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Post Brexit Uk- EU Trade Under WTO
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DOI: 10.2139/ssrn.3025413
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Post Brexit UK- EU
Trade under WTO
- Saswati Mandal
Date – 16.08.2017
Electronic copy available at: https://ssrn.com/abstract=3025413

Table of Contents
Introduction ............................................................................................................................................. 2
Chapter 1 – UK’s Membership in the EU ............................................................................................... 8
1.1 A Prologue to UK’s trading relation with EU since 1973 ...................................................... 8
1.2 The Possible options after ‘Brexit’ ....................................................................................... 11
1.2.1 CETA Model ................................................................................................................. 11
1.2.2 Customs arrangement .................................................................................................... 12
1.3. The unescapable WTO ............................................................................................................... 13
Chapter 2 - Trade with EU under the WTO rules ................................................................................. 15
2.1 What is WTO? ...................................................................................................................... 15
2.2 UK a WTO member? ............................................................................................................ 17
2.3 UK-EU trade under WTO ..................................................................................................... 18
2.3.1 Rights and Obligations under the GATT ...................................................................... 19
2.3.2 Trade under GATS ........................................................................................................ 22
2.3.3 The Tariff Rate Quotas ................................................................................................. 24
2.3.4 Share of the EU agricultural subsidy commitments ...................................................... 25
2.3.5 Accession to the Government Procurement Agreement ............................................... 26
Chapter 3 – Post Brexit Trade Dilemma under WTO ........................................................................... 28
3.1 Applying an MFN Trade Rule on Goods .............................................................................. 29
3.2 Trading services under GATS............................................................................................... 31
3.3 Problems of Rectification and Modification ......................................................................... 32
3.4 Issues of subsidies and TRQs................................................................................................ 33
3.5 Trade under GPA .................................................................................................................. 34
Conclusion ............................................................................................................................................ 36
1|Page
Electronic copy available at: https://ssrn.com/abstract=3025413

Introduction
‘Brexit’ – one of the historical event of 2016, where the majority people of United Kingdom
(UK) voted to leave the European Union (EU) in the referendum held on 23 June, 2016.1
Such a historic event is likely to have serious consequences including, but not limited to,
agriculture, immigration, politics, domestic regulations, investments, trade and foreign
relations. This paper attempts a humble approach to provide a legal analysis of the UK’s trade
arrangement with EU after the Brexit, with specific consideration to UK’s position under the
WTO rules.
The Brexit referendum (or any referendum) is not necessarily binding unless the same is
required under the structure of the legislation which enables it.2 UK does not have any
legislation which provides for compulsory implementation of the referendum results.3 This
was therefore the UK Parliament’s discretion. In the landmark judgement of the Miller4 the
Supreme Court of UK held that the government cannot use the royal prerogative to trigger
Article 50, and can be triggered only with the authority of the Parliament.5 Following this
judgement and as per the provision under Article 50 (1) of Treaty of European Union (TEU)6,
the Parliament passed the Brexit bill on 17th March 2017, leading the way to trigger Article
50 and leave the EU after 44 years of partnership.7
Historically, UK’s inclusion in the EU started off as a trade endeavour. In 1960, UK joined
the European Free-Trade Association (EFTA), and eventually joined the European Economic
1
Referendum on the UK’s membership of the European Union, available on
https://www.electoralcommission.org.uk/find-information-by-subject/elections-and-referendums/past-elections-
and-referendums/eu-referendum, visited on 10, June 2017.
2
Sionaidh Douglas-Scott, ‘Brexit, The Referendum and the UK Parliament: Some Questions about Sovereignty’
(UK Constitutional Law, 2016), <https://ukconstitutionallaw.org/2016/06/28/sionaidh-douglas-scott-brexit-the-
referendum-and-the-uk-parliament-some-questions-about-sovereignty/> visited on 10, June 2017.
3
Ibid.
4
R (on the application of Miller and another) v Secretary of State for Exiting the European Union [2017]
UKSC 5.
5
Miller, [2017] UKSC 5.
6
Article 50 (1) of TEU states – “Any Member State may decide to withdraw from the Union in accordance with
its own constitutional requirements.”
7
Anushka Asthana, Rowena Mason and Lisa O’Carroll, Parliament passes Brexit bill and opens way to
triggering article 50, Monday 13 March 2017, https://www.theguardian.com/politics/2017/mar/13/brexit-vote-
article-50-eu-citizens-rights-lords-mps, visited on 16th July 2017.
