It is undeniable that the EU has been in the driving seat for Brexit negotiations to date.
The Withdrawal Agreement is specified under EU law – Article 50 of the Lisbon Treaty – and has never worked for us. Without one, all the EU treaties stop applying as of 29th March.
However, should the UK leave the EU under what is wrongly referred to as a ‘No Deal’, trade deals would then be carried out under the international trade rules of the World Trade Organisation (WTO) that the UK helped establish.
The 164 member WTO offers Britain a remarkable opportunity to leave the EU cleanly, avoiding all of the apocalyptic predictions set out by the likes of the CBI, Bank of England or Chancellor.
Because through GATT Article 24, the EU and UK are able to agree a very basic Free Trade Agreement that would keep tariffs at zero for the duration of the period the two sides negotiate a comprehensive Free Trade Agreement.
Article 24 is by no means a final destination, it is simply a stop gap that would allow Britain to leave the EU on 29th March 2019 – as promised time and again by the Prime Minister – while at the same time, avoiding any uncertainty that could negatively impact our economy or that of the EU.
Some have been dismissive of Article 24, arguing that with tensions between the UK and the EU at an all-time high, it would be impossible to agree to a Free Trade Agreement. However, they are missing the point that such an agreement does not have to be comprehensive. All that is needed is a one-page agreement signed by both sides. Cambridge law expert Dr Lorand Bartels has written a bare bones agreement that would suffice in order to instigate Article 24.
By doing so, the UK would be protected from discrimination claims by other WTO members. In the event that other WTO members did make legal challenges against the UK, they take a number of years to be heard and a comprehensive Free Trade Agreement would be the ideal remedy anyway.
One of the greatest benefits of implementing Article 24 would be that businesses would avoid having to calculate 20,000 tariffs, many of which are complex with very slight variants for many products. Granted, customs declaration forms would need to be completed, just as they are for suppliers from the rest of the world. But the removal of tariffs would make this process extremely straightforward. HMRC have introduced Transitional Simplified Procedures (TSP) for the 145,000 VAT-registered businesses which trade with the EU (meaning only 7% of UK businesses and 12% of the UK economy) removing the need for full customs declarations at our borders and import duty payments.
It is absurd to be voting on No Deal today as the option really does not exist. There should be a meaningful vote on GATT Article 24 as a safe, alternative Brexit deal that would get Britain out of the EU with minimal drama. The British people expect their politicians to deliver on the result of the referendum without causing chaos, and Article 24 ensures that can happen.
The post Forget about absurd votes on No Deal – MPs ought to be invoking GATT Article 24 appeared first on BrexitCentral.
There are undoubtedly many Remainers in the establishment who are determined to stop Brexit outright. Others are trying to create a fiction of Brexit that in reality keeps the UK in the EU in all but name. Many Brexiteers would like to see the UK leave without a deal, on WTO terms – a clean Brexit. After all, this is what was on the referendum ballot paper: it said Leave, it said nothing about a deal and David Cameron was explicit that there would be no further deals beyond his.
However, there are those in both camps who are prepared to countenance some sort of deal that would smooth the UK’s exit from the EU. What has unified many on both sides, however, is the awfulness of the deal the Prime Minister negotiated. For “alt Remainers” it did not achieve the objective of defeating Brexit outright, nor did it provide a good alternative to a clean Brexit. For Leavers, May’s deal was in many ways worse than staying in the EU. The deal is dead in its original form, quite likely in any form.
So, what should be Plan B?
“No deal is better than a bad deal,” promised the Conservative manifesto, as has the Prime Minister repeatedly in her many statements and speeches. This evokes unnecessary but real alarm amongst most Remainers. For some it is a useful tool to fulfil their Remain ambitions, for others a genuine concern that such an outcome will lead to significant disruption and economic harm. It would not, but perception is as strong as reality and perception has been nurtured and reinforced by the Remain media establishment, who have consistently and persistently framed a clean Brexit – the Brexit people voted for – as a “cliff edge”, as “crashing out” etc. How can this possibly be detoxified? Or made into an acceptable Plan B?
