German carmakers export around £50 billion worth of new cars into the UK each year. If the UK exits the EU on 31st October 2019, then those exporters will face tariffs of around 2.5% on their vehicles. That will be devastating in their number one market, but, if their number two market, the USA, follows through with their threat to impose 25% tariffs on German cars, that could, literally, be the end for them. We’re talking thousands of jobs here. We’re also talking a shock which no Government could survive if they did nothing to mitigate the losses. But, that is exactly what will happen say the Remainers. Nothing will be done to eradicate tariffs. The German carmakers will not lobby the German Government and the German Government will not lobby the EU to get a quick “interim agreement” in place, to eliminate tariffs and smooth trade. They would be perfectly happy with huge losses to their profits, large numbers of skilled workers laid off and a possible win by the more “populist” political parties.
Well, the fact is that something will happen. Very quickly too. The German Government will lobby hard for an “interim agreement” as allowed under Article XXIV (GATT). A plan and schedule will be quickly worked out to accommodate this, in fact, the UK has already stated its preference for a Canada type agreement and that can be concluded in two years or even less. But, what of the Backstop? Well, once Republic of Ireland agri producers have taken a massive hit, counted in the £billions, the Backstop will be resolved with technology as it always should have been. Checks will be carried out away from the border, and free movement will be allowed, with security checks again carried out away from the border just as the system operates today.
The Spanish Government successfully lobbied the EU to impose a 16% tariff on imported oranges to protect Spanish Growers. That industry is a fraction of what German automakers and the Republic’s agri producers are set lose. Anyone who thinks an “interim agreement” isn’t going to happen quickly should apply for the job of Governor of The Bank of England when it comes up later this year. They will fit in quite nicely there.