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The pro-Brexit view

We’d have more influence, not less. By regaining our seat on the WTO, which we gave up in 1973 on joining the EEC, we would have more say in global trade talks”. Richard Tice, 31 March 2015, writing in City A.M.

What is the “WTO option”? Exiting the EU and relying on the World Trade Organisation (WTO) rules for trading access to the EU, which apply to all WTO members.

What would it mean for the UK?

  • The WTO rules follow the principle of non-discrimination: countries must not treat any trading partner less advantageously than any other, unless covered by a separate free trade agreement.[1]
  • The UK would control its own trade policy and have the freedom to negotiate its own bilateral agreements with other countries. It would lose the benefit of existing FTAs between the EU and other countries, including Korea, Norway, Mexico, South Africa, Colombia, and those in progress such as with Japan and the US.
  • The UK would not have access to trade in the EU on terms any more advantageous than third countries which do not have free trade agreements with the EU:
    • UK businesses would be subject to the EU Common External Tariff, meaning that they would be less competitive compared to competitors from the EU or from countries with an FTA (which will soon include the US). Tariffs would be imposed on around 90% of the UK’s goods exports to the EU.[2] These tariffs range from 10% (cars), to 11% (clothing), to around 15% (food).
    • Financial services would not be covered such that the UK would not enjoy its current level of preferential access to the single market for financial services.
  • UK businesses wanting to sell their products into the EU would still have to adhere to EU products standards and regulation, but the UK would not have any influence in their formation.
  • The UK Government would no longer be automatically entitled to challenge EU legislation before the Court of Justice of the European Union.
  • Each WTO member operates with a schedule of agreed tariffs. The UK’s goods and services schedules are currently incorporated into those of EU. On leaving, the UK would need to negotiate a new set of tariffs. The same is true for agricultural commitments under the WTO Agreement on Agriculture.
  • There are no provisions under the WTO rules for the UK to grant subsidies to its exporters to compensate for additional tariffs on exports and imports that were previously tariff-free (such provisions expired in 1999).[3]
  • Under this or any other total exit model, the UK courts would no longer be required to interpret national law consistently with EU law or EEA rules, giving increased freedom for the UK parliament and UK judges. However:
    • It is likely that EU case law would continue to be persuasive, given that so much EU law has been transposed into UK legislation.
    • The UK Government would need to decide how to address more than 40 years’ worth of legislation which has been influenced by EU membership. In particular, which legislation should be retained as UK legislation, which should be modified, and which should be repealed.
  • As under any total exit model, the UK would cease to make contributions to the EU budget and would also cease to benefit from EU funding. Although the UK as a whole is a net contributor to the EU, many regions are net recipients (for example, Wales).[4]
  • The UK would not be subject to the rules on freedom of movement and would have full control over its own borders. However, British people would equally lose the right to work and travel freely in the EU.
The UK business lobby view

Relying on WTO rules alone would not work for the UK. Any limited advantages are easily outweighed by the significant costs to the economy as a whole”. CBI, “Our Global Future: The Business Vision for a Reformed EU”, November 2013.


 

  1. The General Agreement on Tariffs and Trade (GATT), Article I – https://www.wto.org/english/docs_e/legal_e/gatt47_e.pdf.
  2. House of Commons Library, Research Paper 13/42, Leaving the EU, 1 July 2013, page 27 – http://www.parliament.uk/briefing-papers/RP13-42.pdf.
  3. Article 8 of the WTO Agreement on Subsidies and Countervailing Measures (“SCM Agreement”) originally contained a list of non-actionable subsidies (i.e. subsidies that states could provide to their own national businesses against which other WTO members could not take action). However, these provisions expired at the end of 1999, by virtue of Article 31 of the SCM Agreement, which provided for their expiry after a period of five years after the entry into force of the WTO Agreement (1 January 1995). As a result, these carve-outs would no longer be available to the UK Government to grant subsidies to its exporters.
  4. The CBI has estimated that Wales would lose around £207 million in structural funding and £290 million in agricultural funding following UK departure from the EU, based on 2009 data (CBI, Our Global Future: The Business Vision for a Reformed EU, November 2013) – http://news.cbi.org.uk/reports/our-global-future/our-global-future/.