–MPC’s Ramsden Sees Risk of ‘Trade Friction’ on Top of WTO Tariffs
By Laurie Laird
LONDON (MaceNews) — Bank of England leaders have begun to break their silence over the possibility of a no-deal Brexit, with a top policy maker voicing fears that a lack of cooperation between trading nations could introduce informal barriers to trade between the UK and the European Union.
The continuation of trade between the UK and its biggest trading partner could be subject to “the behaviours among negotiating parties,” said BoE Monetary Policy Committee Member Dave Ramsden, addressing a virtual conference hosted by the University of Nottingham on Tuesday. “Will there be a degree of cooperation … will there be even more checks at the border?” he asked.
His comments echo those of BoE Governor Andrew Bailey at a central banking conference last week, in which he suggested that ill will between the UK and the EU in the event of a no-deal Brexit could introduce friction in flow of goods between the trading partners.
Until recently, Bank of England officials have declined to comment on the economic impact of a no-deal Brexit, maintaining that the Bank’s forecasts reflect an orderly shift to a free-trading arrangement with the EU once the UK completes its transition period at year end.
Negotiations between the two parties have been stuck since the summer, stalled by disagreements over state aid to industry and the allocation of fishing rights in UK territorial waters.
Failure to reach an agreement will leave the UK reliant on World Trade Organisation rules, incurring tariffs on a wide range of goods both leaving and coming into the country. “If you move away from a trading arrangement with the EU, you will introduce longer-term friction,” said Ramsden. “You mitigate that according to the type of deal you have,” but any formal arrangement will involve “less ease of doing trade and less ease of doing investment” than in current trading arrangements.
But even the UK government’s favoured model, a largely tariff-free agreement covering goods, modelled on the EU’s pact with Canada, will exert damage to the already-stricken British economy knocking “one percent off the level of GDP in” the first quarter, said Ramsden, with “disruption continuing into Q2.”
Ramsden declined to fuel speculation over the Bank’s intentions toward negative interest rates, reiterating that the MPC is “looking at the case” for sub-zero rates, but it’s not “something we’re taking out of the toolbox and applying to the UK at present.”
—
Contact this reporter: laurie@macenews.com.
Content may appear first or exclusively on the Mace News premium service. For real-time email delivery contact tony@macenews.com. Twitter headlines @macenewsmacro.