Britain’s WTO Opportunity
Adam Smith, Britain's most influential Economist said: "On the road from the City of Skepticism, I had to pass through the Valley of Ambiguity." This is our creed when we think of a 'No Deal' Brexit and immediately going onto World Trade Organisation (WTO) rules. The future is bright, but we need to take the correct path, argues Joel Casement.
We have heard constant reports of Britain being able to trade under WTO rules immediately in the event of a 'No Deal' scenario. However, what does "trading under WTO Rules" actually mean? After all, we voted to Leave the EU because we didn't like their rules and directives, so it only seems right we know the new rules of the game are before we start playing.
The World Trade Organisation, established in January 1995, replaced its parent organisation the GATT (The General Agreement on Tariffs and Trade) which was set up, and we joined in 1948. When we joined the EEC, we then became full members of the WTO as an EU member – therefore trading around the world under the EU's Trade Schedule, so we would eventually more towards a unique Trade Schedule after Brexit.
This would mean we will trade internationally on our own bespoke "Trade Schedule". The schedules are complex documents in which each country identifies the sectors to which it will apply their market access and national treatment obligations of the GATS (General Agreement on Trade in Services) and any exceptions from those obligations it wishes to maintain. To ensure our immediate and seamless transition, we will need to borrow largely from our current WTO trade schedule blueprint. International Trade Secretary Dr Liam Fox has now submitted schedules on both goods and services, marking the two major milestones involved in finalising an independent seat at the WTO. When we do our Trade Deals with the rest of the World we will tailor this blueprint so we optimise our trading quantity and profitability.
Once we have our own Trade Schedule we must adhere to the WTO's 5 key principles.
- Trade without discrimination.
- Freer trade; gradually through negotiation.
- Predictability through binding and transparency.
- Promoting fair competition.
- Encouraging development and economic reform.
To every Briton's eyes, these should be a welcome change from the insular and protectionist tendencies of EU international trade policy. These rules will mean we could reap the rewards of Brexit. We have access to the world market and worldwide competition, where we can compete and succeed. We all seek a world of freer markets and lower trading tariffs and Britain has made clear, we will be setting low tariffs with the eventual desire to move to Free Trade deals as we expand globally. We will ensure our markets grow through mutually beneficial relations with our trading partners.
The current Director-General of the WTO, Roberto Azevedo, echoes this view: "The moment that other countries begin to sense an opportunity to increase the market share or increase the quota here or there, they're going to go for that.". Here is a clear indication of the essence of the WTO, the increase of trade to the benefit of all. We will see Britain's markets increase and the goods we can export will be governed by our own regulation. We will no longer be bound by the shackles of bureaucracy, but operate under a system whereby innovation is allowed to thrive and the market mechanism of profit incentive is given primacy.
The WTO's essence is fairness and equality, which means the tone of economic relations we set with the EU is the bar by which the world will be expected to be treated. If we set initially low and favourable tariffs with the EU, which is in our mutual interest, then we would do the same with other nations of the world. It is in the British interest we move away from the EU's Customs Union and become completely untied from the EU structurally and legislatively, and are not within a quid pro quo relationship. In trade, our European neighbours are our closest and largest partner. Setting low tariffs for the EU and moving towards Free Trade is in our interest. This will benefit every British business, large or small, because the tariffs we set with the EU countries in goods will have to be applied to the rest of the world until we do our own bespoke trade deals. Mr Azevedo has made clear: "The EU cannot discriminate among the WTO members…. The other members pay tariffs, so the UK will have to pay tariffs as well." Thus, tariffs are a reality. Non-preferential treatment is a reality. Thereby the benefits of low tariffs and eventually no tariffs are also a reality.
We will be trading with the EU under WTO Rules if we opt for 'No Deal'. Thereby, we must trade with the EU on low tariffs in a favourable relationship. Britain's most important sector is the Services sector. This sector makes up 80% of the UK's economy. Financial Services is Britain's most important product. We are a world leader. Financial Services employs 1.2million people – 3.2% of all jobs in our economy. Trading Financial Services without tariffs or constraints is vital to protect and improve on the 6.5% which Financial Services contribute in Britain. In short, Financial Services are the heart of the British economy. In order to secure the most prosperous future, we must relentlessly pursue the option which sets our Financial Services free and ensures regulations do not impede the interaction of international financial markets.
The current American administration, which has been a constant supporter of a US-UK Free Trade Agreement between our two nations, has made clear, if Britain finds itself locked into the EU Customs Union or any situational derivative, a Free Trade Deal with the US may not be feasible. We must ensure we open ourselves to the world's largest economy after Brexit, whilst optimising trade with the world's largest market, the EU. The answer is to conduct a Free Trade deal with each party. Only the WTO Rules option allows us to tailor and optimise our trade completely unilaterally, bilaterally or as part of a group. We must ensure when we enact Trade Deals which give British interests sole primacy over third party interests, WTO Rules will be the mechanism through which to achieve this.
Britain under WTO rules will present us with a unique opportunity to re-establish ourselves on the world stage as a major, independent and significant economic actor. We will shortly be leaving the EU and our entrance in some form to WTO rules. International trade is not easy, but it won't be difficult. This is the path before us. We must work, strive and compete for every unit of trade. This is our unique opportunity. We have a proven legacy of being a successful free-trading nation, harkening back to the days of the primacy of our maritime tradition. Leaving on WTO Rules offers the chance to negotiate Free Trade Deals with the rest of the world. We can no longer tally. We must leave on WTO Rules and negotiate these trade deals immediately. After all, Adam Smith himself said, a human is the only animal that makes bargains.
