Does WTO law allow us to go without tariffs in the UK/EU relationship for 10 years, to give us time to negotiate a free trade agreement? Professor Holger Hestermeyer disproves the Brexiters’ claim.
Brexiters like to mention Article 24 of the General Agreement on Tariffs and Trade (GAAT) where, according to their reading, UK and EU have a 10-year period to agree a free trade agreement and can trade tariff-free during that period.
Does World Trade Organization (WTO) law really allow us to go without tariffs in the UK/EU relationship for 10 years, to give us time to negotiate a free trade agreement?
Let’s start off with the premise. The premise is that under WTO law you have to treat the goods of all Members of the WTO alike. That’s called the Most Favoured Nation (MFN) obligation. It is Article I of the GATT, which is the WTO Agreement covering goods.
What does that mean? That means that post Brexit, in principle, the UK has to treat EU goods like those from China. And the EU has to treat UK goods like those from China. Which includes imposing the same tariffs. I explain that basic obligation here.
What is the Most-Favoured-Nation clause? / UK Trade Forum
However, there are exceptions to this obligation. The one we discuss here is the one that allows WTO Members, under certain conditions, to conclude Free Trade Agreements (FTA). That’s Article XXIV. (Yes, the GATT is numbered in Roman numerals. Probably so that we can identify nerds quickly!)
You have an FTA under Article XXIV, you can treat your FTA partner better than other WTO Members.
Take the EU and Norway. The EU doesn’t impose tariffs on cars, even though it has tariffs for other WTO Members. That’s OK because they have an FTA, namely the EEA. (We love acronyms!)
Now, Article XXIV has a curious provision: Article XXIV:5 states that the GATT shall not prevent the formation of a customs union, a free-trade area 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.
If you love convoluted sentences, here’s the wording of Article XXIV:5:
Article XXIV:5 of the GATT. / WTO
It is this provision, the “interim agreement” that the 10-year myth relies on. But why 10 years you ask?
Well, Article XXIV is complemented by an “Understanding on the Interpretation of Article XXIV”. It has something to add to Article XXIV:5 (c) which states that the Customs Union/Free Trade Agreement should be formed within a reasonable time (we will get to the precise wording). The Understanding adds this:
Understanding on the Interpretation of Article XXIV of the GATT. / WTO
To fall under the exception of Article XXIV and hence be liberated from the obligation under Article I to treat all other WTO Members alike, you obviously have to fulfil the requirements of Article XXIV.
And, sticking to the language of the provision, Article XXIV:5 requires “the adoption of an interim agreement...”, plus — Art. XXIV:5 (c) — the Members need to include a plan and schedule for the formation of such a Customs Union / Free Trade Area within a reasonable length of time.
All of this means that the parties need to agree, they need a rather concrete idea of where they are going and how to get there.
In practice, indeed, a Free Trade Agreement was long considered an agreement fully in force, whereas an agreement that was slowly implemented was still an interim agreement. Lorand Bartels, a reader in International Law at the University of Cambridge; wrote this [full text available here]:
“Interim Agreements” under Article XXIV GATT. / Trade Beta Blog
You will see that the notification of interim agreements — even of implementation plans under full FTAs and even though there now is a transparency mechanism — are rare. Why?
Because Article XXIV:7 (b) of the GATT gives other Members some powers to intrude if they find the schedule / plan leaving to an FTA bad.
Article XXIV:7 (b) of the GATT. / WTO
You see the problem.
1) Would the EU and the UK agree, after being unable to reach an agreement?
2) What’s the plan and schedule, where do we want to got, do we know, can we agree?
3) Well, we don’t get to 3, which would be XXIV:7.
If you arrived here, you probably also have your sanity impaired. So, let me say: WELCOME!🔷
ps. On the reality of the UK sustaining any trade deal advantages post-Brexit, in the future, this will be like other negotiations. One side will say “but you granted this to X”, the other will say “yes, but X also gave us Y”. In that regard, I do not see any particularity. The main question that remains lingering is which regulatory model the UK chooses...
ps.2. If you have read the wording of the GATT and have not been previously scarred for life by studying/teaching/working on the GATT: Kudos. You might think none of us speak proper English and you might be right. Here are two anecdotes about the GATT.
The most famous book on the GATT ever written, “World Trade and the Law of GATT” by John H. Jackson, starts with a quote by Senator Milliken: “Anyone who reads GATT is likely to have his sanity impaired.” [Book review.]
I edited the first edition of the GATT volume of a WTO Commentaries series. We contracted a native speaker to correct the authors. The native speaker didn’t stop there: She corrected the legal texts as well. Her comment? “That’s not really English.”
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(This piece was first published as a Twitter thread and turned into the above article, with the author’s consent, with the purpose of reaching a larger audience. It has been minorly edited and corrected. | The author of the tweets writes in a personal capacity.)