2|Page
Community (EEC) in 1973.8 The EEC was changed to EU by the TEU (also known as the
Maastricht Treaty) on 1 November 1993.9 Further in 2007 the EU members adopted the
Treaty of Lisbon, which amended and updated the TEU and the Treaty of Rome, making UK
one of the existing members of the treaty of TEU and Lisbon Treaty.10
Prior to 2009, none of the EU treaties provided a clause on voluntary withdrawal of a

member from the treaties.11 The right to withdraw from the EU was initially proposed under
the Constitutional Treaty, which was never signed and therefore during the drafting of the
Lisbon treaty, the text included right to give a member state to voluntarily withdraw from the
EU was included.12 This was ratified and is now contained under Article 50 of the TEU.13
This clause has not been tested until recently when Brexit was triggered. In the past only the
state of Algeria and Greenland left the EEC in 1962 and in 1985 respectively.14 No
independent member state has ever left the EU and thus there is no precedent which could be
used as a reference to understand the withdrawal process.15
Article 50 (2) of the TEU requires that, post notification of a member’s intention to leave the
EU, a withdrawal agreement shall be concluded between the member state wishing to leave
and EU detailing the arrangements of the withdrawal.16 To start this process, UK gave notice
8
The EEC and Britain’s late entry, http://www.nationalarchives.gov.uk/cabinetpapers/themes/eec-britains-late-
entry.htm, visited on 12, June 2017.
9
Ibid.
10
Robert Wilde, The History of the European Union, March 25, 2017, https://www.thoughtco.com/the-history-
of-the-european-union-1221595, visited on 16th July 2017.
11
Mike Cuthbert, Article 50 TEU – The Beginning of the End?, Posted September 9, 2016 by Simon & Filed,
http://blogs.northampton.ac.uk/law/2016/09/09/article-50-teu-%E2%80%93-the-beginning-of-the-end/, visited
th
on 16 July 2017.
12
Ibid.
13
Article 50 states that a state can leave the EU in accordance with its constitutional requirements. It further lays
down the nature of a ‘withdrawal agreement’ and the process in which the withdrawal will take place. Article 50
also states that this withdrawal agreement should also include the framework that will be put in place for any
future relationship between the EU and the state withdrawing from the EU.
14
Cuthbert, M., n (11).
15
Swati Dhingra and Thomas Sampon, ‘Life after BREXIT: What are the, UK’s options outside the European
Union?’ (2016) LSE Center for Economic Performance, Paper Brexit 01.
http://cep.lse.ac.uk/pubs/download/brexit01.pdf, visited on 12, June 2017.
16
Article 50 (2) of TEU.
3|Page
to the European Council of its intention to withdraw on 29th March 2017.17 From that day
onwards, the two-year period started, within which UK and EU need to reach to an agreement
detailing the terms of exit. However, irrespective of either parties reaching an agreement on
the terms of leaving, exit will happen automatically unless there is a unanimous decision to
extend this period by the European Council in agreement with the concerned member states.18
Under the current Brexit withdrawal agreement negotiation, the EU on 22nd May 2017,
identified a two phased approach and has detailed the guidelines and the items that it would
negotiate.19 The EU has further refused to negotiate a future relationship agreement with UK
in parallel with the withdrawal agreement and has proposed to commence negotiation on this
agreement once UK has left the EU.20 Therefore, in the absence of a trade agreement, it is
highly likely that UK’s trade with EU will be impacted and therefore it would need to prepare
its trade rules and regulations for the period commencing after the signature of the
withdrawal agreement.
By virtue of UK’s membership with the EU, UK is able to transfer goods and deliver services
freely across the borders of all EU members. About 44% of UK exports in goods and services
went to the member states of the EU in 2016 and 53% of UK’s imports was from the EU
member countries.21 UK exported around £96 billion worth services to the EU in the year
2015 which amounted to 42% of the UK’s exports to the EU. On the other hand UK imported
17
Prime Minister’s letter to Donald Tusk triggering Article 50,
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/604079/Prime_Ministers_letter_t
o_European_Council_President_Donald_Tusk.pdf, visited on 12, June 2017.
18
Menelaos Markakis, ‘Legal Issues Arising from the Brexit Referendum: A UK and EU Constitutional
Analysis’, International Journal of Legal Information, (2017) Volume 45, Issue 1, page 14–23.
19
Special European Council (Art. 50), 29/04/2017, http://www.consilium.europa.eu/en/meetings/european-
council/2017/04/29/, visited on 17th July 2017.
The most important list of matters that the EU will negotiate at priority in the withdrawal agreement are –
1. Protect the rights of citizens of EU and UK and their family members affected by Brexit.
2. Financial settlement of the shares and obligations undertaken by UK as member of EU and the Brexit
specific cost and relocation of EU agencies based in the UK.
3. Safeguard free circulation of goods that are placed in both the markets prior to the withdrawal final
date.
4. Ensure a safe and peaceful relationship with regard to Ireland and avoid a hard border.
Directives for the negotiation of an agreement with the United Kingdom of Great Britain and Northern Ireland
setting out the arrangements for its withdrawal from the European Union, Brussels, 22 May 2017,
http://data.consilium.europa.eu/doc/document/XT-21016-2017-ADD-1-REV-2/en/pdf, visited on 17th July 2017.
20
Ibid.
21
Dominic Webb, ‘Statistics on UK-EU Trade’ Briefing Paper Number 7851, 6 January 2017, available at
researchbriefings.files.parliament.uk/documents/CBP-7851/CBP-7851.pdf, visited on 12, June 2017
4|Page
services from the EU worth £68 billion, which amounted to 48% of all UK services
imports.22 Given the statistic it is fairly clear that EU is the UK’s largest trading partner and
hence, post Brexit, the content of the future relationship agreement with EU becomes ever
more crucial.23 The Prime Minister in her Lancaster House speech on 17th January, 2017,
made it clear that UK will be leaving the single market and the customs union of the EU.24 As
an immediate step, UK have to conclude a new agreement covering trade relations with the
EU. UK would also require to draw up agreement with non-EU countries which have existing
trade agreements where UK as part of EU was also a party to. In the later stages, UK could
also seek new trade agreements with countries that do not currently have a deal with the EU.
