IFO report finds 'no deal' could hit Republic of Ireland ten times harder than UK

A new report by the German economic group IFO Institute has painted an interesting picture of what a ‘hard but smart’ No Deal Brexit could look like, covering several scenarios.

The IFO set out how under the ‘hard but smart’ strategy “customs duties on all trading partners and extensive controls against the EU and the existing FTA partners are waived”.

As they argue, British consumption wouldn’t be burdened by no withdrawal agreement “because no new barriers would arise; on the contrary, lowering tariffs to zero against other members of the WTO means that consumer prices are even falling”.

According to analysts, such an outcome would mean “there is no significant statistical difference between the effects in the UK and in the EU”, with large unilateral tariff cuts meaning broadly equal dips between the UK (0.5%), Germany (-0.48) and France (-0.4%).

That compares to the Republic of Ireland who would be hit ten times harder (- 5.39%).

In addition to this, they forecast a huge 8.7% gain for the UK pharmaceutical industry and a 8.4% boost for British mechanical engineering.

As the IFO Institute set out on UK tariffs: “It is often assumed that the UK is through a unilateral lowering of tariffs to zero in negotiations on free trade agreements would relinquish all its leverage. That’s right not, as the UK at any time could return to WTO tariffs.”

And they underline how this is the sensible approach: “After all, political pressure in the UK will allow for nothing more than to waive customs duties and the like. How could you explain to voters that beef is almost 70% and dairy products should be more than 20% more expensive.”

Therefore “the abolition of all duties would be the first and very visible act one off March 30, 2019 commercial sovereign British government and one in the purses of the citizens immediately noticeable sign of the newly achieved Independence from Brussels”.

The boss of the IFO Institute, Gabriel Felbermayr, has previously called for the EU to make concessions to the UK to secure a deal.

He told the BBC: “The EU should, as a quick fix at least, offer to remove both the backstop and the withdrawal agreement’s current time limit on the mobility of goods and capital so that the provisional agreement would keep the EU and the UK in a joint customs territory association even after 2020 without making a difference between Northern Ireland and the UK. That would be key.”

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