Ten days ago I visited Geneva to see the World Trade Organisation (WTO) to discuss practical aspects of a move to WTO trading terms. Having during my career done business on every continent and been involved in trade and international standards throughout, I was well aware of the efficacy of WTO-based trade terms, after all most trade the UK conducts with the rest of the world is WTO rules-based, as indeed is much of the trade the EU conducts, for example with countries like: the USA, China, India, Brazil, Australia, New Zealand etc. Nonetheless, it was instructive to hear from the “horse’s mouth” an obvious Plan B solution which would smooth the UK exit without recourse to a transition period, or to paying £39 billion, or to any restrictions on our removal of external tariffs and making trade deals around the world.
This solution has a weakness by comparison with just leaving in that it requires both parties, that is the UK and the EU, to agree; but there is a chance of success as it would be in the economic interests of both parties to agree. It is based on the use of Article 24 of the GATT under WTO (as explained in more detail by David Campbell Bannerman MEP on BrexitCentral on Sunday) whereby both parties would agree to operate current terms of trade in relation to, for example, tariffs for a period of time while a free trade agreement (FTA) is being negotiated. Provided both parties commit to an FTA and set out to negotiate one, this period of time can be many years.
This Plan B, which could be agreed quickly, would result in there being no tariffs between the EU and the UK at least until an FTA is completed: the current arrangements would simply continue, thus removing the objections of trade groups. It could be extended to customs arrangements, but would not require the UK to be part of a customs union, nor would it require the UK to be part of any of the EU institutions or constructs. The agreement would be between two sovereign powers under international WTO conventions and the UK would have properly left the EU.
If the EU were to reject this perfectly legitimate approach, it would be proof positive of their malign intent towards the UK – but they have every incentive to agree to it given the alternative of an exit on WTO terms without interim arrangements. It merely requires will to make it happen, there is no other impediment. So, why has the Government not adopted this simple approach as Plan B? It would seem, if they do not, that it is proof positive we have a Remain Government hell bent on remaining locked into the EU.
We have yet to see what the outcome of the days leading to 29th March will bring, but certainly it is open to our Government to seek to resolve this matter with a Brexit Plan B built like a springboard, rather than the mirage of a cliff edge.
The post There is a Brexit Plan B built like a springboard which the UK and EU both ought to embrace appeared first on BrexitCentral.
In the aftermath of Parliament’s rejection of the draft Withdrawal Agreement, there is a way forward for the Government which allows a smooth transition into a No Deal scenario after 29th March, if found necessary, and then allows the UK to negotiate its desired comprehensive Free Trade Agreement with the EU without having to impose tariffs or quotas in the interim. There is a mechanism to ‘manage’ a No Deal scenario; one that works within existing WTO rules, and that is not widely known about.
This is essentially an alternate transition or interim period, but within WTO rules without having to levy tariffs or (arguably) pay membership fees to the EU, but requiring some customs forms levied on the 7% of UK businesses (400,000 out of 5.7 million UK private registered businesses) that actually trade with the EU. This is the deal with the EU used by China, the USA, India, Australia and New Zealand for example.
These recommendations are based on my nearly ten years of experience as a member of the European Parliament’s International Trade Committee, working on EU trade deals such as those with Canada, New Zealand, India, South Korea, Japan and Columbia/Peru, and drawing on high level discussions I have had with senior trade representatives for the EU and the World Trade Organisation (WTO).
In the event of No Deal, there is a strong case to maintain preferential tariff and quota rates at zero between the UK and the EU for a limited period – thought to be around two years. There are a number of arguments for exemptions to what are termed ‘Most Favoured Nation’ (MFN) rules, which require the same treatment in terms of tariff rates and treatment between WTO members to avoid discrimination. They are:
1) It is to the advantage of fellow WTO members to minimise disruption between our two large markets, which would reduce knock-on impacts to their imports/exports to the UK or EU markets. WTO members have to show financial harm to justify objections to practices (or tariff schedules). Civitas calculate that £13 billion of tariffs would have to be levied on EU goods entering the UK and £5 billion on UK goods entering the EU Single Market if standard tariffs are levied under No Deal. This is one justification for keeping preferential rates of tariffs for a period whilst a full trade deal is finalised.
2) There are exemptions under National Security grounds such as over the issue of Northern Ireland, which the IEA have argued as a case for an exemption, but this is less appealing given its association with US and Russian cases for exemptions, such as over US tariffs on Chinese steel.
3) Exemptions to ‘Most Favoured Nation’ (MFN) rules under Article 24 of the General Agreement on Tariffs and Trade (GATT) 1947. This appears to be the most substantive argument. WTO rules state that preferential benefits, such as tariffs and quotas for goods which are more favourable than MFN treatment, may only be extended to another country if it is part of a customs union or a free trade area. The ultimate legal authority to grant such preferences is Article 24 of GATT , incorporated into the WTO regime when that body commenced operations in 1995.
