Of the WTO and deal or no deal

This week, Prospect Magazine published an article which details conversations with various members of the WTO organisation about some of the statements made my Brexiteers and the Vote Leave campaign.

It makes troubling reading.

Director General Roberto Azevêdo states: “in simple factual terms in this scenario, you could expect to see the application of tariffs between the UK and EU where currently there are none.”

Pascal Lamy, Director General of the WTO from 2005 to 2013 added: “Jumping brutally from trade league one (the internal market without borders) to trade league three (a WTO, multilaterally committed trade regime for goods and services) would certainly hurt.”

On the subject of the infamous GATT 24 article, Azevêdo says, clearly: “Article XXIV of the GATT is simply the provision of global trade law under which free trade agreements and customs unions are concluded,” he explained. The problem is that it only kicks in in the event of such a deal being struck. “If there is no agreement, then Article XXIV would not apply, and the standard WTO terms would.”

Stuart Harbinson, former Director of the WTO’s General Council Division, said of damage to trade: “The effect of increased costs [to trade] would be to make UK businesses less competitive, with the risk that EU importers of goods and services might look elsewhere,” he said. “Potential investors would also have to take these increased costs into account when deciding where to locate investments.”

“Processed food and drink suppliers based in the UK would also be affected,” Harbinson warned. “Experience elsewhere tends to suggest that big businesses, with economies of scale, may sometimes be able to cope with increased trade barriers, but small enterprises will often struggle.”

“Affirmations such as ‘WTO terms would be painless, after all many countries do that’ are one of the many Brexit unicorns flying around,” said Lamy. “If that were the case, why would all developed countries (and many emerging countries) have negotiated free trade agreements, which provide a higher bilateral level of openness than the multilateral WTO regime?” The question answers itself.