What effect on the UK would there be if it were to adopt WTO rules when it leaves the EU?

Q

Do you have any information on what the effect on the UK would be if it were to adopt World Trade Organization (WTO) rules when it leaves the EU?

A

WTO rules are already in place between the UK and countries outside the EU, and the standard relationship between the EU and other countries is also covered by WTO rules. This situation only changes when there is a free trade agreement (FTA) of some kind in place between territories that overrules some of the standard WTO rules. Therefore, as the EU is a customs union and a single market, these agreements overrule the way members trade with each other, so in some way we should be saying that the UK and the EU27 will revert to trading under WTO rules (although the WTO actually was formed until 1995 two years after the Customs Union was created).

There are very few countries, such as North Korea, that don’t have any trade agreements with other countries in place. This means that if the UK leaves the EU without any deals or trade arrangements in place, it would be in an unusual trading position globally and would be an entirely new concept for UK businesses to deal with.

Currently, the UK/EU trades on WTO rules with only 24 countries:

Argentina, Australia, Bahrain, Brazil, Brunei, China, Cuba, Gabon, Hong Kong, Kuwait, Macau, Malaysia, Maldives, New Zealand, Oman, Qatar, Russia, Saudi Arabia, Taiwan, Thailand, Uruguay, Venezuela, UAE and the USA.

But even with these 24 countries the EU has a variety of arrangements which make trade easier, for example in accepting CE marked goods or other certifications of compliance and conformity raised in the EU as meeting domestic standards criteria.

Trading under a trade agreement as opposed to under WTO rules is generally considered to mean trading with preferential trade terms, that in practice typically lead to lower duty rates at import on goods originating in the partner countries.

Whatever customs law the UK puts in place, it will have to be compliant with WTO rules (unless, as President Trump has suggested for the USA, the UK decides to go against global standard customs procedures). The difference will be in the UK’s relationship with the remaining EU27 members, for which there are precedent options: under Customs Union terms (currently being hotly debated in the House of Lords and House of Commons); under a special arrangement (such as exists in Monaco and the Isle of Man); as a special territory; as an affiliate member of the customs union, such as Turkey; as a member of the single market as in the case of Norway or under WTO rules with (or without) an FTA.

If you want to see what trading with the EU27 would be like under WTO rules look at the Trade Tariff and Importers Guide for conformity certificates, registrations (pharma products/REACH, etc), licences, to name just a few, as well as the payment of Most-Favoured-Nation (MFN) duties and the restrictions under quota/ceiling and anti-dumping regulations — all of these are approved under WTO rules and affect countries trying to sell into the EU. What the UK implements as a tariff schedule will again depend on the final exit deal between the UK and the EU — it could be a mirror image of the EU but with additional paperwork and origin declarations needed or it could be completely different as long as it complies with WTO rules.

Source – Croners Wolters Kluwer Business

For more information please contact Stephanie Warrington on 01254 356473 or [email protected]

2018-06-07T16:44:58+00:00 June 7th, 2018|International Business|
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