Article 24 is helpfully the ultimate basis in international law for the existence of the EU itself as a preferential trading bloc, which grants preferential treatment to its members within the Customs Union.
If the UK accepts Donald Tusk’s offer of a free trade agreement along the lines of CETA+++ or what I propose as ‘SuperCanada’, then the UK and EU will be in the process of moving towards creating a free trade area – Tusk has offered a tariff and quota free deal plus services (whilst leaving the EU Customs Union) – so qualifies under this criterion.
There are two under-appreciated aspects of Article 24 which have direct relevance to our situation, and which provide reassurance.
Firstly, Article 24, para 3 states:
The provisions of this Agreement [i.e. the requirement to extend MFN treatment equally to all] shall not be construed to prevent:
(a) Advantages accorded by any contracting party to adjacent countries in order to facilitate frontier traffic
- This has direct relevance to the position of Northern Ireland, and our adjacent country of Ireland. Some commentators have claimed that a sensitive and appropriate management of trade which respects and upholds both the letter and the spirit of, for example, the Good Friday Agreement would be in some form an unauthorised infringement of MFN treatment. That claim is clearly untrue.
- There is also no obligation under WTO rules to erect a so-called “hard border” on 29th March. Government may continue discussions with our counterparts in Dublin to arrive at adequate and effective technological measures for the management of trade with minimal friction. You will have noticed the encouraging signs that the Irish Government already appreciates this fact. (See, for example, “Ireland has no plans for hard border after Brexit, says Varadkar”, from The Guardian of 21st December 2018)
- We can expect that there will be considerable international sympathy for measures which support the situation in Northern Ireland, and hence a reluctance on the part of third countries to lodge objections. Although given the sensitivities this should not be stressed too heavily, such an exemption falls into ‘National Security’ related actions.
Secondly, Article 24 not only authorises member states to operate lower/zero tariff free trade agreements, it also permits them to offer lower/zero tariffs pre-emptively during the course of negotiations. The relevant provision, Article 24 para 5, is worth quoting at length, with emphasis added to the critical wording:
Accordingly, the provisions of this Agreement shall not prevent, as between the territories of contracting parties, the formation of… a free-trade area or the adoption of an interim agreement necessary for the formation of… a free-trade area; Provided that:…
(b) with respect to a free-trade area, or an interim agreement leading to the formation of a free-trade area, the duties and other regulations of commerce maintained in each of the constituent territories and applicable at the formation of such free–trade area or the adoption of such interim agreement to the trade of contracting parties not included in such area or not parties to such agreement shall not be higher or more restrictive than the corresponding duties and other regulations of commerce existing in the same constituent territories prior to the formation of the free-trade area, or interim agreement as the case may be; and
(c) any interim agreement referred to in subparagraph… (b) shall include a plan and schedule for the formation of such… a free-trade area within a reasonable length of time.
(A WTO declaration, the Understanding on the Interpretation of Article 24, 1994, clarifies that the ‘reasonable period of time’ in para 5(c) will generally taken to be no more than 10 years.) I estimate based on EU trade deals to date, that a UK-EU comprehensive Free Trade Agreement could take around two years, especially given the unique reality that the UK is starting from a convergent position with the EU, with zero tariffs and quotas and with our laws and standards currently harmonised.
- If, before 29 March, the UK has reached an ‘interim agreement’ with the EU to pursue negotiations towards a comprehensive free trade deal, both sides would be permitted under WTO rules to continue with the present zero tariff/zero quota trading arrangements. There would be no disruption to the man or woman on the high street. No Deal would mean No Change, as the cost of goods would not go up.
- In the present situation the ‘interim agreement’ would not have to be an extensive document running to hundreds of pages. The schedule of items covered by the negotiations would be all goods, as already envisaged in our discussions with the EU. The plan which the document sets out would have to amount to little more than a timetable for regular meetings and an ultimate deadline, some years hence, by which point negotiations will have to be concluded.
- An ‘interim agreement’, then, need be little more than an agreement to continue talks – while also continuing zero-tariff and zero-quota trade on both sides – plus a deadline no later than 29th March 2029. I accept that the EU has so far declined to agree any deadlines (other than 29th March) but since the absence of a final cut-off point has been a major contributing reason for Parliament’s rejection of the Draft Withdrawal Agreement, perhaps the EU will now reassess that stance.
