Brussels claims the UK will need to cough up $47.7 billion in a hard BREXIT. PM Johnson claims the number is closer to $8 billion. Who is right?
When Theresa May was PM, she supposedly offered $40 billion to the EU Commission and that was rejected. Obviously, the art of the deal was to never have a deal. And May was a part of that treason. While the EU continues to use this number as an agreed dollar figure, given there was ‘no agreement’, that number disappears from any future negotiations. As in – poof.
In other words, the EU Commission may have royally screwed themselves in not making any partial or piecemeal form of agreement within the Theresa May treason. That could have obligated the UK to some form of payment. But a ‘no deal’ means exactly that, nothing was resolved. A legal misstep.
And in that, Boris Johnson is correct, the only potential obligation would be the UK’s annual membership fee through 2020.
Most recently, the EU has insinuated that a nonpayment scheme would result in instituting a trade war to punish the UK. Roughly 35% of UK exports find their way to EU countries. But more significantly, 45% of UK imports come from the EU bloc. With the economy of Germany tanking, a trade war with the UK would all but collapse the EU. Still, the EU is adamant, “UK will have to pay no deal BREXIT”.
But the UK isn’t arguing that, the argument is how and how much?
The problem? The legal position is unclear, allowing for vast differences of ‘opinion’ as to how and how much.
While May invoked Article 50 in 2016 giving a two year window for negotiations, there is no mandate in that Article for financial reparations. Article 210(3) discusses the exact template of divorce, but also provides no insight into a financial obligations. However, some legal opinion states that the UK is subject to trade agreements made by the EU in 2014, which are valid for seven years, placing the UK liable for their unused share – November 1, 2019 thru December 31, 2020, which would amount to 16%.
It is then up to the EU Commission to provide substantive analysis of each and every trade agreement created in 2014 for which the UK would be held responsible, and the amount that remains unpaid in such negotiations. But that is rather simplistic when one considers the co-mingling of assets – as in a marital divorce. Those assets far exceed any dollar figure the EU can legally assert against the UK, and will require extensive research and market analysis.
In 2017, the UK’s net contribution to the EU was roughly $9 billion. If the EU wants to have access to the single market system like Switzerland, it is estimated to cost $3.71 billion per year. It is based on a flat rate of .2% of GDP. But someone hasn’t done their math! In 2017, Switzerland’s GDP was roughly $679 billion. If their contribution rate is .2% – their contribution would only be $1.35billion.
In 2017, the UK GDP was $2.62 trillion. If we impose the same deal as Switzerland, the incorporated trade deal would cost the UK, $5.2 billion per year or about half its current contribution with all the luxuries that are afforded other non-EU members including Switzerland.
In that light, the UK would have no obligation to commit to the Socialist rules and agendas imposed by the EU, would not be propping up faltering economies, and would enjoy the freedom of single market trade.
But during the massive treason exploited by Theresa May, the GDP growth rate for the UK tanked falling recently to negative territory triggered by manufacturing. France and Germany have also experienced a sharp decline in the GDP since the beginning of 2018. (Interestingly, Russia’s GDP growth rate has far surpassed that of the EU member states – but the media is silent…).
Forecasts for France and Germany, the EU powerhouses, are glum with high unemployment, low growth, a rising trade imbalance, and high personal and corporate tax rates. They have lost their ‘mojo’.
The EU Commission no longer holds the aces in a poker hand, and PM Johnson and President Trump are all too aware of that truth.
A no-deal BREXIT may have a sluggish start, but given assistance from the US in trade, it would be absolutely disastrous for EU partners to lose the UK as a trade account. Germany’s economy would tank, France’s would follow, while other lesser trade countries might take advantage of a lucrative deal; Hong Kong, Italy, China, Japan, South Korea, Turkey and UAE, to name a few.
If Germany and France go – so shall the entire EU, as in – poof…