THE TTALK QUOTES
On Global Trade & Investment
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No. 66 of 2016
TUESDAY, NOVEMBER 22, 2016
Filed from Portland, Oregon

Click  here for the November 7 quote on Japan and TPP.
BREXIT: THREE CHALLENGES

"The difficulty for the poor Brits right now is, in order to really solve this whole puzzle, they have to work simultaneously, I would say, on three different fronts."

Rufus Yerxa
November 16, 2016
CONTEXT
Rufus Yerxa, now the head of the National Foreign Trade Council, has had a long and distinguished history with the World Trade Organization. After serving as the U.S. Ambassador to the WTO, Mr. Yerxa went on to become a Deputy Director General of the WTO itself. Given his expertise, we at the Global Business Dialogue count ourselves lucky indeed that he was able to speak at the first event in the GBD-Steptoe & Johnson series on Brexit. This was BREXIT: THE WTO ISSUES, held last Wednesday in Washington.

Ambassador Yerxa was the keynote speaker and today's featured quote was taken from his opening presentation. We need to continue, though, as he did, by naming those three fronts.  As Ambassador Yerxa put it:

I. "They [the British] have obviously got to go forward with their Article 50 process and [negotiating the] terms of re-establishing their relationship, their post-Brexit relationship with the EU.

II. "At the same time, some process has to be going [on] in the WTO. How formal that becomes, when it actually becomes a formal renegotiation of their schedules with everybody is a question I can't ... answer.

III. "Then thirdly ... their disentanglement from being party [to the] EU's many, many FTAs around the world and to what extent they will negotiate FTAs with those same countries ..."
COMMENT
We almost gave this entry the title "BREXIT'S PRIMARY COLORS." That, however, might have been read as a reference to Joe Klein's marvelous book about Bill Clinton's first Presidential campaign in 1992, while all we really have in mind are the endless hues that can be generated from red, yellow, and blue. The issue of the interrelationships, for example, among the three challenges listed above came vividly to life in the closing portion of Ambassador Yerxa's remarks last week. In particular, he drew attention to how others in the WTO might use the UK's need to win WTO approval for its own, new tariff schedules and services commitments as leverage regarding any new arrangement between the UK and the EU. He explained the situation this way: 

"[The UK is] part of a customs union. They have relied on ... the provision in the GATT which allows them to have a preferential, internal regime with the rest of the EU. They are now going to set up some other arrangement with the EU. I presume that what they're thinking is that that [new arrangement] will be like a free-trade agreement that fully fits within Article XXIV ...that enables them to have, basically, a preferential arrangement with the rest of the EU, similar to what they have as part of a customs union. 
 
"But that's not a given for everybody else [in the WTO]. You know there are lots and lots of FTAs in the world. Many of them don't meet the requirements of Article XXIV, but nobody challenges them in dispute settlement. 
 
"But here we have a situation where the leverage everybody else in the WTO has is not to challenge the UK in dispute settlement. The leverage is [to say], 'Well, I've got to agree to your new schedules as a separate entity. And if there are things I don't like about the way you have done your arrangement with the EU, I am going to use that leverage against you in my negotiations with you over your new WTO schedules." 

In fact, it probably doesn't matter too much whether a particular trading partner of the UK is concerned more with an element in their WTO schedules or with something in a proposed new arrangement between the UK and the EU. Both will be issues within the WTO. That means that the two are linked, and so there are likely to be plenty of opportunities for WTO members to raise their own concerns (demands). Carrying that logic a step further, what today are mainly issues for the UK and the EU could in time turn into a major challenge for the World Trade Organization itself. 

As noted, Ambassador Yerxa is now the president of the National Foreign Trade Council. He talked about the NFTC at the outset of his remarks, noting that its members are some of the "biggest [and] most globally integrated and active companies" and that they are major traders, with investments in Europe and UK. What those companies really care about," he said, are "stability, continuity, predictability, and, obviously, maintaining the kind of open trade-and-investment climate they have had." 

***

No matter how the Brexit drama turns out, the June 23 referendum has had the effect of putting "stability, continuity, and predictability" on hold for a while. But we are optimists. Brexit - even a hard Brexit - could be a boon to the kind of open trade-and-investment climate favored by the members of the National Foreign Trade Council, especially if that goal is shared by the relevant actors: the UK, the EU 27, and all of the other members of the WTO.
COMMENT: A REMEMBRANCE
This is November 22. If you are of a certain age it is an unforgettable date, forever associated with the assassination of President Kennedy fifty-three years ago. Looking back, however, it is not the assassination we want to focus on, nor even the policies of the Kennedy Administration. We have our quarrels with many of them. 
 
No, what we choose to remember is that in some fundamental way John Kennedy and the Kennedy Administration were inspiring. That thought was reinforced for us today when we came upon a YouTube clip from a Kennedy dinner on November 29, 1962. President and Mrs. Kennedy were there of course.   So were President Eisenhower, Marian Anderson and Robert Frost. The star of the show, however, was a seven-year-old cellist, Yo-Yo Ma, introduced by Leonard Bernstein. If you want to think about John Kennedy today, think of him in a setting like that, surrounded by the strength of America and bringing forth new strength.
SOURCES & LINKS
BREXIT: THE WTO ISSUES was the first in a series on Brexit jointly sponsored by the Global Business Dialogue and Steptoe and Johnson. Today's quote was taken from our unpublished transcript of Ambassador Rufus Yerxa's comments at that event. 

Article XXIV is a link to this provision of the General Agreement on Tariffs and Trade. 

I N CONCERT is a link to the YouTube clip of the very young Yo-Yo Ma playing for President and Mrs. Kennedy and a host of American luminaries on November 29, 1962.

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