The United Kingdom as an Independent Member of the World Trade Organization: A Strategic Forecast?

Jose-Ignacio Saldana

Vol. 38 Associate Editor

On the eve of the historic referendum held in the United Kingdom (UK) to decide whether to leave the European Union (EU), Roberto Azevêdo, current Director-General of the World Trade Organization (WTO), discussed the implications that an exit from the EU could have on the UK’s status as a member of the WTO. Mr. Azevêdo highlighted the potential challenges in the need to re-establish trade relationships with the EU Member States and the rest of the countries with which the EU currently has trade agreements. He pointed out that the UK would need to “re-establish its terms of trade with the WTO” after its exit from the EU. [1] A number of issues arise out of this scenario, including whether it could be possible for the UK to obtain a realistic projection of its future membership status within the WTO before leaving the EU, and decide whether to halt “Brexit” in view of these considerations, if possible. Despite the turmoil caused by “Brexit” and the number of talks currently taking place between EU Member States,[2] nothing has actually happened—legally speaking. Article 50 of the Lisbon Treaty provides that “[a]ny Member State may decide to withdraw from the Union in accordance with its own constitutional requirements” and “a Member State which decides to withdraw shall notify the European Council of its intention.”[3] There is controversy as to whether the UK could comply with this notification requirement without obtaining the approval from its Parliament.[4] On September 2016, the House of Lords Constitution Committee published a report affirming that “it would be constitutionally inappropriate . . . for the Executive to act on an advisory referendum without explicit parliamentary approval . . . [t]he Government should not trigger Article 50 without consulting Parliament.”[5] Foreign Secretary Boris Johnson contends that article 50 “should be triggered before May next year in order to avoid Britain having to participate in European elections and send new MEPs to Brussels.”[6] A full hearing at UK’s High Court is expected to take place in October 2016.[7] “Brexit’s” effect on the UK’s economy is significant because, as the “world’s major global player in the international trade,”[8] the EU is a key piece in fostering competitive prices, economic growth, and the creation of jobs.[9] The EU is a single customs union[10] and it operates as a single actor before the WTO.[11] It is represented by the European Commission (EC), which negotiates trade agreements on behalf of the EU.[12] It bears noting that the 28 Member States of the EU are also WTO members in their own right.[13] Thus, even after leaving the EU, the UK would still have individual membership to the WTO. But because the UK’s status concerning the trade of goods and services is virtually controlled by its EU membership, the UK will have to re-negotiate its position within the WTO.[14] Some of these terms could be substantially similar to those currently in force, though the success of the negotiations would depend on the openness and needs of the rest of the WTO members.[15] By the same token, the UK would have to negotiate many of these treaties afresh.[16] Under the so-called “WTO option,” the UK would trade solely and exclusively within the WTO framework.[17] Because the UK would not have mutual obligations with the EU, it would be able to regulate its borders without outside interference or compromise.[18]On the other hand, experts also claim that this option might be economically unfeasible due to higher tariffs imposed on both imported and exported goods.[19] Could the UK, as a matter of strategy, predict whether it would be better positioned as an independent member of the WTO than as part of the EU, and use “Brexit” as a tool for negotiation? —it is unlikely. European leaders are “forbidden” from negotiating with the UK until after it submits its notification of withdrawal from the EU, as the President of the European Commission, Jean-Claude Juncker, prohibited EU officials from talking to UK’s government officials until after article 50 is invoked by the UK.[20] Juncker stated that he does not think EU officials “should condone shadow boxing or cat and mouse games.”[21]In other words, the EU leadership will almost certainly not let the UK use the referendum as a negotiation tool to gain more favorable post-Brexit terms or better its position within the community order. Further, whether the UK would be able to withdraw its notification of withdrawal from the EU is uncertain. Some argue that there is a “loophole” in article 50 that would allow the UK to retract from withdrawing.[22] However, the House of Lords has expressed that “[i]t is unclear whether a notification under Article 50, once made, could be unilaterally withdrawn by the UK without the consent of other EU member states.”[23] Whether the UK’s economic growth and trade relationships will be improved after new terms are negotiated remains to be answered. But it is evident that the cloud of uncertainty surrounding the political and procedural aspects of “Brexit” make the position of the UK relative to the rest of the WTO members hard to predict.