Negotiating such agreements are complex and often lengthy taking multiple years and will
play an important role in shaping the UK’s economic future.25 However, given that the EU is
not willing to discuss the future relationship with the UK till it ceases to be a EU member,
UK’s trading relationship with EU and rest of the world will fall under the WTO, unless both
the countries reaches a transitional agreement with the withdrawal agreement. It is therefore
important to understand the rules and regulation of WTO with specific applicability to UK’s
future trade and this paper aims to address them in details.
The WTO provides a global multilateral agreement for trading goods and services between
member countries based on the fundamental principle of non-discrimination, the National
Treatment (NT)26 and Most Favoured Nation (MFN) 27
treatment. Trade under WTO rules
takes place as per the NT and MFN principles unless countries have entered into Free Trade
22
Dr Gabriel Gari, Trade implications of BREXIT, (23rd August 2016), available at
https://asiancorrespondent.com/2016/08/trade-implications-brexit/#DUPIKpMTqJdHBlbt.97, visited on 14,
June 2017.
23
House of Commons, International Trade Committee, UK trade options beyond 2019, HC 817, 7 March 2017,
https://www.publications.parliament.uk/pa/cm201617/cmselect/cmintrade/817/817.pdf, visited on 14, June
2017.
24
The government’s negotiating objectives for exiting the EU: PM speech, (PM Speech)
https://www.gov.uk/government/speeches/the-governments-negotiating-objectives-for-exiting-the-eu-pm-
speech, visited on 14 June 2017.
25
Thomas Sampson, Four principles for the UK’s Brexit trade negotiation, Centre for Economic Performance,
Paper Brexit 09, available at http://cep.lse.ac.uk/pubs/download/brexit09.pdf, visited on 14 June 2017.
26
The principle of giving others the same treatment as one’s own nationals. GATT Article 3 requires that
imports be treated no less favourably than the same or similar domestically-produced goods once they have
passed customs. https://www.wto.org/english/thewto_e/glossary_e/national_treatment_e.htm, visited 14 June
2017.
27
The WTO agreements and Article I of the GATT 1994, requires countries not to discriminate between goods
on the basis of their origin or destination.
5|Page
Agreements (FTA), Multilateral and Bilateral Trade Agreements or a Customs Union. Till
date, UK’s trade with rest of the world was through the EU membership. Post Brexit UK will
be trading as an independent member state of WTO.28 Establishing UK’s own WTO Schedule
of Concessions (Schedules) might be politically difficult task, given the same could require
consensus from 164 other WTO members.29 One of the easier way to establish UK’s schedule
of commitment without disrupting the current trade is by replicating the existing set of EU
Schedules. But the process of replicating and getting consensus is more challenging than
perceived. Dr. Liam Fox30 and Christian Häberli31 are of the view that replicating current
Schedules of EU is particularly problematic for sectors like agricultural products, given the
current quotas or subsidies or complex lower tariffs which are currently given under the EU
Schedules. How quickly and smoothly UK will be able to trade under the WTO rules terms in
its own right will depend much on its political willingness and economic diplomacy than on
law.
This paper aims to point out the scope of some of the key challenges and the complexities
that the UK will face with regard its trade with EU under the WTO rules, till a future
relationship agreement or FTA is reached. The paper is divided into three chapters. The first
chapter will set the scene by exploring the brief history of UK joining the EU and then
provide a clear picture of the trade relationship between EU and UK since then. Then it will
discuss the trade deals that the UK could refer to. However, given Prime Minister’s speech to
leave the single market,32 a number of possible future trade options gets ruled out (which
involves UK remaining in the single market). Finally the chapter concludes by establishing
why UK’s trade future under the WTO is inevitable irrespective of the FTAs it enters into.
The second chapter provides a detailed legal analysis of UK’s membership in the WTO, and
will establish that UK already possess all the rights and obligations under specific agreements
such as GATT, GATS and GPA. It will further establish that UK already has its Schedules
28
Christian Häberli, ‘Brexit without WTO-Problems: For the UK? The EU? Global Business?’ Global Trade
and Customs Journal, (2017), Volume 12, Issue 3.
29
Brexit Essentials: The World Trade Organization, September 2016, Available at
https://www.slaughterandmay.com/media/2535741/brexit-essentials-the-world-trade-organization.pdf, visited
on 14, June 2017.
30
James Blitz and Shawn Donnan, Liam Fox Opens Talks with WTO over Terms of Membership, Financial
Times (5 December 2016), available at https://www.ft.com/content/97d1c8ce-bb0b-11e6-8b45-
b8b81dd5d080?mhq5j=e2, visited 14 June 2017.
31
Häberli, C, n (28).
32
PM Speech, n (24).
