Does WTO Article 24 allow us to have tariff-free trade with the EU?

Published: 15th Mar 2019

In brief

Claim

If we leave the EU on WTO terms, Article 24 of the World Trade Organisation would allow the UK and EU to maintain zero tariffs for up to 10 years while negotiating a new deal with the EU.

Conclusion

This is very unlikely in practice. This refers to Article 24 of the WTO’s General Agreement on Tariffs and Trade. It allows countries who are negotiating a free-trade area or customs union to have an interim agreement on trade tariffs for a period of (in most cases) up to ten years provided they have a “plan and schedule” agreed for concluding a final deal. It’s unlikely we could have such a “plan and schedule” in place with the EU before we leave.

"If you are in a negotiation for a free trade agreement, you can maintain your existing standards for ten years under WTO rules. So we have ten years from the point at which we leave the European Union to negotiate a free trade agreement with the EU which would mean we can carry on with our zero tariffs."

Jacob Rees-Mogg, 10 May 2018

“If we have a short temporary period in which we have set up a genuine agreement with the European Union, then we can invoke article 24—which I am not sure many people have heard of—of the general agreement on tariffs and trade, which enables us to go on at the current rate of zero tariffs for a reasonable length of time, potentially up to 10 years, so we can carry on exactly as we are.”

Owen Paterson, 4 December 2018

“In fact, we will never need to trade on world trade terms with Europe either. Article 24 of the World Trade Organisation treaty allows us to continue to trade with Europe on zero tariffs while we negotiate a free trade arrangement.”

Ben Bradley, 14 January 2019

Over the course of the last year a number of politicians, news outlets and commentators have made claims about the World Trade Organisation (WTO) and something known as ‘Article 24’. Our readers have also asked us to look into these claims.

The claims describe Article 24 as a WTO trading rule which will allow the UK to temporarily carry on trading with the EU under the current zero-tariff system even if we leave the EU’s customs union and single market on WTO terms.

But it’s not that simple and experts have said this is unlikely to happen. That’s because Article 24 only allows countries negotiating a free-trade area or customs union to have an “interim” agreement in place (which in the case of the UK and EU could allow tariff-free trade to continue) provided they have a “plan and schedule” agreed for what their final deal will look like. The EU would also have to agree to this plan before we leave the EU.

Where does the claim come from?

This claim has had a long shelf-life. The earliest instances we could find of ‘Article 24’ being mentioned in connection with the UK’s withdrawal from the EU were from news reports around March 2017.

In February 2018, the pro-Brexit group of Conservative MPs known as the European Research Group wrote a letter to Theresa May suggesting how Brexit could be best achieved ahead of negotiations with the EU.

This included the following: “Any ‘implementation period’ should be based on WTO principles. Any implementation period must not restrain the UK from negotiating or signing other trade agreements. Legally, that means it should be an interim period in contemplation of a free trade agreement, compliant with GATT Article 24 (7) b.”

Since then it’s been raised as a possibility by a number of politicians, including prominent Leave campaigners.

Its proponents argue that in a situation where we leave the single market and customs union and begin trading with the EU on WTO terms, we could then begin a trade deal negotiation with the EU. This negotiation, the argument goes, would be conducted during an “interim period”—asset out in Article 24—that could last up to ten years and allows us to maintain tariff-free trade with the EU.

What is Article 24?

As we’ve looked at before, if we leave the EU without a withdrawal agreement we will automatically begin trading with it on World Trade Organisation (WTO) terms.

The precursor to the World Trade Organisation was the General Agreement on Tariffs and Trade (GATT) agreed in 1948. The GATT still forms the basis of most of the WTO’s rules on trade today and it is Article 24 of this agreement to which people have been referring.

Generally Article 24 sets out the rules under which a customs union or free-trade area can be created between WTO members.

For countries that want to create free-trade areas or a customs union, but haven’t yet concluded the final deal, Article 24 allows them to put in place an interim arrangement. During this interim period, Article 24 says that tariffs and regulations can “not on the whole be higher or more restrictive” than before the interim agreement (there are currently no tariffs on trade between the UK and EU). These countries can only put such an interim agreement in place if they have a “plan and a schedule” to form the free-trade area or customs union within “a reasonable length of time”.

Further on in Article 24 it says that a reasonable length of time “should exceed 10 years only in exceptional cases”.

The House of Commons Library says that “This recognises the fact that a customs union or a free-trade agreement cannot be concluded rapidly and might need gradual implementation. It is this idea that those promoting [Article 24] have in mind.”

So could we leave on WTO terms and keep tariff-free trade under Article 24?

Almost certainly not.

The Article 24 plan is possible in theory, but very unlikely in practice. Article 24 does not remove the need to strike a deal with the EU.

Both the UK and the EU would have to reach an agreement about going into such an interim period—the UK couldn’t make the decision by itself—and they’d also need to agree on what the “plan and schedule” for the final deal would look like.

Article 24 also says that the future agreement must cover the “duties and other restrictive regulations of commerce” of “substantially all the trade” between the countries involved. Other members of the WTO could also ask for changes to the agreement if they have concerns about it.

This would all need to be agreed before we leave the EU. Experts have said such an agreement is unlikely.

Without such an agreement, or some kind of withdrawal agreement as proposed by the government being in place, the UK will leave the EU and being trading with it on WTO terms—meaning tariffs on trade.

Article 24 itself only covers trade, so other elements we might want to include in any future deal with the EU, services for instance, wouldn’t be covered under Article 24 or the GATT, it would be under separate agreements.

The government has weighed in on the issue too

It has said the suggestion we could use Article 24 “is a misunderstanding of what the rules are”.

Dr Liam Fox, the Secretary of State for International Trade, said in the House of Commons on January 14: “There are two immediate problems facing that suggestion. The first is that it would require the agreement of the EU and be based on the expectation of a future trade agreement or customs union to be operable in WTO law. Although it might be argued, as I am sure many in the House [of Commons] would, that that would be in the economic interests of the EU27, we all know from experience that the politics of the EU can take precedence over economic pragmatism. In the political atmosphere of no deal, it would be difficult to cultivate the good will necessary for that to proceed. Secondly, that suggestion would not deal with all the regulatory issues—the non-tariff barriers—that are so important to many businesses.”

Why can’t we just have no deal and zero tariffs with the EU?

It would be possible for the UK to unilaterally remove or reduce tariffs on any or all EU goods without an agreement post-Brexit. But because of WTO rules known as ‘Most Favoured Nation’ the UK would then have to do the same for all other countries. Even if we did do this there would be no guarantee that the EU would do the same in return.

On 13 March the government published its plans for temporary tariffs in the event of a no deal Brexit. They would remove tariffs from “87% of total imports to the UK by value”, according to the government’s figures, but would apply tariffs to some categories of imports, including some food products, vehicles and fuel. This would last for up to 12 months, and we don’t know what tariffs the EU might place on goods imported from the UK to the EU.

We’ve written more about how the WTO works here.


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