[1]Azevêdo Addresses World Trade Symposium in London on the State of Global Ttrade, World Trade Organization (June 7, 2016), https://www.wto.org/english/news_e/spra_e/spra126_e.htm. [2]’No Notification, No Negotiation’: EU Officials Banned From Brexit Talks with Britain, Rt   (June 28, 2016), https://www.rt.com/uk/348683-article-50-eu-brexit/ [hereinafter No notification, No negotiation]. [3] Treaty of Lisbon Amending the Treaty on European Union and the Treaty Establishing the European Community art. 50, Dec. 13, 2007, 2007 O.J. (C 306) 1 [hereinafter Treaty of Lisbon]. [4] See, e.g., Jens Rinze, Brexit: EU and UK Constitutional Requirements, Squire Patton Boggs: Brexit Legal (Aug. 16, 2016), http://www.brexitlegal.com/2016/08/brexit-eu-and-uk-constitutional-requirements/. [5] The Invoking of Article 50, www.parliament.uk, (2016), http://www.publications.parliament.uk/pa/ld201617/ldselect/ldconst/44/4404.htm#_idTextAnchor008. [6] Lynsey Barber, Boris Johnson Hints Article 50 Should Be Invoked Before May 2017, City A.M. (Sept. 25, 2016, 11:27 AM) http://www.cityam.com/250033/boris-johnson-hints-article-50-should-invoked-before-may. [7] October Court Date for Brexit Challenge, BBC NEWS (July 17, 2016) http://www.bbc.com/news/uk-politics-36834743.

[8] EU and WTO, European Commission, http://ec.europa.eu/trade/policy/eu-and-wto/ (updated Sept. 26, 2016).

[9] Id. [10] See Daniel Thornton, Leaving the EU Customs Union: What is Involved?, Institute for Government (July 28, 2016), http://www.instituteforgovernment.org.uk/blog/14403/leaving-the-eu-customs-union-what-is-involved/. [11] See EU and WTO, supra note 8. [12] See, e.g., Susana Mendonça, The European Union and the World Trade Organisation, (May 2016), http://www.europarl.europa.eu/ftu/pdf/en/FTU_6.2.2.pdf. [13] See EU and WTO, supra note 8. [14] See Larry Elliot, WTO Chief Says Post-Brexit Trade Talks Must Start From Scratch, The Guardian (June 7, 2016), https://www.theguardian.com/business/2016/jun/07/wto-chief-brexit-trade-talks-start-scratch-eu-referendum. [15] See Clair Gammage, UK Trade After Brexit: Is the WTO a Suitable Alternative? U. of Bristol L. Sch. Blog (June 2016), http://legalresearch.blogs.bris.ac.uk/2016/06/uk-trade-after-brexit-is-the-wto-a-suitable-alternative/. [16] See, e.g., Peter Ungphakorn, Nothing Simple About UK Regaining WTO Status Post-Brexit, International Centre for Trade and Sustainable Development, (June 27, 2016), http://www.ictsd.org/opinion/nothing-simple-about-uk-regaining-wto-status-post-brexit. [17] The World Trade Option and its Application to Brexit, EUReferendum.com (July 29, 2016), http://www.eureferendum.com/documents/wtooption001.pdf. [18] Jonathan Lindsell, Exit Option: The World Trade Organisation, Civitas (Feb., 2016), http://www.eu-facts.org.uk/content/files/EUF16_Exit-option-WTO-option.pdf. [19] See id. [20] No Notification, No Negotiation, supra note 2. [21] Id. [22] Jim Edwards, There’s a Loophole in Article 50 That Lets Britain Back into the EU Whenever we Want, Bus. Insider (Jul. 21, 2016), http://www.businessinsider.com/brexit-how-does-article-50-work-2016-7?r=UK&IR=T. [23] The Invoking of Article 50, supra note 5.