6|Page
under the EU’s Schedules and post Brexit, UK will need to extract the same from the EU’s
Schedule and continue its trade even if the same is not certified by WTO members, unless
there is a dispute settlement establishing differently.
After establishing how UK can trade under the WTO rules after Brexit, the third chapter aims
to discover the procedural and practical difficulties that UK might face while trading with the
EU under the WTO rules. It will discuss the issues of getting consensus in the WTO trading
system, the trade impacts and the problems of sharing or determine its subsidies, TRQs, and
accession in various WTO agreements.33
Overall, this paper aims to understand the UK-EU trade under the WTO regime in order to
enable UK government to minimize trade disruption and also negotiate a better trade
agreement. After establishing the clear picture of UK’s position as a WTO member and its
rights and obligations post under the WTO, the paper will conclude with the suggestions on
the UK’s bargaining power and the points to negotiate a better trade deal with the EU.
33
Häberli, C, n (28) at 90.
7|Page
Chapter 1 – UK’s Membership in the EU
UK’s decision to leave the EU has led to extensive analysis about the leave process and the
implications for UK. The day UK ceases to be an EU member, both parties relationship will
change substantially. To evaluate and comment on the forthcoming changes it is important to
be apprised of the existing relationship with the EU and perform a cost benefit analysis of the
same. Currently, EU is a customs Union of 28 countries, creating the largest economy and
single market in the world.34 Given the limitation of space, this chapter will focus on the
UK’s current trading relationship with the EU and analyse its trading success.35 It is essential
that we discuss the past relationship to predict the impact of Brexit and the possible future
relationship. This will ultimately set the background for the next chapters where we establish
UK’s rights and obligation to trade under WTO and its implications.
The below sections will give a brief overview on how UK became the member of the EU and
the journey till date. The later part of this chapter will go on to give a brief details on the
prospective future relationships that UK government seems inclined to have with EU and
finally setting the background for trade under the WTO rules.
1.1 A Prologue to UK’s trading relation with EU since 1973

In 1960, Britain along with Switzerland, Austria and the Scandinavian countries formed the
EFTA to facilitate free trade amongst the contracting members.36 During this time period,
the EEC, led by Western Germany, Italy and France had a better success.37 Thereafter, in
1963, UK proposed to join the EEC which was then rejected by the French President Charles
De Gaulle. UK made a second proposal to join the EEC in 1967 but was again rejected by
President Charles de Gaulle.38 Third time lucky, in 1973, UK was able to join the EEC
successfully.39
34
EU position in world trade, http://ec.europa.eu/trade/policy/eu-position-in-world-trade/index_en.htm, visited
on 17 July 2017.
35
Nauro Campos, Fabrizio Coricelli, Some unpleasant Brexit econometrics, 11 December 2015,
http://voxeu.org/article/some-unpleasant-brexit-econometrics, visited on 17 July 2017.
36
EFTA through the years, http://www.efta.int/about-efta/history, visited on 17 July 2017.
37
Alistair Jones, Britain and the European Union, Edinburgh University Press Ltd, 2007, page - 13-16,
http://richardmajor.com/teaching/Milestone/Britain/Jones.pdf, visited on 17 July 2017
38
Jones, A. n (37) at 15.
39
Jones, A. n (37) at 15.
8|Page
The concept of single market was first introduced in 1957 by the Treaty of Rome. The aim
of single market was to integrate the European market by providing four fundamental
freedoms - the freedom of movement of goods, services, capital across the borders and
people.40 The Treaty of Rome was later succeeded by the EEC and the total number of
member were six in 1958. The EEC, since has since 1958, grown to become a political and
economic union of 28 countries. Integration of the economic market of 28 member states by
enabling free movement of goods, services and people led to trade liberalization, economic
development with increased efficiency for all EU member including UK.41
Through the membership of the EU, UK reaped the benefits of being part of single market,
achieving significant growth in GDP and economic success. From the period of 1973 to
2010, UK’s GDP rose to about 55%.42 Access to the single market has further led to removal
of tariffs within the customs union of the EU members, allowing cheaper trade in goods and
service within the entire trading block. The free movement reduced non-tariff barriers by
eliminating border controls, checks on rules-of-origin, and threats of anti-dumping (given
the harmonisation of the safety and product standards across the EU members). These
further reduces time43 and administrative costs to complete a transaction. In contrast to this,
the average tariff rate the WTO members applied to imports of countries with which they do
not have any preferential agreement was around 9% in 2013.44 These reductions in trade
barriers have proven to be the most important factor for the increased trade between the UK
and other EU members.45
40
Economic integration and the “four freedoms”, The Economist, (United Kingdom, 08 Dec 2016),
https://www.economist.com/news/finance-and-economics/21711327-why-free-movement-labour-essential-
europes-economic-project-economic, visited on 17 July 2017.
41
Jones, A. n (37) at 15-16.
42
Campos, S.N., Coricelli, F., n (35).
43
Reduction of transaction time and administrative cost at the bored is specifically important for perishable
goods and time sensitive industry. Industries which Pan-European supply chain such as aviation and automotive
will be highly impacted by the non-tariff barrier and the resultant checks and other administrative activities. A
delay of 1 hour at the customs can increase ad valorem cost and therefore increasing the cost of products which
might lead to decrease in trade. Further, for perishable products such as meat, fish, vegetables and fruits, longer
it takes at the border higher is the cost and the quantity of sale will reduce.
https://www.uktradeinfo.com/Statistics/Pages/Monthly-Tables.aspx, visited on 17 July 2017.
