WTO Works! WTO UK-EU trade option would work for Dover – and the Irish Border

Rather than give in to the EU’s all-or-nothing pressure tactics which threaten an ominous post-EU apocalypse, the UK must be prepared to walk away from the negotiating table. While a comprehensive FTA with the EU along the lines of the CETA would be optimal, a no-deal scenario is entirely feasible and can lead to economic prosperity.

The Brexit World Trade Organization (WTO) option, sometimes described as the ‘no deal’ scenario should not be feared despite media scaremongering and a natural aversion to change. Far from crashing out of the EU or falling off the ‘cliff edge’, dealing with the EU on WTO terms is realistic and workable. In fact, the UK government has been preparing for this outcome for some time by establishing its schedule of WTO tariff concessions for goods, setting up the domestic Trade Remedies Authority office to handle WTO complaints and helping businesses prepare for customs inspections.

The WTO sets the rules of trade among its 164 members, covering no less than 98 per cent of global trade. The General Agreement on Tariffs and Trade (GATT) principle of Most Favoured Nation ensures that tariffs commitments are extended to all other members equally, and the principle of National Treatment prohibits a wide range of discriminatory regulations imposed either at the border or internally through regulations. The EU’s WTO tariffs on manufactured goods are already quite low (something like 3 per cent). Under the Sanitary and Phytosanitary (SPS) and Technical Barriers to Trade (TBT) Agreements, the EU cannot arbitrarily impose additional health and safety inspections on UK products because the UK intends to preserve EU regulations, at least for the time being. Since the level of scientific risk will not go up immediately after Brexit, UK goods won’t be backed up at Dover in endless queues. Furthermore, the WTO Trade Facilitation Agreement obliges the EU to maintain as frictionless borders as possible through modern technology like pre-inspections and trusted traders, meaning that customs procedures at the Northern Ireland border should not be problematic.

It is true that the WTO regime for services under the General Agreement on Trade in Services (GATS) is somewhat weaker, but EU Members’ GATS schedules often appear more restrictive than they are in practice. It is worth remembering also that the EU’s famed Single Market for services is not as liberalized as is often thought. While EU tariffs on some products, like agriculture and automobiles, are high, losses here can be more than offset by lower tariffs on products which the UK does not produce, like tropical fruit, combined with the shift to a more pro-competitive economy unencumbered by EU rules.

Breaking free from the EU will also empower the UK to negotiate its own free trade agreements (FTAs) with third countries, covering issues which matter most to its economy, like services and high-value manufacturing. There is a good indication that the UK will be able to rollover some of the EU’s 60+ FTAs with third countries, including the Comprehensive Economic and Trade Agreement (CETA) with Canada. FTAs with other Commonwealth allies and most importantly of all, with the US, could bring massive gains to the UK economy. Ninety percent of the world’s GDP growth in the coming decades will be outside the EU, which accounts for an ever-decreasing portion of the UK’s total trade. This strategy will require the UK to have control over its own trade policy, which appears to be impossible under the White Paper’s unworkable track-and-rebate Facilitated Customs Arrangement for goods.

The UK must be prepared to walk away from the negotiating table rather than give in to EU pressure. A UK-EU free trade agreement with the EU along the lines of the EU’s with Canada (CETA) would be optimal, a no-deal scenario is entirely feasible and a practical basis for economic prosperity. The UK must therefore adopt a position of confidence that its relationship with the EU will be governed by WTO rules for as long as necessary.

 

Professor David Collins

David Collins is Professor of International Economic Law at City, University of London and a member of Politeia's Academic Advisory Council. A WTO specialist, he previously practised commercial litigation in Toronto and was a prosecutor for the Attorney General in Ontario, Canada. His publications include The Public International Law of Trade in Legal Services (Cambridge, 2019), An Introduction to International Investment Law (Cambridge, 2016). His Politeia publications include The EU, the UK and Global Trade – A New Roadmap? (with New Direction, 2019) and How to Level the EU’s Playing Field – Trade Remedies for a Trade Deal (2020).

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