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Why reverting to WTO rules won’t create a free-trading state

"WE’LL just revert to WTO terms!” shriek the Brexiteers when challenged that the EU stuff is a bit complex. I’ll let you into a secret: anyone saying that clearly doesn’t understand what they’re talking about and should be quarantined as a dangerous fool.

Scotland’s best interests are emphatically to stay in the EU, but lets look at the reality of WTO membership. If you didn’t like Brussels, wait till you meet Geneva!

The National header

First published in The National, 2 August 2018

“Pursuant to paragraph 3 of the Decision of 26 March 1980 (BISD 27S/25), the United Kingdom hereby submits, for certification, the attached draft Schedule XIX”. With these dry technical words, filed at the World Trade Organisation in Geneva, the Brexiteers have launched Britain into what they think is a brave new world. A world of trade deals, of opportunity, of throwing off Brussels bureaucracy. The problem is none of them have ever dealt with Geneva.

The first thing to understand is that the WTO is not dedicated to free trade (note the lack of an “F” in the title, and it doesn’t stand for “fair” either come to that), neither is it democratic nor accountable to you as a citizen.

It is an intergovernmental club of states, and the democracy starts and ends with the UK Government (unlike the EU). At its most basic it is a mechanism for the countries of the world to argue with each other. The WTO is complex, multifaceted and rarely does action result in one outcome and even more rarely the outcome intended. One illustration of this is Trump’s tariffs.

What started in January as a set of tariffs designed more as a publicity stunt covering 18 products now covers nearly 10,000 because it hits their components as well.

The world does not trade freely. It trades within a carefully negotiated rules based system which the WTO administers. Changing anything in that balance creates unintended consequences, because nothing can be done unilaterally. Everybody must move with care, particularly considering that that the background is Trump’s new trade war, China’s new assertiveness, Russian sanctions and world-wide good will isn’t exactly abundant.

So, to the basics, the key information about a nation’s trade is written up into a schedule outlining what and how it trades. For years the UK schedule has been parcelled up in the rest of the EU into one mega-schedule that can look the US, China or Russia in the eye. As the UK leaves the EU27 the new smaller UK schedule means that the EU schedule needs to be updated. They intend to do this through formal renegotiation processes regarding their schedules. These are complex and take a long time.

The UK is in a rather different position and has taken what is to my mind a much riskier course of action. Here’s problem one: The UK is indeed a WTO member, but does not have any schedules and it intends to create them through “a technical rectification”. This process appears initially appealing in that it should be quicker the writing them from scratch but there are significant risks.

If it goes wrong then by not filing independent schedules and instead just tweaking the EUs and claiming them we could end up in years if not decades of legal confusion.

Still with me? Because what happens next is where it gets really interesting. In essence everybody complains. Any WTO member can complain about any action by any other member, for any reason.

Not necessarily because they have to but because they can. Trade is all about leverage and whilst we are tied up in a legal quagmire of our own making they may as well try and get something from us. After all, why not? What is to be lost from their side?

We have already seen the start of this. Earlier, the EU and UK put forward a joint proposal to divide agricultural tariff quotas and it was immediately challenged by six countries including the US, Canada and New Zealand. This is all to be expected since in Geneva the only currency is size. The EU has done such a good job of representing us because it is the largest market on earth. Dear ol Blighty will have to give up more simply because it is not worth as much.