44
Trade and Tariffs, https://www.wto.org/english/thewto_e/20y_e/wto_20_brochure_e.pdf, visited on 17 July
2017.
45
John Van Reenen, Brexit’s Long-Run Effects on the U.K. Economy, Brookings Papers on Economic Activity,
fall 2016, https://www.brookings.edu/wp-content/uploads/2017/02/brexits-long-run-effects-john-van-
reenen.pdf, visited on 17 July 2017.
9|Page
The trade for UK with other EU members increased from around 35% in 1958 to 50% in
1973, after joining the EEC.46 Further, the statistics of HM treasury shows that with the EU
memberships, trade share for UK rose for countries outside the custom union.47 UK’s
membership in the EU has led it to enjoy the most amount of Foreign Direct Investment
(FDI) from all over the world. Multiple non-EU countries access the European market
through UK.48 Further, UK’s trade is not restricted to EU and in fact UK through EU has
been able to access to global markets through multilateral trade agreements and,
increasingly, bilateral agreements with other countries.49
One of the UK’s most important trading sectors are the financial and insurance services. In
2016, these services amounted to 7.2% of UK’s total Gross Value Added (GVA) and
employed over one million people (3.1% of total employment),50 accounting for almost a
quarter of total UK exports. Financial services amounts up to around 3% of UK’s GDP,
which is twice the average in EU level and thrice the average OECD level.51 Single market
and the openness of services has attracted FDI across the globe. The entry of foreign firms
led to sector-wide gains increasing UK’s GDP and growth.52
From the facts above it is clear to conclude that UK had a prosperous and growing economy
through the EU membership. Following Brexit and till UK manages to reach preferential
trade deals with EU and other bigger trading economies, UK will need to trade under the
WTO rules. Under this UK’s growth might be stagnant or even fall. A detailed analysis is
provided in Chapter III below.
46
Campos, S.N., Coricelli, F., n (35).
47
HM Treasury analysis: the long-term economic impact of EU membership and the alternatives, April 2016
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/517415/treasury_analysis_econo
mic_impact_of_eu_membership_web.pdf, visited on 17 July 2017.
48
Foreign banks establish in the UK so that they can access they EU market under the single market.
49
UK could access the markets of Canada, Chile, Mexico, Caribbean states and Korea trough FTAs that was
entered by EU. The EU and preferential trade with third countries,
https://publications.parliament.uk/pa/ld201617/ldselect/ldeucom/129/12910.htm, visited on 17 July 2017.
50
The financial sector’s contribution to the UK economy, Tuesday, April 4, 2017;
http://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN06193, visited on 17 July 2017.
51
Leaving the EU: an assessment of its impact on services and trade, London First, http://londonfirst.co.uk/wp-
content/uploads/2016/06/Leaving-the-EU-impact-on-trade-June-2016.pdf, page 10, visited on 17 July 2017.
52
Ibid.
10 | P a g e
1.2 The Possible options after ‘Brexit’
As mentioned earlier, the Prime Minister declared that UK will be leaving the single
market.53 However following the general election in 23rd June 2017, the government lost
majority support casting doubt on its intention to leave the single market.54 Nevertheless,
the following section will discuss the trade arrangements which the UK government is
deliberating on. Currently, the negotiation of the withdrawal agreement is underway, but
the EU has refused to negotiate future relationship agreement with UK until UK have left
the EU.55 During its negotiation of a future relationship agreement, UK is likely to adopt a
mixture of FTAs and customs arrangement. This chapter discusses mainly two types of
arrangements that the UK might consider. However, it is likely that UK will be interested in
negotiating trade agreement(s) which are beyond the model trade agreements already in
place.
1.2.1 CETA Model
EU and Canada entered in to CETA on 30 October 2016.56 The characteristic features of

this agreement are as follows57 –
a. Provide almost free trade, i.e. 98% of EU goods can enter the Canadian border
with zero tariff.
b. EU can bid for Canada’s public procurement.
c. Eliminating trade barriers in the service sector by allowing mutual recognition of
qualifications.
d. Conservation of Geographical Indicators;
e. Reduce non-tariff barriers and simplify the border regulation by certification.
This agreement covers areas which has not been negotiated in any other exiting FTA with
EU (for example reduction of non-tariff barriers) and UK would benefit to adopt this
53
PM Speech, n (24).
54
Results of the 2017 General Election, BBC, (United Kingdom, 09 June 2017)
http://www.bbc.co.uk/news/election/2017/results, visited on 18 July 2017.
55
Special European Council, n (19).
56
Alternatives to membership: possible models for the United Kingdom outside the European Union, March
2016,
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/504661/Alternatives_to_member
ship_possible_models_for_the_UK_outside_the_EU_Accessible.pdf, visited on 18 July 2017.
