Looking down the wrong end of the telescope
I asked in my last article for readers to do a bit of research into the importance of regional trade and I will come back with a concluding article in the next edition. I feel however, that before I do, I need to clear up some misapprehensions over discussions many of you will have seen on Article XXIV (24) of the GATT and in particular, references to section 5. It has a bearing on the whole discussion.
So what is Article 24?
In essence it allows two or several parties to negotiate and reach agreement on Customs Unions and Free Trade Areas. The importance of article 5 is that it allows for interim arrangements during this process under which lower of zero tariffs can be applied. This is crucial, as the impression given in the populist media is that the UK can somehow ‘use’ Article 24 to bind the EU to a prolonged period during which it must maintain the status quo.
There has to be an agreement which would have to include a plan and schedule for the formation of a customs union or free-trade area within a reasonable length of time – normally up to 10 years. And this has to be done in good faith! So we can’t just pretend that we are going to reach an agreement for 10 years to buy us time to sort out the mess and then step away.
The whole point of the WTO approach on this is to prevent countries from forming arbitrary, discriminatory arrangements without some clear, documented intent. To imply that we can use the rules otherwise is to look down the wrong end of the telescope.
Let’s be clear, if the UK and the EU were to jointly have in place a plan and schedule for the formation of a comprehensive free trade agreement then, even if this were to take longer than 10 years to conclude, then the two parties could apply interim arrangements under which, more or less, the current zero levels of duty apply. It isn’t a complete solution as services are not covered, but the rules under Article 24 would allow this.
Simples? Well it would be if the EU agreed to it and surely this is the point. This is a key tenet of the withdrawal agreement. It provides the basis for, in a second phase, the UK and the EU to negotiate a Free Trade Agreement. A relatively short implementation period is envisaged but it is perfectly credible to imagine that the EU would agree to applying the provisions of Article 24 (5) beyond that date on the basis that it was going to take longer to conclude a deal.
But if the UK chooses to leave without concluding a withdrawal agreement, without paying the withdrawal bill, without some assurances over the UK/ROI then, bluntly, I can’t see why the EU would now suddenly allow the UK to ‘cherry pick’ an FTA despite all this. That just won’t happen.