- Whilst legal challenges at WTO level might be expected from an unhelpful member, the reality is that any such challenge is unlikely to get to the WTO ‘court’ – its appellate body – for at least two years and possibly longer, and only if that body finds the UK non-compliant would any compensating actions be authorised such as tariffs. This is within WTO rules, and if any challenges arise a fully compliant Free Trade Agreement should already be in place by the time any appellate body were to meet. The EU is now under extreme pressure from EU27 industry and commerce who enjoy a £96 billion surplus with the UK.
- You will recall that the draft Political Declaration indicates the EU want to reach a comprehensive Free Trade Agreement with the UK on the basis of zero tariffs and quotas (see paras 17, page 5, and para 23, page 6) and extending to services (para 29, page 7). Those provisions are fully in line with numerous public statements made since the 2016 referendum by Donald Tusk, President of the European Council, and Michel Barnier, European Chief Negotiator – offering a CETA+++, or what I term a ‘SuperCanada’ trade deal, on 7th March 2018, 30th August and 6th October 2018.
It is significant that Heiko Maas, Foreign Minister of Germany, has already indicated a willingness to continue talks (see “Germany says EU ready to talk if UK rejects Brexit deal” on Reuters, 15th January).
This approach would continue the pre-29th March status quo in trading arrangements and patterns without interruption, justified by an explicit provision of the WTO regime. The possible grounds on which any third country could lodge an objection to this are extremely slight (unlike for schedule changes).
An ‘interim agreement’ would therefore be an important component of a ‘Managed No Deal’ outcome from 29th March. It permits trade between us and the EU to continue without tariffs or quotas under No Deal while creating a space for negotiations to be reset and recommenced on the basis of reaching a SuperCanada or CETA+++ trade treaty.
I urge the Government to now adopt this course of action, as it will mitigate the main impacts of a ‘No Deal’ Brexit and eliminate the task of having to assess and charge tariff rates on 19,753 MFN tariffs under the EU Customs Union, thereby substantially reducing friction at borders.
The post A ‘Managed No Deal’ WTO option using Article 24 of GATT can avoid raising tariffs or quotas appeared first on BrexitCentral.
The current political turmoil and constitutional crisis has so many twists and turns that it makes House of Cards look pedestrian.
Of course the real issue comes down to what happens when – rather than if – the proposed deal is voted down on tomorrow, 11th December (or even dropped).
Here there is a clear gap opening up between media reports and hard legal reality – what the actual effects are of the political manoeuvring of Dominic Grieve, Sir Keir Starmer and their merry conniving bands. There have been desperate media reports that ‘no deal’ is off the table, when it is actually remains the ‘default position’ as Andrea Leadsom told Radio 4 just last week.
Let’s assume Conservative MPs think there is enough turkey on Christmas menus not to be part of the required two-thirds majority needed to vote for a General Election, and that the EU have indeed ruled out any major renegotiation.
The bottom line is that the various options being desperately pushed by those who want ‘anything but a true Brexit’ are just not viable. There is:
- ‘Norway Plus’ – even worse that the slavish EEA, which adds back membership of the customs union, thereby killing all future UK trade deals, and with no control of immigration, no say over EU laws, and large payments;
- A ‘Second Referendum’ – with its totally confused offer: ‘tell us if this final 2,000-page deal is better than staying in the EU when we’ve already left. Oh, and by the way you will have to join the euro and lose the rebate’. Pointless too in that Leave is predicted to win again; or
- Extending Article 50 to allow more muddle time – which will either mess up the EU by landing the Brexit issue right in the middle of European Parliament elections in May or mess up all the groups, chairmanships and procedures of the European Parliament in the farcical situation of British MEPs being elected for a few months.
But all such amendments to the motion are not legally binding anyway – they can only be advisory. They might bring political pressure, but they do not have legal effect. As the Commons Chief Clerk, Sir David Natzler, confirmed: whatever MPs vote on by way of motion “has no statutory significance”, as they do not constitute “a vote on whether to accept or reject no deal.” That requires new legislation. The actual law – in the EU Withdrawal Act – states clearly that we will leave on 29th March 2019.