57
Professor Richard Whitman, Oh Canada? An alternative for the UK after Brexit, 08 February 2016,
https://blogs.kent.ac.uk/uk-eu-ref-watch/2016/02/08/oh-canada-an-alternative-for-the-uk-after-brexit/, visited on
18 July 2017.
11 | P a g e
aspect of the agreement. Further, getting into a FTA would save UK the membership fees
and also the rights to enter into FTAs with other countries. While these aspects of the
CETA is useful but it is worth noting that this does not include financial services. The
financial sector is very crucial to UK and contributed around £71.4 billion in tax
payments in 2016.58 Further, under this agreement Canadian retail and investment banks,
insurance and pension companies, as well as investment funds, are required to set up
subsidiaries in EU to provide services to the EU members.59 Given the scope of this
agreement, it is only fair to state that the CETA model is not particularly appealing for
UK. Therefore, it is most likely UK might want to pick the aspect of reduction of non-
tariff from this model during its negotiation.
1.2.2 Customs arrangement
UK is at present in the customs union with EU. Under the customs union any goods can
be moved across the borders freely without facing any customs duty or other barriers.60
This helps in keeping the price low and faster delivery to final destination without facing
other non-tariff barriers. According to an OECD estimate of trade costs, the inefficiencies
with regard to the border clearance can add up to 10 % of the value of goods.61 As per
KPMG report, imports to EU are subject to on average 135 different rates of customs duty
and faces several classification of goods.62 In the absence of custom union and no free
movement of goods, customs clearance could take days. If UK is out of the customs
union, the food sector, sectors involving trading of perishable goods and pan-European
industry will incur increased costs and take significant business hits. A detailed
explanation on the impacts on trade if UK leaves the customs union without an
arrangement and trades under the WTO is provided in Chapter 3.
58
Total Tax Contribution of UK Financial Services, published by the City of London Corporation, 9 th Edn.
December 2016; https://www.cityoflondon.gov.uk/business/economic-research-and-information/research-
publications/Documents/research%202016/total-tax-report-2016.pdf, visited on 18 July 2017.
59
Whitman R. n (57).
60
By contrast, goods from outside the Customs Union face considerable nontariff barriers such as customs
clearance processes and various regulatory challenges in addition to the external tariffs.
Bob Jones, Brexit and trade: How Theresa May can navigate the customs conundrum, January 2017
https://home.kpmg.com/content/dam/kpmg/uk/pdf/2017/01/brexit-trade-theresa-may-can-navigate-customs-
conundrum.pdf, visited on 18 July 2018.
61
Ibid.
62
Jones. B., n (60).
12 | P a g e
It is thus clear that UK will be aiming for elimination of all customs tariff and quotas but
not ready to agree to a common external tariff. UK does not want to be deprived of its
sovereignty to form its own trade policy. UK would therefore need to negotiate an
agreement with the EU to reduce all trade barrier and have zero tariff.
1.3. The unescapable WTO
WTO rules provide the base structure and regulates almost all aspects of international trade.
Trade agreements such a bilateral, FTAs or any customs unions are built around the WTO
rules. Therefore, irrespective of what the UK government agrees in the withdrawal
agreement or in future relationship agreement, the trade aspect has to be WTO compliant. It
is only a matter of whether UK has to trade under the MFN principle (Article II, GATT and
Article II, GATS) or under an interim agreement under Article XXIV (5) of GATTs and
economic integration agreement under Article V of GATs. However, the WTO does not
cover all areas of trade such as regulatory restrictions, geographic indicators or standards
therefore, giving scope to rise of non-tariff barrier,63 and hence most countries seek FTAs
to enable smooth trade and eliminate non-tariff barriers.
The day UK ceases to be a member of the EU, it will be responsible to represent itself at the
WTO and its trade policies will no longer be determined by EU. This new reallocation of
position will cause new opportunities and challenges in the WTO. UK will need to ensure
continuity of its trade and also be WTO compliant. Currently UK’s Schedule is bundled
with that of EU. Post Brexit, it would need to establish its own Schedule and minimise
trade disruption.64
Given the current political scenario, it is likely that once UK establishes its Schedule, trade
will continue under the MFN rules. A detailed analysis of trade with EU under the WTO is
provided in Chapter II.
Overall, EU by creating single market has led to trade liberalisation and openness through
removing internal trade barrier and diminishing administrative and regulatory obstacles. This
led to increase in jobs, improved productivity, competition and movement of both people and
capital. Since joining the single market, UK’s economy has been growing with financial
services being the key to UK’s economic growth. Monique Ebell argues that UK’s GDP
63
UK trade options beyond 2019, n (23).
64
The UK’s position in the WTO, Bar Council Brexit Working Group, 3 rd Edition,
http://www.barcouncil.org.uk/media/575749/brexit_paper_21_-_wto.pdf, visited on 18 July 2017.
13 | P a g e
might be 7.8% lower after 15 years from the date UK enters into a FTA with EU as compared
with what it could have been if it remained in the EU.65 Currently, any future relationship
agreement will be negotiated once UK has left the EU. Therefore, on the day UK leaves the
EU, the trade will fall under the WTO rules and all preference will cease unless the UK
government negotiates an interim agreement with the EU along with the withdrawal
agreement. Without any transitional arrangement or a FTA, UK’s business will incur
significant changes, uncertainty and huge tariff costs under the existing rules of WTO,
thereby adversely affecting the GDP. Uncertainty always affects an economy adversely.
