There have been repeated claims in the UK media recently that in the event of a no-deal brexit, the UK would not insist on a hard border or impose tariffs. The view is that any tariffs imposed would be entirely the EUs fault. This pervesely suggests that it is the EU that wishes to install an unnecessary border, and that the UK is blameless in this. It seems all the "take back control of our borders" rhetorc is being selectively airbrushed out of the picure whenever Ireland is mentioned.
Lets take a deep breath and moment to examine this.
A customs border will come into effect automatically in the absence of an agreement otherwise. Enforcement is another issue. Most businesses will trade lawfully rather than resorting to smuggling so 90% of the economic impact will happen even without enforcement. If it continues for a protracted period the EU will need to implement stop and search of vehicles somehow but it will not be a disaster if it takes a while to figure out how to do this on a softly softly basis. It will probably be a mixture of pre-registration of goods vehicles, cameras on the border and random searches of vehicles on roads near border crossings, but largely avoiding fixed checkpoints.
The EU need not be concerned with the movement of people as Ireland is in the CTA not Schenegen. The Schenegen zone will be protected as it is now by passport checks to/from Ireland. On the other hand, it is not clear how the UK can implement the much-vaunted migration controls without passport checks on Irish border.
The idea that that the UK would not impose any tariffs at all comes from Rees-Mogg’s ERG and goes hand-in-hand with the notion of trading on WTO rules alone. Let’s be clear what this entails. The WTO rules say that without a trade deal, MFM (most favoured nation) applies. This means if you set zero tariffs for anyone (eg Ireland), you must do the same for everyone (eg China).
The first thing to note is that if you already have zero import tariffs for everyone, why would any other country bother entering into a trade deal with you? They all already have a great one-way situation in their favour. Maybe some other benefits can be found, but the inescapable fact is that it is a very weak negotiating position indeed.
The second and most important thing to note is that with zero tariffs for everyone, you have a model called “unilateral free trade”. This is exactly the model proposed by the ERG’s favoured economist, Professor Patrick Minford. The idea is that one’s own businesses will be forced to become the most competitive in the world in order to survive, and that they are helped in this by being able to purchase supplies worldwide at free market prices without tariff barriers. Countries keeping trade barriers will only be hurting themselves by keeping the protected sectors inefficient. Poorer countries will gain the most by this (due to cheaper labour, land etc) so it is “progressive” in the sense of redistributing labour opportunities from richer nations to poorer ones.
It is an attractive model, but one I fear is flawed in it's analysis by reliance on static equilibra, not taking full account of the strategic dynamics of other nation's trade policies. Mainstream economists regard Minford as more or less a lunatic fringe, so his model should be considered a radical experiment. The risk involved is not negligible as mainstream models of unilateral free trade predict industrial collapse. To adopt it would be an ideologically driven leap of faith that advances neoliberalism in a way that I doubt the public expected at the time of the referendum nor would approve of now.
Refreshing was the candour Rees-Mogg showed by stating it could take 50 years for the benefits of this model to appear. The picture he did not paint so candidly was of the 50 years privation required to reach this promised land. No matter; what I predict will actually happen is that a public backlash at their dismal fate will bring Corbyn to power without restraint or caveat. This will expose the UK to the full horrors of socialism, especially harshly if the UK has also left the ECHR and become estranged from it's closest democratic friends due to the anti-EU rhetoric used by the Brexiteers to shift the blame for Britain's home-made problems.
