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Analysis

It’s astonishing Boris still hasn’t grasped WTO basics

by Luke Lythgoe | 21.06.2019

Either Boris Johnson is trying to bamboozle the public with jargon or he just doesn’t get the basics of how global trade works. Both are bad omens for the man who is likely to be our next prime minister and tasked with navigating a way through the Brexit mess.

“What we want to do (in a no-deal Brexit) is get a standstill in our current arrangements (with the EU), under GATT 24, or whatever it may be, until such time as we have negotiated the (free trade agreement with the EU),” Johnson claimed in Tuesday’s BBC debate.

His blase remarks have since been picked apart by numerous experts, including the governor of the Bank of England. Mark Carney told the BBC that, contrary to Johnson’s claims, a no-deal Brexit meant tariffs being slapped “automatically” on goods moving between the EU and UK.

It’s time Johnson took a lesson on how the World Trade Organisation, the international body which oversees global trade, actually works.

First up, there’s something called the “most favoured nation” rule, which is designed to ensure fair play in global trade. This means that if you give a concession to one WTO member country – for example a lower tariff on beef – you need to give it to all member countries. Unless, that is, you have a free trade agreement with that country.

So MFN rules mean we couldn’t crash out of the EU and still keep our favourable terms of trade with its 27 members. The only way to keep tariffs between us and the EU at zero would be to scrap tariffs with all 163 other WTO members – the US, China, Australia, etc. And even then the EU would not have to lower its tariffs with us.

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Scrapping all our tariffs would also leave us with very little leverage in future trade talks with other countries after Brexit. Having already given potential trade partners tariff-free access to our market, there would be little incentive for them to open up theirs.

Johnson thinks we can get round this conundrum by invoking Article 24 of the General Agreement on Tariffs and Trade (GATT), a treaty under the WTO. But this wouldn’t work because GATT 24 requires a proper “plan and schedule” to be in place for reaching a trade agreement within a “reasonable length of time”. That clearly won’t be possible if we’ve just crashed out of the EU in chaos.

What’s more, to get a GATT 24 waiver on MFN rules, both parties – not just the UK – need to notify the WTO that they want one. It looks highly unlikely that the EU would do that. Last December, as part of its no-deal preparations, the EU notified the 27 member states that in the event of a no-deal Brexit they would have to charge third-country tariff rates on UK exports. That could be ruinous for UK businesses – for example, 10% on cars would devastate our car industry. But new customs duties are something the EU is prepared for and has already accepted as a consequence of no deal – what Johnson thinks should happen is besides the point.

Carney cited the opinion of both the director-general of the WTO and UK trade secretary Liam Fox, Johnson’s erstwhile ally on the Vote Leave campaign, to rebut the Tory frontrunner’s claims.

Johnson’s GATT 24 wheeze would meet instant and fierce opposition. If we were to attempt to use it we would, on the first day of our independent membership of the WTO, be transgressing its most fundamental rule. This international knock-back, not to mention the border chaos and price hikes resulting from a no-deal Brexit, would be a painful lesson in the realities of “taking back control”.

Edited by Hugo Dixon

5 Responses to “It’s astonishing Boris still hasn’t grasped WTO basics”

  • (Dr Lorand Bartels is a Reader in International Law, University of Cambridge)

    Saw this one page FTA which Dr Lorand Bartels wrote 25th Jan 2019…………….

    “I have written a basic UK-EU FTA (in my personal capacity) to show what minimum one needs to satisfy Art XXIV GATT. It does not of itself guarantee frictionless trade. And not all PEM rules of origin will be suitable. But it works as an emergency measure.”……………………

    Explanation: this is a draft of a very basic FTA providing for free trade on EU and UK products that meets WTO rules (in particular Article XXIV GATT 1994).
    Issues relating to subsidies, regulations, trade remedies, among others, are dealt with under WTO law.
    Disclaimer: This document is written in a personal capacity, and not to be attributed to any employer
    Author: Dr Lorand Bartels, University of Cambridge ([email protected]), 22 January 2019.
    UK-EU FTA
    The parties agree as follows
    ARTICLE 1
    Customs duties
    No Party shall apply customs duties to the products of the other Party, as defined in the Annex on Rules of Origin. For the purposes of this
    Chapter, ‘customs duties’ means any duty or charge of any kind imposed on or in connection with the importation or exportation of a good,
    including any form of surtax or surcharge imposed on or in connection with such importation or exportation, but does not include any:
    (a) charge equivalent to an internal tax imposed in accordance with Article III:2 of GATT 1994;
    (b) duty applied in accordance with Articles XXIV:8 of GATT 1994 or Article 22 of the WTO Dispute Settlement Understanding;
    and
    (c) fees or other charges imposed in accordance with Article VIII of GATT 1994.
    ARTICLE 2
    Quantitative restrictions
    Article XI of GATT 1994 is incorporated into and made part of this Agreement, mutatis mutandis.
    ARTICLE 3
    General and security exceptions
    Articles XX and XXI of GATT 1994 are incorporated into and made part of this Agreement, mutatis mutandis.

    ANNEX ON RULES OF ORIGIN
    Article 1
    Applicable rules of origin
    For the purpose of implementing this Agreement, Appendix I and the relevant provisions of Appendix II to the Regional Convention on pan-
    Euro-Mediterranean preferential rules of origin (“the Convention”), shall apply. All references to the “relevant agreement” in Appendix I to
    the Convention and in the relevant provisions of Appendix II to the Convention shall be construed so as to mean this Agreement.

    INSTITUTIONAL PROVISIONS
    [Including dispute settlement]

  • I think it’s obvious that Johnson gets it and is just lying. I guess you can’t say that in the article for libel against the untouchable Johnson, though.

    Perhaps a couple more scandals like the domestic argument will finally bring this bozo down. I’d love to see him humiliated out of the race.

    I’m still pissed off that he “somehow” wink-wink, managed to make the misconduct in public office case against him disappear and in under a week, when he’s clearly got some serious questions to answer and anyone else would have been held to account. Justice depends on who you are, doesn’t it, Boris?

  • Do you all not understand that a person’s private life is private.
    The media interferes and thinks it can write what it likes
    Curtail the media and we would all be better off

  • John Perry: My life is private, but then I am a 70 year old retired person. If I choose to spend all day at the bar (I don’t drink) that is my business. Until I get into my car and run into a crowd of schoolchildren killing many. How I treat my life and body is my own affair until it impacts on the well being of others.

    A person who’s job description includes taking responsibility for millions of people must be in a position to do so. Spending the day in a bar even without killing anybody seriously limits such a person’s ability to fulfill their responsibilities. Thus impacting negatively on the lives of all the people who expect to be provided the services of those whom they elected to do so.

    By accepting a job that requires a responsible behaviour that person must be prepared to have irresponsible behaviour exposed, for the protection of us all.

    Having said that, those who control the news services must behave in a responsible manner. But they do not. Our information services serve as a tool by the powerful to manipulate public opinion. Not for the good of the public. It is for their own self serving goals, often at the expense of the public’s well being.

    Freedom of the press is a two edged sword and the public’s well being edge is the blunted one.