Brexit trade war would have ‘immediate and devastating’ impact on UK economy, industry warns

British business leaders have urged Boris Johnson’s government not to suspend the Brexit deal with the EU, warning that it could launch a “devastating” trade war in the weeks to come.

Brexit Minister Lord Frost said last week the option to trigger Article 16 to suspend memoranda of understanding with Northern Ireland remained on the table if “significant gaps” with the EU could not be cured, but seemed to be trying to calm the conflict for the time being.

But as European Commission negotiator Maros Sefcovic hailed UK ‘change of tone’, Brussels is ready for immediate retaliatory action against UK if No 10 goes ahead and suspends the protocol, legal experts and analysts said. The independent.

Industry leaders in the UK have said they fear a series of “damaging” measures that could affect UK exports, further disrupt supply chains and lead to an investment freeze.

Catherine Barnard, professor of European law at Trinity College, Cambridge, said: “A trade war is a serious possibility. The EU is examining a range of options – it is exploring avenues for rapid retaliatory action. “

EU leaders are believed to be considering a ‘nuclear’ option of ending the Trade and Cooperation Pact (TCA) if Downing Street triggers Article 16.

This would put the UK on a 12 month notice period before the pact ends and Britain would be forced to trade with Europe on World Trade Organization (WTO) terms – essentially a Brexit scenario. “Without agreement”.

However, the EU is also considering whether to trigger a lesser-known part of the ATT – Section 506 – to take immediate action, according to Professor Barnard.

“This means that the EU would get its retaliation quickly before having to resort to arbitration. The reprisals range from stopping fishing in [EU] waters, to impose tariffs on British fish entering the EU, and then tariffs on other goods, ”said the legal expert.

She added: “The French and other countries could also carry out more stringent checks on goods coming from the UK – which could mess things up pretty quickly at the border.”

David Henig, UK director of the European Center for International Political Economy, said a decision by Brussels to launch retaliatory measures would “have a very negative impact” on the UK economy.

“If the UK triggers Article 16, I suspect [the EU] can start with things like 100% physical checks on UK products and retaliatory tariffs on some products, before deciding whether to go nuclear by suspending or terminating the ATT. “

He added: “If they do, we could be back in the territory without a Brexit deal, with this threat to the UK economy in 2022. It could lead to an investment freeze.”

The British Meat Processors Association has said it is increasingly concerned about the prospect of short-term damage and much higher tariffs on exports if the trade deal is ultimately canceled.

Nick Allen, the organization’s chief executive, said The independent: “Trade on WTO terms would be appalling for the meat industry. The idea that we are once again concerned with trade on WTO terms is incredibly depressing.

He added: “We are fighting enough food inflation without damaging trade war and retaliatory measures. Another year of uncertainty would be devastating for our industry and the entire food sector – it means that all the investments our economy needs could be put on hold. “

The Road Haulage Association (RHA) fears the EU will insist on more stringent checks at Calais and other border points, which would cause delays for UK truckers and ripple disruption.

“A trade war wouldn’t be pretty,” said Rod McKenzie, RHA policy director. “This is a big concern for all of us in the logistics business. “

The transport chief added: “If Article 16 is triggered, we know the EU is going to be upset and they are probably going to want to react. My big concern is always the supply chains. If the EU fights back, it could further disrupt the highly stressed supply chains that currently exist. “

Barrie Deas, chief executive of the National Federation of Fishermen’s Organizations (NFFO), said it was still not clear which fish deals could be put on hold if a trade war develops – but warned both sides of the dangers of escalation.

“A trade war would hurt everyone,” he said. “This could have big implications for France, the Netherlands, Belgium, Denmark and Ireland – all countries that fish fairly extensively in UK waters. There is a potential for all of us to be losers.

If No 10 decides to trigger Article 16, the extent of the EU’s response will depend on how the Prime Minister and his Brexit Minister Lord Frost explain their actions – and the extent of their “safeguard” measures.

The UK government could decide to unilaterally stop controls on some goods sent across the Irish Sea, or instead choose to suspend much of the MoU involving all customs controls, standards and VAT rules.

The EU has proposed a series of changes to the protocol, saying they would remove 80% of controls on goods between Britain and Northern Ireland.

But Lord Frost continued to demand that Brussels also accept the dismissal of judges from the European Court of Justice (ECJ) in the protocol arbitration process. “On the European court, on our side, definitely, nothing has changed,” said Mr. Sefcovic on Friday.

A spokesperson for the European Commission said The independent that Mr Sefcovic remain “fully focused on finding practical solutions” so that Northern Ireland enjoys “stability and certainty”.

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