Given that reality, and bearing in mind how rash it is to try to indicate a way forward in this maelstrom, this is what I propose now as the best next steps:
1) Assuming the vote fails on 11th December, or is put off, I believe the Government should make a statement immediately saying that preparations for a ‘no deal’ option – better called a ‘Clean Global Brexit’ or ‘World Trade Deal’ – will go into SuperDrive. Sorry, but defer Christmas!
Where there’s a will, there’s a way: in the Falklands War, the Ministry of Defence managed to put together a task force of 100 ships in just 48 hours. We can manage this process, and thousands of civil servants have been on the case for years. Like the Millennium Bug, claims of Armageddon and planes falling out the sky gave way to nothing happening on 1st January 2000.
2) The UK should then go back to Brussels, not to renegotiate this current draft Withdrawal Agreement, but to agree a pared-down, bare bones emergency series of bilateral agreements covering only the essential ‘must haves’: aviation, customs, citizens’ rights, medical products, European Investment Bank assets etc. The beauty of this is that if one agreement falls, then the others are not lost. The DUP’s Arlene Foster has proposed bilaterals. These bilaterals could be agreed by Westminster and the EU by March, and would any sane MP or MEP dare to seek to derail any such vital preparation in these circumstances? They should hold all further Westminster business, such as the Immigration and Trade bills, that may be hijacked.
3) The UK should also formally advise the EU that it wishes to accept the offer made not once but three times by the EU: that of a SuperCanada/CETA+++ Free Trade Agreement with 100% tariff- and quota-free access to the EU Single Market plus comprehensive services (first offered by Donald Tusk on 7th March), and which we could start negotiating from the day we become a ‘third country’ – 30th March next year.
We can build on the three pages on trade in the more appealing draft Political Declaration, but drop all notion of a ‘Single Customs Territory’ – the UK must firmly leave the EU’s Customs Union and Single Market. We are in a unique position to negotiate an FTA fast – as all our laws are convergent at present and we don’t have to spend years wrangling over which tariffs to keep or get rid of, as others do.
4) Having initiated moves to agree a SuperCanada FTA, the UK and EU can now jointly notify the World Trade Organisation (WTO) that in the light of working to agree a comprehensive FTA and future Political Declaration, we are invoking Article 24 of GATT (the General Agreement on Tariffs and Trade).
This is important because Article 24 allows us to maintain the same tariff-free access to both our markets without breaching WTO discriminatory Most Favoured Nation (MFN) laws. Article 24 allows “an interim agreement leading to a formation of a free trade area” and allows “a reasonable length of time” – up to 10 years – to negotiate it.
So, we whilst we will need customs declarations under WTO, we will be able to maintain the same zero tariffs as now with the EU – the free trade area will remain. EU exporters to the UK would save £13 billion in tariffs (and our consumers too) and UK exporters £5 billion. We will also be free to lower tariffs for other trading partners as we wish – something specifically excluded in the Backstop. Nor should there be any Non-Tariff Barriers (NTBs) either under WTO agreements.
We can also enact the WTO’s Trade Facilitation Agreement which recently came into force that obliges the EU27 to adopt measures like authorised economic operators (trusted traders), which are part of the solution for the Northern Ireland border issue along with electronic declarations and remote checks away from the border.
5) As a sign of Britain’s free trade intent, we can now immediately initiate full and unfettered negotiations with international trade partners such as the USA, China and India, without these deals being torpedoed by being tied into the EU Customs Union, Chequers or the Backstop. The picture would be clear at last, and not be delayed by unending years of transition. Similarly, we will seek to build on current work to ‘roll over’ the benefits and obligations of existing EU trade deals such as that with South Korea.
6) So, on 30th March the UK can be cleanly out of the European Union and back into the world, with an acceptable and managed World Trade Deal option in place, free of years more wrangling over transitional arrangements, cost demands, alternative models and heightened business uncertainty – and with negotiations underway for a closer SuperCanada trade deal. We can reallocate much of the £39 billion payment lost by the EU to compensate UK-based companies legally in terms of R&D, regional aid and transport infrastructure – helping to stimulate our economy.
Like an operation we know needs doing, let us get on with the surgery quickly and speed up the recovery process.
This is indeed a Clean Global Brexit. Brexit could be over in a few months, rather than drag on for years on end.
And, for all our sakes – both Remainer and Brexiteer – let’s just get it done.
The post How to get Brexit back on track when the Withdrawal Agreement is rejected by MPs appeared first on BrexitCentral.
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