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New trade terms will have a negative impact if UK votes Brexit: WTO’s Azevêdo

If it votes to leave, the U.K. will have "no way of escaping" a long series of trade negotiations that will most likely have a negative impact on the country's economy, the director-general of the World Trade Organization (WTO), told CNBC.

"There will be negotiations ensuing if the U.K. leaves the EU. So negotiations would be needed between the U.K. and the EU; the U.K. and other WTO members; and the countries with whom the EU has free trade areas," WTO's director-general, Roberto Azevêdo told CNBC Tuesday.

"So negotiations are going to have to happen and there are many scenarios out there, and most of them would be resulting in less favorable terms for trade and therefore a negative impact on the economy."

Trade has been one of the hot topics within the referendum debate, with the remain camp arguing that the EU is the U.K.'s biggest trading partner and a vote to leave would damage the country's trade and harm business.

Roberto Azevedo, WTO director-general.
Saeed Khan | AFP | Getty Images
Roberto Azevedo, WTO director-general.

Meanwhile, the leave campaign suggests that exiting the EU would enable the U.K. to "take back control", allowing them to have an independent voice in the WTO and gain power to strike its own deals. Azevêdo, however said the trading world wasn't as simple as it seems.

"The U.K. is a WTO member. It is bound by the rules of the WTO and therefore it cannot pick and choose with whom they do trade and at what level. The tariffs are going to be set, this involves a multilateral negotiation."

"No WTO member can decide unilaterally what the commitments are, what are the tariffs that will apply between them and the other members. So there has to be negotiations, there is no way of escaping that. It's as simple as that."

The European Union is one of the world's biggest trading powers and has been negotiating on behalf of the U.K. for several years. In the event of a Brexit, it would take "some time" for the U.K. to renegotiate its terms to the same level of the EU, the director-general said.

Official polls have yet to indicate a popular favorite ahead of Thursday's vote. In YouGov's latest poll with The Times, results revealed that the Leave campaign held a slight lead with 44 percent, while 42 percent said they'd vote to stay; leaving the rest either unsure or unwilling to vote.

Rise of protectionist measures

The director-general's remarks come as the organization released its latest trade monitoring report, which revealed that during mid-October 2015 to mid-May, G-20 economies had introduced their highest monthly level of new trade-restrictive measures—a total of 145 over seven months—since the financial crisis.

The sharp rise in these protectionist measures accompanied by a significant uptick in anti-trade rhetoric may result in a "further chilling effect on trade flows" along with ramifications for job creation and economic growth, Azevêdo stated when the report was released.

Container Cargo freight ship with working crane bridge in shipyard at dusk.
Prasit photo | Moment | Getty Images
Container Cargo freight ship with working crane bridge in shipyard at dusk.

"About half of those (protectionist) measures were on anti-dumping measures and very concentrated on some sectors like metals, steel and chemicals," Azevêdo told CNBC.

"This shows that in some sectors we are seeing some strain, and we have to keep an eye on that, as that can spread out, because cost increases in some of those sectors may have an effect on other sectors that use those products as input. So this could have a spread out effect over the economy, if we're not watchful enough."

With prospects for global trade remaining "uncertain" for 2016, the WTO advised the economies to reject new restrictive measures and roll back on existing ones, in the "fight against protectionism". Less than a quarter of the G-20's 1,583 protectionist measures imposed since the crisis have since been removed.

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