GATT 24: new argument, same old problems

Published: 5th Sep 2019

In brief

Claim

The UK can sign a three-page trade agreement with the EU and then trade tariff-free under GATT 24.

Conclusion

In theory such an agreement could satisfy GATT 24, allowing tariff-free trade on most goods with the EU. It would lead to significant wider barriers to trade, and the EU is unlikely to sign up to it.

 

A three-page trade agreement would mean little obvious would change in terms of our trade when we leave the EU.

 

Incorrect. This would be the most basic possible trade agreement. The UK and EU would lose alignment on regulation of goods, with significant non-tariff barriers to trade, and tariffs on trade in services.

 

A three-page trade agreement under Article 24 would be “enough to avoid delays at borders”.

 

Incorrect. This agreement would mean the UK and EU having different regulatory standards, and therefore checks on goods at the border.

Claim 1 of 3

“Only Whitehall stands in the way of our Gatt 24 'get out of jail free' Brexit card”

Iain Duncan Smith MP, David Campbell Bannerman, Martin Howe, Jon Moynihan, Rebecca Ryan, 30 August 2019

Earlier this summer, everyone seemed to be talking about GATT 24. Over the course of a month we wrote four different fact checks addressing the issue.

GATT 24” is shorthand for one of the rules of the World Trade Organisation (WTO), which sets out how member countries can agree free trade areas and customs unions with each other. It also covers the establishment of “interim” agreements which lead to a permanent trade agreement.

Proponents of using GATT 24 often argue that the UK could continue to trade tariff-free with the EU after Brexit without signing the Withdrawal Agreement negotiated by Theresa May’s government, instead coming to an “interim” trade agreement with the EU setting out a plan and schedule for a future trade agreement. We said such an interim agreement was unlikely to come about in practice as the EU has rejected the idea.

A recent article in the Telegraph approached the GATT 24 debate from a different angle. The authors—five people including Conservative MP Iain Duncan Smith—argue that instead of trying to sign an interim trade agreement (which would typically be quite detailed) the UK could conclude a very simple three-page free trade agreement with the EU by the end of October.

This trade agreement, they argue, would comply with GATT 24 and therefore ensure zero tariffs on trade in most goods between the UK and EU.

It’s correct that such an agreement would satisfy the terms of GATT 24.

But presenting their solution as a “get out of jail free” card that allows us to leave the EU with “little obvious” change to our trade is misleading. It overlooks two key points: 1) the proposal made in the Telegraph would (contrary to the authors’ claims) significantly change how we trade with the EU; and 2) the EU is very unlikely to accept such a proposal.

What is the proposal?

The authors propose “a basic 3-page Free Trade Agreement”. This is one of the simplest possible trade agreements that the UK and EU could sign. Because it is compatible with GATT 24, it would allow for tariff-free trade in goods between the UK and EU, but little else.

The article misleadingly claims that “little obvious will change when we leave on October 31st this way” and that it “is enough to avoid delays at borders”.

The article cites a one-page mock agreement drawn up by Dr Lorand Bartels, a reader in International Law at Cambridge University, as a model for a basic agreement.

Dr Bartels says he drafted the text as an example of the most basic deal that would satisfy GATT 24. He specifies that “it does not of itself guarantee frictionless trade”.

Such an agreement would only cover the issue of tariffs on trade in goods. It would not cover tariffs on trade in services, or any non-tariff barriers on any trade.

Trade expert Peter Ungphakorn writes that this means a basic agreement ignores how to deal with areas “such as product standards, food safety, animal and plant health and quarantine, other regulations, mutual recognition of each other’s practices for testing, approving and certifying anything from apples to accountants.”

In short, under this basic agreement, differences in regulatory standards could be a major obstacle to smooth trade with the EU. It would almost certainly lead to checks and delays at the border.

Additionally, the EU is unlikely to accept this proposal. It says it is only prepared to negotiate a trade agreement with the UK once the withdrawal agreement has been passed. The European Commission has also specifically shut down the idea that it will consent to an agreement keeping tariffs at zero using GATT 24.

The question of whether an agreement is compatible with GATT 24 is a small one. It’s much more important to ask what the wider implications are for our trade with the EU, and whether the EU might realistically sign up to it.

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