Iain Duncan Smith & co are wrong about GATT Art24, Brexit and getting out of jail

Tory Brexiteers’ claim that WTO rules let them pull a rabbit out of the hat is pure magical thinking

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Get out of jail: Art24 does it, but not that jail

By Peter Ungphakorn
POSTED SEPTEMBER 5, 2019; ORIGINALLY PUBLISHED ON THE TELEGRAPH WEBSITE, SEPTEMBER 2, 2019 | UPDATED SEPTEMBER 5, 2019

Does the World Trade Organization (WTO) have a magic legal provision, one that Britain can use to get out of the “no-deal” Brexit jail?

No, and this has been pointed out repeatedly. And yet Iain Duncan Smith, David Campbell Bannerman and co, still think it does, judging by their piece for the Telegraph on August 30, 2019.

They are wrong because they misunderstand the provision they cite: Article 24 of the General Agreement on Tariffs and Trade (GATT). They are wrong because they overlook the realities of what it means.

In other words — and this is important — “invoking GATT24” means “concluding a free trade agreement in goods with the EU”.

Nothing more, nothing less

GATT Article 24 really isn’t worth talking about at all. It’s a camouflage in legalese distracting us from the real substance.

What Art.24 does is to allow the WTO’s 164 members to set up free trade agreements with each other in goods — not services, whose separate agreement is never mentioned. Without it, if they trade duty-free with each other, they would have to scrap duty on imports from all other WTO members as well.

That makes it an important exception to the non-discrimination rule (GATT Art.1). It also sets disciplines on what free trade agreements (in goods) can and cannot do.

If it is a get-out-of-jail card, then “jail” is “the non-discrimination rule”, not no-deal Brexit.

In other words — and this is important — “invoking GATT24” means “concluding a free trade agreement in goods with the EU”.

Nothing more, nothing less. The agreement could be one page, or 20,000.

So the solution to “no deal” is “have a deal”. Well, duh.

Art.24 is only worth talking about if the UK and EU are planning a deal that would violate Art.24’s disciplines. Otherwise, let’s take it for granted that the two are going to respect their WTO obligations.

It’s so commonplace that the UK has 49 GATT Art.24 agreements currently in force, according to the WTO’s database, everything from membership of the EU Single Market, to the EU-Canada agreement — yes the famous one that would be a model for Britain’s future trade with the EU, with a “Super” prefix or a string of pluses behind it.

Canada_ali-tawfiq-unsplash_1080
‘Super’ Canada too: Any free trade agreement in goods has to ‘invoke’ Art.24
Not ‘either-or’

It is not either the Withdrawal Agreement or GATT24. The Withdrawal Agreement itself would have to come under Art.24

This makes a nonsense of the idea of “binning the Withdrawal Agreement, and invoking GATT24”.

It is not either the Withdrawal Agreement or GATT24. The Withdrawal Agreement itself would have to come under Art.24. It would keep the UK in the Single Market during the transition, even if the backstop is scrapped.

So, translation: “binning one agreement that invokes GATT24 and replacing it with another.” Big deal.

If Art.24 is not worth talking about, what then is? The content of the free trade agreement, not the clause that keeps it honest.

The authors propose a couple of pages covering only tariffs and quotas.

This would exclude all non-tariff barriers such as product standards, food safety, animal and plant health and quarantine, other regulations, mutual recognition of each other’s practices for testing, approving and certifying anything from apples to accountants. Crucially it would totally exclude services.

And there are no “mini deals” covering them except perhaps a handful, if any. There are temporary unilateral contingency plans for managing disruption, not deals.

The Government’s own plans for “no deal” show that tackling only tariffs and quotas falls far short of being “enough to avoid delays at borders”.

The authors claim this would be “massively in the EU’s interest to agree”. It’s a make-or-break assumption; if it’s wrong, their entire article is in shreds.

There is a simple test. Put it to the EU and see if it will agree, without a deal on citizens’ rights, payment and the backstop.

Britain has never proposed it to Brussels, but EU Trade Commissioner Cecilia Malmström has already rejected it. The difficulty is not Whitehall, but reaching agreement with the EU.

Wise move? A two-page free trade agreement would slam the door overnight on much of present frictionless trade
Wise move? A two-page free trade agreement would slam the door shut overnight on much of present frictionless trade
Britain’s interest?

The first question should actually be whether it is in Britain’s own interest to have a deal with the EU that overnight slams the door on so much that is currently frictionless. The transition in the Withdrawal Agreement was partly designed to prevent an overnight shock. So, we should be asking ourselves, is this a wise proposal to put on the table in the first place?

The original slimline free trade agreement came from Lorand Bartels of Cambridge University who drafted a 1-pager in his lunch break (or was it over coffee?).

How it has become an object of desire is a mystery. Dr Bartels has clarified repeatedly that he only drafted it to show the minimum that a deal would need in order to comply with GATT Art.24, not because it would be useful in the real Brexit world.

Mr Duncan Smith and co were right on one point, though. Andrew Neil was indeed mistaken when he tried to trap Boris Johnson on paragraph 5(c).

That only applies to an “interim” free trade agreement, once the favoured get-out-of-jail card of co-author David Campbell Bannerman and the ERG wing of the Conservative Party.

Most of them have now ditched it after a flood of comments about why interim agreements are unnecessary and cumbersome. Mr Johnson did not say “interim”. (But he did only mention tariffs and quotas.)

Still, traces of the confusion remain. “Yes this needs the EU’s and the WTO’s agreement, for sure,” the authors write.

Correct on one point; wrong on the other. It does need the EU’s agreement, which is not a trivial matter and also means this isn’t really about a “no-deal” Brexit.

But it does not need the WTO’s agreement. That only applies to the now-abandoned interim version. All that’s needed is a notification to the WTO membership, with questions and answers in an information session of the Regional Trade Agreements Committee, which comprises all members.

So is it true that “the option of using the GATT Article XXIV is more viable than ever”?

Only if we think “a deal with the EU in goods is more viable than ever” — because that’s what using Art.24 means.

That is the real issue. To consider it properly, we must stop talking about Art.24.


Peter Ungphakorn is a freelance journalist and former staff member (1996–2015) of the WTO Secretariat. He has written about GATT Article 24 and other trade and Brexit issues on this blog.


Updates: None
Photocredits
: All CC0 — “Jail” by Michael Jasmund via Unsplash; “Canada” by Ali Tawfiq via Unsplash; “Door” by PhotoMix via Pexels


Author: Peter Ungphakorn

I used to work on trade issues and am now retired. I am an occasional freelance journalist, focusing mainly on international trade rules, agreements and institutions, with periodic analyses for AgraEurope www.agra-net.com/agra/agra-europe. This blog is for trialling ideas on trade and any other subject, hence “β”. You can respond by using the contact form or tweeting @CoppetainPU — Copyright © Peter Ungphakorn except where stated