We have seen regular commentary along the lines that ‘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’, thus offering a straightforward solution to the UK’s post-Brexit trade with the EU in the case of no-deal exit. However, in the words of the current prime minister: ‘The question of GATT 24 is perhaps not quite as simple as some may have understood it to be’.
The General Agreement on Tariffs and Trade (GATT) article XXIV, to give it its full nomenclature, provides World Trade Organisation (WTO) members the framework to establish customs union or free trade agreements that allow countries to trade under zero tariff’s. And, as part of the negotiations for customs unions or free trade agreements, article 24 also allows for interim agreements to be established whilst negotiations are taking place.
If the UK leaves the EU in a no-deal scenario, the UK and the EU must trade under WTO terms; this is not an issue that has any ambiguity. Absent a withdrawal agreement, the UK and the EU will trade with each other under WTO rules which will be the end of tariff-free trade between the UK and EU.
It has been said that as article 24 allows interim agreements it provides a scenario where the status quo in tariff-free trade can be maintained while the UK and EU negotiate a post-Brexit free-trade agreement; this is true but only where both sides agree to any interim agreement.
Crucially, the UK can only act unilaterally in regard to its own tariffs, so if it chooses to reduce tariffs to zero for EU trade to keep the similar trading terms that are currently enjoyed as part of EU membership, it must also make that same offer to all WTO member countries.
The WTO’s most favoured nation (MFN) rule, which the UK/EU trade would be subject to in a No-Deal scenario, prevents discrimination between WTO members and, outside of a customs union or free-trade agreement, the EU would only be able to reciprocate if it offered the same tariff-free trade to all WTO countries.
This is where the true impact of article 24 comes in.
It allows WTO members to form customs union’s or a free-trade agreement that provide exception from the MFN rule that they negotiate and mutually agree; there is no allowance for unilateral action by one party. Indeed, any agreement between countries under article 24 must not be detrimental to any other WTO country that is not party to such agreements. Therefore, any customs union or free-trade agreement must be notified to the WTO, giving other WTO members the opportunity to raise concerns.
In a similar way, any interim agreements that are mutually agreed between WTO members, are subject to referral to the WTO and review by other WTO members, who are at liberty to dispute the agreement and possibly block its implementation. So, even if the EU agree to an interim agreement, WTO members could still block it. This may be why no interim agreements have been presented to the WTO since 1995.
We have seen regular commentary along the lines that ‘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’, thus offering a straightforward solution to the UK’s post-Brexit trade with the EU in the case of no-deal exit. However, in the words of the current prime minister: ‘The question of GATT 24 is perhaps not quite as simple as some may have understood it to be’.
The General Agreement on Tariffs and Trade (GATT) article XXIV, to give it its full nomenclature, provides World Trade Organisation (WTO) members the framework to establish customs union or free trade agreements that allow countries to trade under zero tariff’s. And, as part of the negotiations for customs unions or free trade agreements, article 24 also allows for interim agreements to be established whilst negotiations are taking place.
If the UK leaves the EU in a no-deal scenario, the UK and the EU must trade under WTO terms; this is not an issue that has any ambiguity. Absent a withdrawal agreement, the UK and the EU will trade with each other under WTO rules which will be the end of tariff-free trade between the UK and EU.
It has been said that as article 24 allows interim agreements it provides a scenario where the status quo in tariff-free trade can be maintained while the UK and EU negotiate a post-Brexit free-trade agreement; this is true but only where both sides agree to any interim agreement.
Crucially, the UK can only act unilaterally in regard to its own tariffs, so if it chooses to reduce tariffs to zero for EU trade to keep the similar trading terms that are currently enjoyed as part of EU membership, it must also make that same offer to all WTO member countries.
The WTO’s most favoured nation (MFN) rule, which the UK/EU trade would be subject to in a No-Deal scenario, prevents discrimination between WTO members and, outside of a customs union or free-trade agreement, the EU would only be able to reciprocate if it offered the same tariff-free trade to all WTO countries.
This is where the true impact of article 24 comes in.
It allows WTO members to form customs union’s or a free-trade agreement that provide exception from the MFN rule that they negotiate and mutually agree; there is no allowance for unilateral action by one party. Indeed, any agreement between countries under article 24 must not be detrimental to any other WTO country that is not party to such agreements. Therefore, any customs union or free-trade agreement must be notified to the WTO, giving other WTO members the opportunity to raise concerns.
In a similar way, any interim agreements that are mutually agreed between WTO members, are subject to referral to the WTO and review by other WTO members, who are at liberty to dispute the agreement and possibly block its implementation. So, even if the EU agree to an interim agreement, WTO members could still block it. This may be why no interim agreements have been presented to the WTO since 1995.
