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The UK formally left the European Union back in January but negotiations are currently at a standstill with neither side able to break the deadlock. Concerns over a no deal outcome have been raised with seemingly no progress made in recent weeks.
Prime Minister Boris Johnson has vowed to leave by the end of the transition period in December, with or without a deal in place.
Although businesses have been told to prepare for a no deal outcome, an economist has detailed why UK-EU trade will not collapse overnight without a deal.
Economist Catherine McBride claimed trade does not need an agreement and points out the EU’s biggest markets are the US and China.
She added an agreement does not “generate trade” but the consumer demand and business suppliers do.
Ms McBride said: “The idea that trade or financial ties between the EU and the UK would ‘collapse overnight’ without an agreement is not something you would expect to read in the financial media.
“Trade agreements do not generate trade – consumer demand and business suppliers do.
“Trade agreements can make trade easier but if consumers want to buy something, then that demand will be supplied with or without a trade agreement – even if the product is banned by the government.”
Ms McBride also claimed the very worst outcome would see tariffs added to products crossing from the EU into the UK and vice versa.
But she argued it would become a bigger problem for the EU.
She said: “At the very worse, if tariffs are added to products crossing from the EU into the UK and vice versa, then EU-UK trade would merely become more expensive.
“But this would be a bigger problem for the EU than the UK because the UK is a net importer of goods from the EU.
“It is the UK that provides a lucrative market for EU merchandise.”
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Ms Mcbride ended her comment piece in Briefings for Britain by saying trade between the UK and EU will not collapse but will become “ever so slightly more expensive”.
Negotiations between Britain and the EU are currently ongoing, with the deadline to agree on terms now extending to October due to the coronavirus pandemic.
However, one of the main issues in these crucial talks is fishing as the EU wants to maintain its rights to Britain’s fishing waters.
Under the Commons Fisheries Policy (CFP), all members states are given access to EU waters via quotas.
The controversial policy has widely been criticised after critics argued the system is unfair due to the UK’s large coastal area.
In June, the EU’s chief Brexit negotiator, Michel Barnier, suggest the UK would be treated as an independent coastal state.
According to reports, he told other diplomats a compromise would have to wait until other parts of the trade deal were being finalised.
Earlier today, the government vowed to take action against illegal French fishermen at the conclusion of the EU transition period.
Mr Johnson’s official spokesperson has said the Government will ensure the UK’s “status as an independent coastal state is properly respected” from next year.
When quizzed how Britain will prevent illegal fishing in UK waters, the Downing Street official said: “We will ensure whatever agreement we reach with the EU on fishing rights, or indeed if we are unable to reach one, we will make sure our status as an independent coastal state is properly respected.”
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