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MIND THE GATT

Mr Johnson has recently relied on a proposed standstill agreement under GATT Article XXIV as a No Deal buffer, while a new interim free trade agreement (FTA) is negotiated. Unfortunately this latest gambit suffers a significant gap between the plan and reality.


If the UK leaves with No Deal on 31 October 2019, the scale of potential losses is vast. UK exports in 2018 were valued around £621+ billion with almost half going to the EU. To avoid devastating tariffs on goods alone, the UK would require, at a minimum, an Article XXIV agreement. This is because Article I of GATT demands non-discrimination between trading partners; so if the UK permitted EU goods to enter tariff free, it must do the same for all WTO members. Article XXIV provides a theoretical means around that for goods. It provides for the formation of a (a) customs union (CU) or (b) free trade agreement or the adoption of an interim agreement necessary for a CU or FTA, subject to conditions.


Dr Bartels at Cambridge University tweeted a one page draft agreement that Brexiters rely on to demonstrate how simple the exercise might be. However, Dr Bartels emphasised the draft was not a guarantee of frictionless trade and subject to limitations. He suggested “it works as an emergency measure”, but the proposal is untested with substantial practical gaps. It was an academic exercise, to demonstrate the bare minimum required by Article XXIV. Dr Bartels himself and other trade experts have emphasised that Article XXIV is no solution.


The Article XXIV proposal also presupposes a willingness by the UK and EU to step into negotiating a future CU or FTA. To avoid disruption a transition period is required, in which to put in place an interim agreement. That transition is provided for in the Withdrawal Agreement that EU officials emphasise is the final negotiated text for UK departure from the union


There is no precedent for a standstill proposal without a realistic plan for a CU or FTA. Article XXIV is not simply a convenience, to avoid the provisions applicable to interim FTAs (including the requirement for a schedule and plan) or full external FTAs (requiring ratification of the Member States). Article XXIV allows for a “reasonable time” (maximum 10 years) for the formation of an FTA. The myth that this provides a 10 year grace period has been comprehensively quashed. Not least, since it depends on EU agreement, a plan and timetable. 


There are other dangerous gaps. A ‘standstill’ agreement fails to resolve the Irish Border predicament. It does not address trade in services, the level of regulatory alignment and mutual recognition of standards. It lacks any dispute resolution mechanism, which, from the EU’s perspective, requires involvement of the European Court of Justice. These are vital issues. Services alone account for approximately 40% of the UK’s exports to the EU. 


EU membership is an exceptionally privileged trading position for the UK, unattainable post-Brexit. When all indicators show Brexit bringing serious harm to the economy, to international relations and to security, coupled with a mass call for a final say, the obvious course is to put the question of departure back to the people. The standstill proposal is another poorly planned attempt by Mr Johnson at circumventing the facts, which is destined for rejection


Felicity Williams, Garden Court Chambers

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