GATT24 Not An Option

The current Hard Brexit debate centres around the use of GATT24 to avoid a Hard Brexit – that is crashing out of the EU and all the trade deals we are a party to as part of the EU.

Article 24 of the General Agreement on Tariffs and Trade (GATT) states, “……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…”

Under Article 24 parties to an agreement have a “reasonable length of time” to negotiate a deal. Under Article 24, this should only exceed ten years in exceptional circumstances.

If the UK crashes out on 31st October 2019, (or any other date) the UK will default to World Trade Organisation (WTO) trade terms.

Under WTO law, you must treat the goods of all members of the WTO alike – known as the Most Favoured Nation (MFN) obligation. This would mean the UK has to treat EU goods like those from China, for example. This includes imposing the same tariffs.

However, there are exceptions to this obligation – this is where GATT24 comes in. It allows WTO members to conclude Free Trade Agreements (FTA). Under an FTA parties could agree to better trade terms than those between other WTO members – a sort of club-within-a-club arrangement. A good example of this is the EU deal with Norway their FTA is called the European Economic Area (EEA).

However, under GATT24 other WTO members can object to a proposed FTA agreement between the UK and the EU.

Conclusion

1. GATT24 requires both the UK and EU to agree to do a trade deal. Given the current impasse, this seems highly unlikely.

2. The EU will want to avoid offering a generous FTA agreement to the UK that mirrors to the current single market agreement – after all, what would then be the point of the single market if it can be undermined?

3. The current members of the European Economic Area (EEA) seem very reluctant to have the UK join them. They have a deal that works and does not wish to have the UK with its “reluctant European” nature mess things up for them.

4. If the EU even wanted to offer a generous FTA with the UK – if it did other WTO members might be tempted to seek the same from the EU. This is a can of worms the EU will not be opening.

GATT24 is not the magic wand or a silver bullet; some Brexiteers have already admitted this. After much wishful thinking and wilful posturing, time is running out for the UK. Crashing out would likely lead to a recession on the scale of 2008 – or worse.

The alternatives remain – the current negotiated deal or a second referendum.

Whatever route the UK goes down people need to make hard-headed commercial and political decisions – arguing about sovereignty is not one of them. We have a parliament, and we vote for the MPs who sit in it, as we do with the European Parliament. We are a sovereign nation – it’s our democracy that is damaged.

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