This and GATT

WTOThe World Trade Organisation (WTO) regulations on free trade agreements (and interim arrangements on the way to such agreements) do not support the claims of those who shriek that leaving the EU without a deal would lead the UK over a disastrous cliff edge. That is a choice, which can be made or avoided by the EU.

It seems that WTO rules would allow the UK and EU plenty of time to make an interim agreement to continue trading much as they do now until a free trade agreement (FTA) can be formally agreed. There is no need for a cliff edge, which is a negotiating strategy by the EU and a lie by Remainers. It is fairly clear that if the EU and UK agree that they are in the process of negotiating a trade agreement they have up to 10 years to operate under an interim agreement that does not require Most Favoured Nation terms (for more details see https://briefingsforbrexit.com/the-mystery-surrounding-gatt-article-xxiv-the-crash-proof-exit-option/)

But this is still controversial and it may be that there will be a cliff edge if the Commission and Council (and, possibly, the UK Government) wish to create one for political reasons, but there is no economic justification. It is a frightener to discourage others from following the UK’s example – very revealing of the EU’s malign purposes to trap rather than encourage members to remain.

The EU need not make drastic impositions on the UK, even if no deal is struck before 29 March. Whatever form of Brexit occurs both the EU and the UK have committed themselves to negotiating a mutually beneficial relationship (but see Négociation sur le Brexit and  Negotiating – really? and Negotiations).

However, we know that ‘need not’ does not imply ‘will not’; we also know that the EU is driven by political pressures that trump economic and commercial priorities, so they may well decide that their remaining members should take a hit “to preserve the integrity of the single market”.

The rest of this post offers some evidence from the WTO that ‘need not’ can be strengthened to ‘should not’.

The WTO took over as it stood the mandate of the General Agreement on Tariffs and Trade (GATT) in 1995: from the WTO website ( https://www.wto.org/index.htm ) we have this:

On 1 January 1995, the WTO replaced GATT, which had been in existence since 1947, as the organization overseeing the multilateral trading system. The governments that had signed GATT were officially known as “GATT contracting parties”. Upon signing the new WTO agreements (which include the updated GATT, known as GATT 1994), they officially became known as “WTO members”.

Next we quote from the relevant GATT/WTO material, which can be found here:

https://www.wto.org/english/tratop_e/region_e/region_art24_e.htm

The heading is: Territorial Application — Frontier Traffic — Customs Unions and Free-trade Areas

  1. The contracting parties recognise the desirability of increasing freedom of trade by the development, through voluntary agreements, of closer integration between the economies of the countries parties to such agreements. They also recognise that the purpose of a customs union or of a free-trade area should be to facilitate trade between the constituent territories and not to raise barriers to the trade of other contracting parties with such territories. (our emphasis)

WTO-2There is a need, and an apparent desire, for the EU and UK to agree how the future relationship will work. The often-repeated statement from the EU that the UK will be a “third country” after Brexit does not imply all that they wish us to believe. Contrary to the WTO regulations, the EU has raised barriers to other WTO-signatory countries and declares that it will do the same to the UK.

  1. Accordingly, the provisions of this Agreement shall not prevent, as between the territories of contracting parties, the formation of a customs union or of a free-trade area or the adoption of an interim agreement necessary for the formation of a customs union or of a free-trade area; Provided that:
(a)    with respect to a customs union …
(b)    with respect to a free-trade area, or an interim agreement leading to the formation of a free-trade area, the duties and other regulations of commerce maintained in each of the constituent territories and applicable at the formation of such free–trade area or the adoption of such interim agreement to the trade of contracting parties not included in such area or not parties to such agreement shall not be higher or more restrictive than the corresponding duties and other regulations of commerce existing in the same constituent territories prior to the formation of the free-trade area, or interim agreement as the case may be; and
(c)    any interim agreement referred to in subparagraphs (a) and (b) shall include a plan and schedule for the formation of such a customs union or of such a free-trade area within a reasonable length of time.

If the EU wished it, an interim agreement with the UK, while the negotiations on the future relationship are under way, could simply preserve the existing arrangements. There is no need – just a political desire – for the punishing regime that the EU is threatening.

Of course, “… shall not be higher or more restrictive than…” gives the EU plenty of scope to continue its unfair trade arrangements with third countries, and to include the UK, in defiance of WTO rules.

