GATT 24: How Farage, Rees-Mogg and Boris want to use rare WTO Article to get Brexit done

In May 2018, Jacob Rees-Mogg said: “If you are in a negotiation for a free trade agreement, you can maintain your existing standards for ten years under WTO rules.

“So we have ten years from the point at which we leave the European Union to negotiate a free trade agreement with the EU which would mean we can carry on with our zero tariffs.”

In June 2019, Tory leadership frontrunner Boris Johnson said: “There will be no tariffs, there will be no quotas because what we want to do is to get a standstill in our current arrangements under Gatt 24, or whatever it happens to be, until such a time as we have negotiated the (free trade agreement).”

The claims have led to fierce debate about whether such an arrangement might actually be possible, offsetting the downfalls of a no deal Brexit.

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So what is Gatt 24?

Gatt 24 is Article 24 of the General Agreement on Tariffs and Trade.

Gatt 24 is a piece of World Trade Organization (WTO) law that allows tariff-free trade for up to 10 years while a permanent trade agreement is negotiated.

It applies to goods only – it has no effect on the trade in services or on issues such as regulations and standards.

Gatt 24 has been applied to interim agreements on rare occasions since the WTO was established in 1995, but never for anything as complex at the EU-UK relationship.

Could this be used for Brexit?

International Trade Secretary Liam Fox said: “In order to benefit from the terms of Article 24, there must be an agreement between two WTO members…Therefore, Article 24 would not, by itself, allow the UK to maintain tariff-free trade with the EU in the absence of a negotiated agreement.”

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The key point is that countries need some form of an agreement on trade to make use of Article 24.

So if the UK leaves the EU without a deal, it means there is no trade agreement, and therefore Article 24 will not be applicable and the UK will fall back on WTO rules without Gatt 24.

Of course, the UK could decide to continue applying zero tariffs to goods being imported from the EU to try to minimise the disruption to trade and prevent prices soaring.

But if it did that, it would have to apply the same zero-tariff to the rest of the world, due to Article 1 of Gatt.

Rules in Article 1 of Gatt set out the Most Favoured Nation (MFN) rules, which specify a country must offer the same terms to the whole world, not just one country or nation.

The problem here is that offering zero tariffs across the board would create a sudden influx of cheap produce in the UK, which would put a major strain on British companies and disrupt the economic balance.

There is also no guarantee that anyone would offer the UK free trade in return, meaning exports would become unaffordable.

The only way to bypass the MFN rules is to set up a customs union or free trade area, or have an interim agreement to enable the use of Gatt 24.

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But the UK will be back to the same problem: No deal, no room to invoke Article 24.

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Peter Ungphakorn, a former WTO secretariat official: “No deal means there is no agreement with the EU and therefore Gatt Article 24 doesn’t apply.”

The UK also cannot invoke Article 24 on its own, meaning the EU would have to agree to it.

EU Trade Commissioner Cecilia Malmstrom has said that the idea Article 24 could be used to avoid tariffs without an agreement was “completely wrong”.

She said: “They will have to trade with us and other countries, until there are trade agreements – and we hope that will be a trade agreement – on the ‘most favoured nation’ basis. And that will mean new tariffs.”



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