Therefore, unless the terms and impacts of Brexit are clear UK’s economy will be effected at
least in the short term. It is therefore important to analyse UK’s position outside the EU on
the trading rights and obligation it will have under the WTO rules. The following chapter will
give a legal analysis of UK’s position in the WTO and how it can trade with the EU keeping
in best interest of trade in mind.
65
Monique Ebell, Rebecca Piggott, James Warren, The Long and the Short of it: What price UK Exit from the
EU?, 12 May 2016, https://www.niesr.ac.uk/blog/long-and-short-it-what-price-uk-exit-eu, visited on 18 July
2017.
14 | P a g e
Chapter 2 - Trade with EU under the WTO rules
While the aftermath of Brexit is yet to be clear, it will definitely change the trading relationship
between EU and UK. As evident from the current EU Brexit guidelines, trade discussion will
start once UK ceases to be a member of the EU.66 Till the period a trade agreement is
negotiated, UK will continue to trade with EU and other countries under the WTO rules.
The WTO, is the most successful multilateral trading system. It operates on the principle of
non-discrimination, reciprocity and negotiation. It aims to reduce trade barriers, liberalize
trade and provide assistance to developing and least developed countries to open up their
markets to trade.
Contrary to popular belief, leaving the EU does not require UK to apply for new accession
for membership in the WTO. UK is a member of the WTO in its own rights. The difficulty is
to determine whether membership of the WTO would allow UK have unhindered trade and
whether UK could continue with the existing trading rules on market access for its imports
and exports.67
This chapter will start with first setting the scene with brief details on the function and rules
and regulations under the WTO. It will move on to establish that UK is a member of WTO,
its obligation and rights under the different agreements of the WTO and how UK could trade
with EU under the rules of the respective agreements. It is further established that UK’s
position under the WTO realm does not gets affected with Brexit. However, there are certain
difficulties to continue under the same rights and obligations and will need to negotiate those
with the other WTO members.
2.1 What is WTO?

WTO was the first multilateral organisation developed through a series of trade negotiations,
held under GATT 1947.68 Contracting parties under the GATT 1947 first started discussion
from the Uruguay Round negotiations in 1986 at Punta del Este, with the aim of reduction of
tariff barrier, but then slowly moved on to the burning issues of anti-dumping measures and
66
67
Häberli, C, n (28) at 90.
68
The GATT years: from Havana to Marrakesh,
https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact4_e.htm, visited on 18 July 2017.
15 | P a g e
the rising non-tariff barriers.69 In the last round of negotiation of the Uruguay Round in 1995,
the Marrakesh Agreement Establishing the World Trade Organization (Marrakesh
Agreement) was signed.70
The WTO is built on principles of non-discrimination, unfair trade practices, rules on special
and differential treatment for developing countries, and harmonisation of specific national
regulation.71 It has its own dispute resolution system with compulsory jurisdiction and a
decision making body. These substantial and procedural rules makes WTO a multilateral
trading system.72 However, all these principles are based on negotiations and good will
among the members. The current WTO agreements are the outcome of commitments that
countries have voluntarily negotiated with each other since 1947.73 Under the Marrakesh
Agreement the basic principles of trade remained essentially unchanged from that of under
the GATT 1947. The GATT 1947 text was annexed to the Marrakesh Agreement and was
renamed as GATT 1994. This agreement lays down the rule and regulation for trade in goods.
During the Uruguay Round, other agreements covering specific sectors such as agriculture,
technical barriers to trade, anti-dumping, intellectual properties, subsidies and sanitary
measures were negotiated and annexed to the Marrakesh Agreement.74 All the agreement
annexed to the Marrakesh Agreement applies equally and are binding on all WTO members.
The provisions of these agreements represents ‘an inseparable package of rights and
disciplines which have to be considered in conjunction.’75 The success of WTO mainly lies
with the principle of non-discrimination, reciprocity and negotiation. This non-discrimination
principle is laid down mainly through the principle of MFN and NT obligation. Once UK
leaves the EU, it will need to trade under the principle of WTO and thereby apply equal
treatment for market access to every WTO member without any preference.
69
Peter Van Den Bossche, The Law and Policy of the World Trade Organization: Text, Cases and Materials,
(Cambridge University Press, 2nd edition, 2008) page – 20-40.
70
Ibid.
71
Bossche. P. V. D., n (69) at 40-41.
72
Bossche. P. V. D., n (69) at 41.
73
Chad P. Bown, “The WTO and GATT: A Principled History, Self-Enforcing Trade: Developing Countries
and WTO Dispute Settlement”, Brookings Institution Press, Washington, D.C., 2009, pp. 10–21.
www.jstor.org/stable/10.7864/j.ctt127wbd.5, visited on 19 July 2017.
74
Introduction to WTO Basic Principles and Rules, WTO E-learning,
https://ecampus.wto.org/admin/files/Course_385/Module_1562/ModuleDocuments/BP-L1-R1-E.pdf, visited on
19 July 2017
75
Argentina – Safeguard Measures on Imports of Footwear, WT/DS121/AB/R, adopted 12 January 2000, DSR
2000:I (para 81)
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2.2 UK a WTO member?