Then from Article XXIV:

  1. The “reasonable length of time” referred to in paragraph 5(c) of Article XXIV should exceed 10 years only in exceptional cases. In cases where Members parties to an interim agreement believe that 10 years would be insufficient they shall provide a full explanation to the Council for Trade in Goods of the need for a longer period.

Ten years gives plenty of time to produce an agreement on future trade relations.

  1. The provisions of Articles XXII and XXIII of GATT 1994 as elaborated and applied by the Dispute Settlement Understanding may be invoked with respect to any matters arising from the application of those provisions of Article XXIV relating to customs unions, free-trade areas or interim agreements leading to the formation of a customs union or free-trade area.

If necessary, the UK could call on the dispute settlement procedures to get WTO support for reducing trade barriers.

  1. The provisions of Articles XXII and XXIII of GATT 1994 as elaborated and applied by the Dispute Settlement Understanding may be invoked in respect of measures affecting its observance taken by regional or local governments or authorities within the territory of a Member. When the Dispute Settlement Body has ruled that a provision of GATT 1994 has not been observed, the responsible Member shall take such reasonable measures as may be available to it to ensure its observance.

Conclusion: In the run-up to Brexit what we are seeing is a massive exercise, in which UK Remainers are participating wholeheartedly, to hide the truth and to win backing for what they hope would be a successful second referendum.

 

 

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5 thoughts on “This and GATT

  1. Please, less wording and more facts.
    UK Brexiteers have chosen time and again to put Brexit in peril rather than put it into effect.
    EU’s ability to hang together during years of contentious divorce proceedings, reflects a different understanding on either side of the English Channel of just what Europe is.
    “The fundamental notion that Europe is much more than a market—that is something that almost everyone in continental Europe agrees on, and almost no one in the U.K.”, Charles Powell said.

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    1. Antonio, by “facts” do you mean that we should agree with you? We report what we think are facts about the EU (which is not “Europe”) but we don’t expect everyone to agree with our conclusions. Unfortunately we are not in a position to put Brexit into effect or into peril, that we have to leave to the UK government, which is doing a terrible job.
      The Euro is central to the ambition of the EU; please see our posts on that subject, which start with ‘The State of the Euro’. There are many facts in those posts and we argue that the weakness of the eurozone (EZ) brings weakness to the whole EU, but we don’t see many people who like the EU acknowledging the weakness.
      What Charles Powell said is clearly not the case: there are many people in the EU don’t like it and many in the UK who do. I wonder what the outcome would be if referendums were held in other EU countries? Of course they won’t be because the EU fears that too many citizens would be in favour of leaving.

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  2. Antonio, Your point about Brexiteers putting Brexit in peril rather than into effect is interesting but not developed. Perhaps you mean that a deal has been negotiated that the Union and our Prime Minister find acceptable but Brexiteers won’t accept. The deal covers only the transition to an unknown form of independence, it would be hard to accept by any undefeated country and it demands a huge payment akin to war reparations. It might be argued that it is the best the UK can get at this stage but our Prime Minister has backed us into this corner. As we say in our next post, ‘Something is Rotten’, a Union that was self-confident would not feel the need to impose such frightening terms to dissuade others from following Britain’s lead. [From the other author]

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    1. In my opinion, no institution should feel so strong as to decide its existence by a margin of 52% versus 48%.
      Referenda is an excellent means of practicing Democracy, but with rules, limits and “ad hoc” controls depending on its transcendence.
      Europe, after centuries of wars, especially the twentieth century, must strive to remain united, protecting itself from obstacles that may fragment it.

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      1. The Referendum was not conducted by an “institution” but by a sovereign country, under its own democratic procedures. It is fair to question how it was done but it was done and now we all have to cope with the consequences. By now you know that we believe it was the right decision for Britain to leave the EU, because of its faults, which we do not think can be reformed to make Europe “remain united”. Indeed, we argue that those parts of Europe that are inside the Union are not united, and cannot be united by this EU because they refuse to take note of people’s wishes through a democratic process. Sooner or later this EU will break up, probably chaotically, and then Europe will have to start again on its path to avoid fragmentation. The weakness of the EZ will probably be the main cause of break-up, but there are many other reasons to believe that this is the most likely outcome of the Project.

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