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 49