The UK retaking its membership in the WTO

Posted in WTO and international trade

The EU has been acting in the World Trade Organisation (WTO) on behalf of all its members, including the UK, since the its inception in 1994. Following the UK’s decision to leave the EU, the UK Government has stated in the Brexit White Paper that it will establish its own schedules for trade in goods and services at the WTO. This will be required for the UK to resume full active membership of the WTO, and is a necessary step before reaching new trade agreements with non-EU countries.

The question is – how does the UK resume independent membership of the WTO so as to start acting on its own?

The UK is already a member of the WTO. In fact, it is one of the founder members of both the WTO and its predecessor, the 1948 General Agreement on Tariffs and Trade – the “GATT”. As with every other member of the WTO, the UK will need to submit its own “schedule of concessions” for goods and “schedule of specific commitments” for services. These schedules indicate specific commitments and obligations assumed by WTO members on tariff rates and other concessions. They provide predictability concerning market access for trade and are an integral part of the WTO agreements.

The EU has notified its constitutive treaties to the WTO as constituting a Customs Union and an Economic Integration Agreement. Hence, EU members adhere to a common schedule of concessions for goods and services. Currently, the UK trades with non–EU countries in accordance with those schedules on a Most Favoured Nation basis – unless the EU has negotiated a preferential trade agreement with that particular third country.

WTO members are allowed to change their schedules but they need to follow specific procedures. To disentangle its own schedule of concessions on trade in goods (agriculture and non-agriculture products) from the EU schedule (which sets the EU’s common external tariff), the UK will need to follow one of two WTO’s processes: certification of rectification of the schedule, referring to changes or rearrangements which do not alter the scope of concessions; or certification of modification of the schedule, referring to changes which do affect its scope. A similar process will need to be followed for  the UK to establish its schedule of specific commitments for trade in services.

In terms of process, the UK will need to submit draft changes – whether for rectification or modification – for the certification by the Director General of the WTO.  Those changes will then be communicated to all WTO members. If no objections are raised within three months, the Director General will certify the changes. The EU will also need to consider whether it should deposit amended schedules.  For example, an agreement between the UK and the EU on a division of existing EU tariff rate quotas (which provide reduced tariff access to the EU for specific – mainly – agriculture goods, up to stated maximum volumes) and the existing commitments for subsidies (e.g. under the common agricultural policy) are likely to require adjustments to the residual EU maximums.

But should we assume other WTO member states will not object to the UK’s draft schedules?

There is no a straightforward answer. If the UK merely replicate the EU’s schedule, an argument could be made that changes are to be notified by the rectification procedure. This might not generate objections as the scope of concessions and commitments will be unaltered. 

Nevertheless, even in this case, it will be up to WTO members to raise objections or not, and some might view a division of existing EU tariff rate quotas and subsidies as modifications (i.e. changing the scope of existing concessions) rather than being mere rectifications. Indeed, there is the possibility that individual WTO members might fear that the net result of new UK schedules and an amended EU schedule of concessions for goods will reduce the market access to the EU and UK that they currently enjoy. 

The WTO rules provide for a negotiating procedure which contemplates compensatory arrangements to balance any effects of modification of the schedule of concessions. It would be prudent then for the UK and EU to consider this risk in their negotiations, and to identify countries that might be concerned about market access effects before each submits proposed changes to the WTO for certification.

For the UK to resume its membership in the WTO, other challenges might arise besides those relating to its new schedules. The UK will need to determine its degree of participation and commitments in some plurilateral agreements ratified by the EU, such as the Government Procurement Agreement and the Information Technology Agreement, amongst others. The UK will also need to decide on its level of participation in other WTO programs such as the Generalised System of Preferences for developing countries (which provide preferential market access for certain agricultural products). To what extend these new commitments or rearrangements affect other WTO members remains to be seen.

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