• Brexit: WTO Process and Negotiations of FTAs [PDF]
  • By Shanker Singham
  • February 2017
  • Published by the Legatum Institute


INTRODUCTION

1.1 WTO rules are not something you "fall back on" in the absence of a better bi-lateral agreement. They are the foundation for and structure around which all international trade is carried on. Bi-lateral and platform trade deals (such as FTAs and customs unions) build on this structure. WTO rules still apply, both to cover aspects of trade that are not dealt with in the trade deal and to regulate the parties' trade with countries that they do not have a trade deal with.

1.2 WTO rules comprise a suite of agreements between members. There is a body of cases arising out of dispute settlement and a continuous process of trade policy reviews. The most important agreements for current purposes come under the umbrella of the WTO Agreement, which was the conclusion of the Uruguay Round in 1994. It includes the General Agreement on Tariffs and Trade (“GATT”), the General Agreement on Trade in Services (“GATS”) and the Agreement on Trade related Aspects of Intellectual Property Rights (“TRIPS”). Sector specific agreements and annexes sit under the GATT, including the Agriculture Agreement and each country has specific “schedules of commitments” under the GATT and the GATS. Other WTO agreements include subsidies and countervailing measures, trade facilitation, the government procurement and dispute settlement.

1.3 The GATT comprises general terms on non-discrimination in trade in goods as between WTO members. The so called most favoured nation or MFN principle means that a preference or advantage made available to one member, such as a lower tariff or higher quota, must be extended to all, unless it qualifies for an exception such as being part of a free trade agreement or customs union covering substantially all trade, or support for developing countries. Discrimination between imported and domestically produced goods is also prohibited, once the imported goods have entered a market. This is the principle of “national treatment”.

1.4 WTO members are required to publish the tariffs and quotas that they apply to imports of goods from other WTO members in their schedules of commitments. These are legally binding commitments that set out the rates of duty that a country (or in the case of the EU, each member state) will apply to all goods and, in the case of agriculture, quantitative restrictions (quotas) on amounts of goods that can be imported from each country, tariff rate quotas (TRQs) whereby a higher tariff is applied after a certain quantity of imports has been reached, and limits on subsidies that can be paid to farmers. In WTO parlance, these commitment on tariffs, quotas and TRQs are known as “bindings”, and the permitted agricultural subsidies1 are the “aggregate measure of support” or “AMS”.

1.5 The UK is a WTO member in its own right so will continue to benefit from the right and be subject to the obligations under the WTO agreements but at present its commitments and entitlements are interwoven with those of the other EU member states. There will therefore need to be a process for the UK’s rights and obligations to be rectified to operate independently. The purpose of this paper is to examine the implications of and requirements for the UK’s withdrawal from the EU and subsequent rectification of its WTO schedules.

1.6 This paper focuses on the GATT, the Agriculture Agreement and the GATS. We will also consider the negotiation of bi-lateral and platform FTAs. It assumes an end state for the Brexit negotiations which has the core elements outlined in section 2 (Core Elements)

Shanker Singham

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About the Special Trade Commission

The Legatum Institute Special Trade Commission (STC) was created in the wake of the British vote to leave the European Union. At this critical historical juncture, the STC aims to present a roadmap for the many trade negotiations which the UK will need to undertake now. It seeks to re-focus the public discussion on Brexit to a positive conversation on opportunities, rather than challenges, while presenting empirical evidence of the dangers of not following an expansive trade negotiating path.

The STC will draw upon the talent of experienced former trade negotiators from the US, Canada, Mexico, Australia, New Zealand, and Singapore, among other nations.

In 2017, the STC will host a number of public briefings that offer advice to key stakeholders on EU negotiations.