Is it fair to say that the UK leadership is having some trouble figuring out what to do with Brexit? Yes, I think that's fair. But at least they are talking to the right people. The UK parliament recently brought in some experts to advise on the technical details. There were two sessions. You can read the transcripts here. Here is an excerpt:
The Chairman: We have an array of legislators and a wide range of questions. This is a public session. Therefore, there will be a record, it will be transcribed and you will have sight of it, but we need to bear that in mind in anything we say. We have invited you to contribute your expertise to try to clarify to our two Committees the situation we now face, in dealing both with the WTO and with wider trade organisations. We are focusing in particular on the WTO. I will start with an opening question, but if you wish to elaborate on general points, please use that question so to do.
Our understanding is that we as the UK will have to renegotiate the terms of our WTO membership upon exit from the EU at whatever point that takes place. Some people say that is pretty much the same as being a new entrant into the WTO. Could you give us your views on what we will be faced with, how difficult it would be, how long it would be likely to take, which parts of our current arrangements with the EU we could carry over and which we could not under WTO rules, and the implications thereof? I would like both of you to reply to that and give your views. Who wants to start?
Professor Piet Eeckhout: Seniority?
Mr Richard Eglin: Seniority meaning that I am older not wiser. I think there is a basic misunderstanding in what you have just said, Lord Chairman. The United Kingdom is withdrawing from the European Union. It is not withdrawing from the WTO. It was an original member of the GATT in 1947, it was an original member of the WTO in 1995, and it fulfils in my view—I cannot really see any other view to hold—the two conditions that are necessary to be a member of the WTO. One of those isthat it has ratified the WTO agreement, and the second is that it has market access schedules, one for goods and one for services. It undoubtedly has those; they are the EU schedules at the moment.
The job ahead of us is to extract our schedule from the EU schedule and present it to WTO members. We can go into detail, but I would suggest it as a rectification of the schedule, not as a modification. On a best‑case scenario, it could take three months in the case of the goods schedule and 45 days in the case of the services schedule. Those are the procedures. In the best of circumstances, where nobody objects, we extract our schedules and present them to WTO members. We keep the initiative. We make the presentation so that they have to react, and if nobody reacts, within three months in the case of goods and 45 days in the case of services, the schedules are approved and certified. That is the best‑case scenario. I do not doubt that there will have to be a negotiation of some sort, but we do not have to renegotiate our membership. We need perhaps to renegotiate our schedules.
The Chairman: Thank you very much. That is very clear.
Professor Piet Eeckhout: I agree with that, to the extent, of course, that the United Kingdom Government are happy to continue to apply the current commitments of the European Union as to tariff schedules and services commitments. If the United Kingdom were to choose a different trade regime on the tariff side, it would involve a modification of the current tariffs and we would no longer be in the territory of simply transitioning from EU tariffs applying as EU tariffs to a position where the United Kingdom was applying those same tariffs. There is a political question to be decided that determines the extent to which those negotiations might be straightforward or rather more difficult.
There are a couple of further but more technical points to which attention could be drawn in the scenario that the United Kingdom were to adopt the EU schedules for goods and services. There is an issue potentially of tariff quotas in the framework for agricultural goods in particular, in the sense that the EU has tariff import quotas, which are the amounts of goods that come into the country under a particular tariff—for example, bananas, which in the past have given rise to many difficulties; crafting an EU trade regime on bananas—and precisely how they would be divided up between the European Union and the United Kingdom, and whether they would be divided up.
Similar questions may arise in relation to the European Union’s current export tariff quotas. Other WTO members have tariff quotas on exports from the European Union. Would that be divided between the EU, or would the European Union keep those quotas and would the United Kingdom have to negotiate preferential access itself? Those are uncertainties, I think. On subsidies in agriculture, where the commitments are about the aggregate measurement of support, which is currently not a big issue because the European Union ceiling is very much above the current actual subsidies, the UK commitments would have to be determined. The agreement on government procurement is also one where potentially the United Kingdom would have to negotiate its entry, because it is not an agreement that the United Kingdom has. It is a plurilateral agreement. It is not part of the overall package of WTO agreements. Not all WTO members have signed up to it. As I understand it, the European Union has signed and concluded it, not the individual Member States of the European Union. In contrast with general WTO membership, where both the EU and the individual Member States are members, that is not the case with the government procurement agreement, so potentially there would need to be a negotiation.
I noted another couple of points, but they are related as much to the relationship between the European Union and the United Kingdom post‑Brexit as to the WTO position. I am uncertain what would happen, for example, with the current antidumping measures that the European Union applies to imports from other WTO members, which have been the consequence of an EU‑wide investigation into dumping. Lots of those currently apply, particularly to China. Whether the United Kingdom could simply continue to apply those or would not apply them may also be an issue that comes up in defining the UK’s WTO status.
The Chairman: Thank you. I think you have pre‑empted part of Lord Wei’s question, but we could perhaps generalise and ask how much is dependent.
Q2 Lord Wei: What do you see as the most contentious points or obstacles to the renegotiation or rectification of WTO membership terms? What elements of that renegotiation would be contingent on the nature of the UK‑EU relationship?
Mr Richard Eglin: I do not think that ‘contentious’ is quite the right word. Parts of it will need to be renegotiated. For the market access schedules, the bulk of the goods schedule and, in my view, all the services schedule can simply be extracted and laid on the table as the UK’s schedule. That again is assuming that we are not going to change it—I agree with Piet—and that we simply want to replicate what we already have as an MFN schedule. The parts that will need to be renegotiated are the tariff rate quotas and farm subsidies—the quantitative elements of those schedules—where we will need to reach a deal with the EU on how they are shared out. On the face of it, the EU presumably will want to give us as much of the tariff rate quotas as possible and as little of the farm subsidies as possible. That needs to be sorted out, and it would have to be done before we could complete our schedule and present it in the WTO to other WTO members.
We have to reach agreement first with the EU. Having presented the schedule, I am sure other WTO members will see opportunities, particularly in agriculture, to look for better access to the UK market, and it will be up to us, or the UK Government, to decide whether they continue to insist on rectification, whether they are prepared to negotiate. My advice would be certainly to show openness, to listen to anybody who comes to us and says that they want bigger access for their beef, butter, milk or whatever it might be. That is the key part of the negotiation on market access. There may be other specific tariff lines. I can imagine a situation where another WTO member would say, “When I negotiated this concession with the EU in 1995 it was on the presumption that the UK was part of the EU market. Therefore, I gave a lot to get this access and now the UK on its own does not offer me that kind of reciprocal benefit”. They may say they want to negotiate on something. You cannot predict at the moment how that would work, but there may be individual tariff lines. It is a matter of negotiation. I am not sure it is contentious.
On the government procurement agreement, I agree. Very honestly, I think that the UK will have to accede as a member, but that can all be done. It is not contingent upon us having first reached agreement with the EU. We could work that out. Most of the work in the WTO, most of the negotiation, is informal. Therefore, we should start to talk to the five, six, seven or eight key members, other members who are first of all decision-takers in the WTO and who are major trading partners,and work it out with them. Again, there are the rules, to go back to the Chairman’s original question of how long it takes: after the United Kingdom has ratified a new government procurement agreement, it takes 30 days before it enters into force, so we are not looking at a great gap.
Lord Wei: Just to clarify, what you are saying seems to be counter to popular conception, and, to simplify, if we cut and paste much of what is already there into the WTO discussion, we can start with that as a baseline and work from there.
Mr Richard Eglin: Absolutely.
