What does Brexit mean for the UK in WTO?

12 Jul 2016

In the light of Brexit, World Trade Organisation (WTO) law has attracted considerable attention. It has been viewed as a possible model governing the future relationship between the UK and the EU (should other options fail), as well as the future trade links between the UK and non-EU states (in the absence of specific trade agreements).

The question that Brexit raises is whether the application of WTO rules to the relations between the UK and the rest of the world would be automatic. Put differently, how does Brexit affect the WTO status of the UK?

The UK is currently a member of the WTO along with the EU. This is because, when the relevant agreements were concluded back in 1994, the UK had competence over parts of these agreements, while the EU had exclusive competence to conclude other parts, including the General Agreement on Tariffs and Trade 1994 (GATT 1994). Over the years, the scope of the exclusive competence of the EU within the WTO framework expanded to cover, amongst others, services (a move signalled by the Lisbon Treaty).

In the light of its co-existence with the EU in the WTO, the rights, commitments and concessions of the UK under WTO rules are currently tied in with those of the EU. Following Brexit, the UK will no longer be covered by the common schedules which the EU submitted for all its Member States. The application, therefore, of WTO law on the UK following Brexit will depend on resetting the terms of the British membership in the Organisation. This would be the case across a wide range of economic activities covered by the WTO agreements. The schedules of concessions and commitments on market access, for instance, as well as the UK’s list of exemptions from the MFN treatment obligation would have to be reset and resubmitted. They would also have to be accepted by the other WTO parties.

In the light of the above, a process of negotiation would ensue between the UK and the WTO parties. Given that the existing arrangements constitute part of a package deal, resetting their terms would not be a straightforward exercise: it would entail a complex process which could take time and the successful outcome of which would depend on the political will of the other WTO parties. This point has been made by the WTO Director-General Roberto Azevêdo on a number of occasions (for instance, in his interview in the Financial Times on 26 May 2016).

The WTO rules have been viewed as a safe fall back option for the trade relations between the UK and the rest of the world following Brexit. The application of these rules, however, would not be automatic. The process of resetting and negotiating the terms of British membership in the WTO would require considerable work.