The UK has had its cake, but China has had her cake, the economists at the International Monetary Fund (IMF) say in a report that could complicate the ongoing trade negotiations between the world’s two biggest economies.
China has demanded that the UK withdraw from the euro and withdraw from joining the World Trade Organization (WTO), the report by the IMF’s China Programmes Centre (CPCC) said.
The IMF also noted that the country had not made any progress on its WTO commitments.
It was China’s demand that led to the IMF report being published on Thursday.
China is the largest economy in the world and is not a member of the World Bank or WTO, said the report.
The UK’s withdrawal from the EU and the EU’s withdrawal have also not been met.
“The UK’s continued membership of the EU, as well as the UK’s participation in the WTO, have not prevented the WTO from being breached,” said the CPCC report.
“Nevertheless, we believe that the WTO is a more effective instrument for achieving WTO agreements than the bilateral negotiations between our countries.”
In March, the IMF raised the possibility of the UK leaving the EU as a way to end a series of trade disputes with China.
China said at the time that the move was “counterproductive” and would lead to a trade war.
The IMF said that the economic fallout from Britain’s withdrawal would be a “substantial one”.
“The economic impacts of a UK withdrawal from either the EU or the WTO could be substantial,” the report said.
“Such a withdrawal would have a material adverse effect on UK-China trade relations.
The EU and China would likely face more restrictive trade policies.
This could further delay a UK-EU trade agreement.”
The IMF also highlighted that the trade of goods and services between the two economies would be affected.
“In the event of a withdrawal from both the EU (and WTO), trade flows between the UK and China will increase in both directions, which would further increase trade barriers to UK exports,” the IMF said.
In April, China also told the IMF that it would be “very difficult” for the UK to continue to use the WTO if the UK left the EU.
The country is a member state of the WTO but is not yet a member to its World Trade Organisation (WCO) because it is not currently a member.
The British Government said that its exit from the WTO was “unlikely” but that it could be revisited if needed.
In October, the Treasury told MPs that the government would seek to “retain” the WTO agreement if the British Government were to leave the EU but not the WTO.