The United Kingdom is putting a lot of faith in its membership of one multinational organisation — the World Trade Organization — as a way of mitigating some of the problems associated with its imminent departure from another (the European Union). But might that faith be misplaced?
It is scarcely a secret that the WTO is facing some serious problems at present, which some commentators have been moved to describe as ‘existential’ in nature.
Yet it is widely believed by certain UK politicians and commentators that the WTO represents the answer to a lot of Britain’s various post-Brexit dilemmas. “Let’s Go WTO!” is a currently-popular campaign slogan for those who are calling for the UK to leave the EU without any kind of withdrawal agreement in place.
Unfortunately, faith in “the WTO” as a stock answer to all questions about the UK’s future place in the world trading system outside of the EU appears to be inversely proportional to any given individual’s level of knowledge about the Organization, and how it actually operates.
If Brexit runs according to the schedule currently set out under UK law, then Britain will take its place in the WTO General Council on November 1 — just weeks before the WTO’s Dispute Settlement body procedure starts to grind to a halt. By December 11, the Appellate Body will be down to just one member, unless some solution is found in the meantime which persuades the United States to lift its current veto on the appointment of new members.
Dispute settlement crisis
In the event that the Appellate Body remains inquorate and non-functional, then there will be no higher instance to which trade disputes can be referred once a verdict has been delivered. In effect, any country would be able to defer indefinitely the implementation of any dispute resolution that it did not agree with, simply by referring it to the non-existent AB.
This has implications for a medium-sized economy like the UK which has a big stake in upholding the rule of international law. And it would be truly ironic if the “WTO rules”, which pro-Brexit campaigners so frequently invoke, end up failing to protect the UK against possible hostile action by a trading partner.
“The WTO is struggling to maintain the benefits that it offers to its existing members,” commented David Henig, Director of the UK Trade Policy Project at the European Centre for International Political Economy. “So there is definitely a risk of overselling the benefits of WTO membership in the current UK domestic debate.”
Britain would become a third party in EU disputes which pre-dated its departure from the bloc, including the long-running Airbus-Boeing saga. As one of the four main countries in the Airbus consortium, the UK is at the heart of the dispute, and it is no accident that Scotch Whisky has been placed on the list of products against which the US Administration is aiming to impose retaliatory tariffs against European subsidies.
The UK could also become a co-defendant with the EU against any possible complaints by agricultural exporters over the controversial division of tariff rate quotas between the UK and EU27 as is currently proposed.
But it is also a fact that the UK will be taking its place in Geneva having just seriously annoyed at least 20 of its major trading partners over the TRQ issue — and this will not be an ideal start for Britain from a trade diplomacy point of view.
The UK’s relations with the EU
As well as the issues which it has inherited from its EU membership, the UK would also hope to have recourse to dispute settlement to resolve any issues where it felt its newly-asserted rights under the WTO were being infringed by larger and more powerful players. These may well include the European Union, on whom the UK will continue to be economically reliant after Brexit, in much the same way that Canada – often mentioned as a country with a status similar to the UK in terms of its likely future clout in international trade – is dependent on the US.
Of course, if (or perhaps when) the EU and UK seal a comprehensive free trade agreement to govern their future trade relationship, that deal is likely to include specific provisions on dispute resolution. But until such a deal is in force, the WTO would be the only recourse which either side would have if trading disputes arose.
“It will actually be a problem for the UK that it will have so few trade deals in place at the point where it leaves the EU,” Henig commented. “Trade agreements come with their own dispute settlement procedures – and where you have an FTA, there’s generally more incentive for the parties concerned to keep things moving smoothly.”
It is likely, therefore, that the UK’s initial experience of autonomous WTO membership will be a somewhat chastening one for the more enthusiastic pro-Brexiteers in London. It will provide a helpful framework for its trade relationships – but membership is certainly no substitute for a coherent and engaged trade policy with either the EU, or any of its other trading partners.