory leaders who believed
that the USA was a more suitable partner
than Europe, claiming in New York that:
“I think most people in Britain feel probably
halfway across the Atlantic … rather than
just 20 miles off the coast of Europe.”
Unsurprisingly, the pound has been taking
the strain of this lack of strategy as chart
8 shows, having fallen dramatically since
the referendum result on 24 June. There
are also few signs that it will stabilise, as
current government thinking seems to focus
on reducing immigration as a first priority,
making it easy for EU leaders – many of
whom face critical elections before 2019
– to decide it makes most sense in terms
of their domestic policy needs to simply
let the clock tick down to April 2019.
Home Secretary Amber Rudd’s suggestion
that businesses should be forced to keep a
record of “foreign workers”, even though
subsequently withdrawn, is hardly likely to
promote harmony and understanding, whilst
the Foreign Office’s suggestion that consulting
teams from the London School of Economics
GBP v USD
1.35
1.32
1.29
1.26
1.2185
1.23
1.20
09
19 23 30
MAY 16
06
13 20 27 04
JUN 16
11 18 25
JUL 16
01
08
15 22
AUG 16
29
05
12 19
SEP 16
26
03
10 17 24
OCT 16
SOURCE: THOMSONREUTERS
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