THE UK, THE WTO AND BREXIT

"The UK is a full and founding member of the WTO.  We have our own schedules that we currently share with the rest of the EU.   These set our national commitments in the international trading system.  The UK will continue to uphold these commitments when we leave the European Union.  There will be no legal vacuum." 

Liam Fox

September 27, 2016

The Rt. Hon. Liam Fox MP is the Secretary of State for International Trade.  His department is quite new, being one of two departments formed after the UK's June 23 referendum and the country's decision to leave the European Union. The other new department is the Department for Exiting the European Union.  The latter is, obviously, a wholly new department, created for a wholly new situation.  The Department for International Trade, however, is in sense, not quite so new.  More on that in the Comment Section.

On September 27, Mr. Fox was in Geneva, where that afternoon, he spoke on one of the panels in this year's WTO Public Forum.  The theme for the 2016 Forum was "Inclusive Trade," and the title of the panel with Liam Fox was "Inclusive Trade and SMEs."    To be sure, Mr. Fox did comment on trade and small and medium sized enterprises, noting, for example, that 99 percent of private British firms are SMEs and that they employ some 15 million people.

It was his comments on Brexit, however, that caught our attention, especially that sentence " We have our own schedules that we currently share with the rest of the EU."  We will come back to that too in the Comment Section.  First, however, here is more of what Mr. Fox said about Brexit to those in the audience at this year's WTO Public Forum. 

Two days later, on September 29, Mr. Fox was back in England, where he gave a strong speech in support of free trade at the Manchester Town Hall.  Like many such speeches, it included a condemnation of protectionism.  "It may be a short-term vote winner or temporarily prop up failing industries," he said, "[but] it is always the consumer and ultimately the poorest in society that ultimately lose out."

The same speech also included references to the UK's strengths and to the UK's history as a founding member of the General Agreement on Tariffs and Trade Let's take them one at a time: 

Citing strengths of industry and character, Mr. Fox said:

On the topic of the UK and the WTO, he said:

We expect to pay as much attention as we can to the enormously important development known as Brexit, both in our programming - there have already been two GBD sessions on it - in these TTALK Quotes, and elsewhere.  We shall limit today's comments, however, to a technical question, a comment on trade, a not unimportant quibble, and a bit of history.

The technical question has to do with the highlighted portion of today's quote.  It clearly suggests that the UK does not have to negotiate any new schedules in the context of the WTO.  Can that really be the case? 

Obviously, there are two sets of issues here.  One relates to the UK's new, post-Brexit trading relationship with the other 27 members of the European Union.  Here, of course, a separate negotiation is contemplated.  That, as we understand it, is the principal significance of Article 50 of the Lisbon Treaty.  
Prime Minister Theresa May said earlier this month that Article 50 would be "triggered no later than the end of March." 

So it is the other set of issues that will inevitably be the test for whether Mr. Fox's scenario can be put into practice.  Will WTO members go along with the UK continuing to use the current schedules?  Or will they object.  And what objections can they raise?  What obstacles could they put in the path Mr. Fox has suggested following?  

About Trade. There have been a couple of speeches recently by major figures, highlighting the tremendous advantages the world has reaped from more open trade.  One of those was the excellent speech that the WTO Director General, Roberto Azevêdo, gave a little over a week ago at the National Press Club in Washington.  Another was Mr. Fox's Manchester speech, mentioned above.
  
We have no quarrel with the thrust of either of those speeches.  Yet in reading them, one gets the sense that there are whole areas of discussion which the champions of trade have decided are simply off limits.  Yes, trade is about willing buyers in various parts of the globe and willing sellers in others parts.  And the desire to minimize the obstacles between those two groups is wholly laudable. 

But trade is other things as well.  It is a competition among nations, and it is an instrument of national policy with often unfortunate spillover over effects for trading partners, to name but two.  Arguably, the roots of China's enormous overcapacity in steel and aluminum, for example, can be found in both of those motivations.

Against that background, we would take up a pedant's quarrel with Mr. Fox's reference to the "General Agreement on Tariffs and Trade [as that] which later became the WTO." 

Before the WTO, at least for us, GATT was two things.  Written as an acronym, it was the secretariat of the organization that had grown up to implement and enlarge the General Agreement on Tariffs and Trade.  And yes, that GATT has been superseded by the WTO.  But the General Agreement itself, that is still there, and for many it is still the heart of the organization.  After all, the rules of the rules-based trading system are in the Agreement and associated documents.

We should note here that while a phrase in his Manchester speech was a convenient nail on which to hang this particular argument, Mr. Fox has been clear - certainly he was at the Public Forum - about the importance of enforcing the WTO's rules against dumping and illegal subsidies.

History.  Finally, a word about the UK's "new" Department for International Trade.  We think of it more as a rebirth than as a novel creation.
After all:

Fox at the WTO is the audio recording of Liam Fox's September 27 presentation at the WTO Public Form.  This was the source for today's quote. 

In Manchester takes you to the text of Mr. Fox's speech at the Manchester Town Hall on September 29.

The Prime Minister in Birmingham.  It was at the Conservative Party Conference in Birmingham earlier this month that Prime Minister Theresa May set the end of March as the deadline for triggering Article 50 of the Lisbon Treaty.  This is a link to the text of her speech there on October 5, including of course that commitment.

Azevedo in Washington takes you to the strong pro trade speech given by WTO Director General Roberto Azevêdo on Friday, October 7.

A Missed Opportunity is a link to the October 11, 2016, issue of Trade Flows, published by Stewart and Stewart.  This includes a critique of the October 7 Azevêdo speech, with particular reference to the WTO secretariat's attitude towards trade remedies provided for by the General Agreement on Tariffs and Trade. 

Board of Trade and DTI are, respectively, the Wikipedia entries for the Board of Trade and the UK's Department of Trade and Industry.