To analyse UK’s trading future with EU and rest of the world, it is first essential that we
establish whether UK is a member of WTO. Article XI of the Marrakesh Agreement provides
for the terms of original membership in the WTO.76 As per the text of the Article XI (1), a
state has to accept the Marrakesh Agreement as a whole and have its schedule of specific
commitments under GATT 1994 and GATS annexed to become the member of WTO. UK
has been a member of the WTO since 1 January, 1995 and a member of GATT, 1947 since 1
January, 1948.77 During the formation of the WTO, UK was already a member of EU. Since
EU is a customs union, there was no separate schedule of commitments but one single
commitment on behalf of the members of the customs union. Nevertheless, every member of
the EU and EU itself as an entity, are the original members of the WTO. Bossche argues that
the reason for EU itself and all its members to be individually members of the WTO lies in
the way the EU constitution was structured.78 He further argues that during the time of
accession into the WTO, it was unclear whether the EU (then European Community) had the
necessary competency to enter into Marrakesh Agreement on behalf of all its members.79
Therefore, both the EU and all its members are full members of the WTO and all the
obligations of WTO apply equally to all of them.80
76
Article XI, Marrakesh Agreement. This article states that, “The contracting parties to GATT 1947 as of the
date of entry into force of this Agreement, and the European Communities, which accept this Agreement and the
Multilateral Trade Agreements and for which Schedules of Concessions and Commitments are annexed to
GATT 1994 and for which Schedules of Specific Commitments are annexed to GATS shall become original
Members of the WTO.”
77
United Kingdom and the WTO, https://www.wto.org/english/thewto_e/countries_e/united_kingdom_e.htm,
visited on 18 July 2017.
78
Bossche. P. V. D., n (69) at 104.
79
Bossche. P. V. D., n (69) at 104.
80
Bossche. P. V. D., n (69) at 104.
Regarding the UK’s status as a member of the WTO, the Director General of the WTO, Roberto Azevêdo, stated
as follows in October 2016:
“The UK is a member of the WTO today, it will continue to be a member tomorrow. There will be no
discontinuity in membership. They have to renegotiate [their terms of membership] but that doesn’t mean they
are not members. Trade will not stop, it will continue and members negotiate the legal basis under which that
trade is going to happen. But it doesn’t mean that we’ll have a vacuum or a disruption.”
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Bartels supports this view by drawing reference to footnote 2 of Article XI of the Marrakesh
81
Agreement. It refers to the right of EU members to vote. It recognises that EU can vote on
behalf of its members, but the total number of votes of the EU and its members cannot in any
case be more than that number of the states comprising the EU.82 It can therefore be agreed
that the WTO clearly recognises the individual rights and obligations of the EU members
along with the EU under the WTO system.
This view can be further confirmed by the Panel’s decision in EC/Certain MS – Airbus.83 In
this dispute a claim was initially brought by the US against Germany, France, the United
Kingdom, and Spain and with the European Communities concerning measures which affect
large civil aircraft trade.84 EU requested to remove the EU Member as respondent, making
EU as the sole respondent. This request was rejected by the Panel and they stated that each of
the respondents in their own rights are a member of the WTO and they have all the rights and
obligations by virtue of such membership.85 The Panel further commented that just because
under Article XI of the Marrakesh Agreement, EU gets to vote for all its members and takes
responsibilities for its members, it does not take away or diminish any rights and obligations
of its member from that as their WTO membership.86
From the WTO texts, WTO panel decision and the above discussion, it is clear that UK is an
original member of the WTO in its own individual right. Therefore, UK will not be required
to negotiate its membership in the WTO once it leaves the EU.
2.3 UK-EU trade under WTO

The preceding section already establishes that UK is a member of the WTO and that it has all
the rights and obligation under the WTO similar to that of the other WTO members. Unlike
present day, post Brexit, UK will represent itself in the WTO forum and performs its rights
and obligations individually like any other WTO members who are not a part of EU. UK’s
membership and continued rights and obligation under the WTO has been established and
there is not any contention with that regard, however, as Mr Azevêdo puts it, the terms of the
UK’s membership in the WTO is much contented. Can UK just continue business as usual
81
Lorand Bartels, ‘The UK’s Status in the WTO after Brexit,’ (September 23, 2016) page – 1-22,
https://ssrn.com/abstract=2841747, visited on 19 July 2017.
82
Footnote 2 of Article IX (1) of the Marrakesh Agreement.
83
WTO Panel Report, EC and Certain Member States – Large Civil Aircraft (Airbus), WT/DS316/R, adopted 1
June 2011.
84
EC/Certain MS – Airbus; n (83).
85
EC/Certain MS – Airbus, n (83) at para 7.174
86
EC/Certain MS – Airbus; n (83); at para 7.175
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and if that will be accepted by the WTO member? To comment on that, the following
subsection will establish UK’s position after Brexit with regard to its obligation under
GATTs, GATs, TQRs and Agriculture subsidies and how these rights and obligation are
important for UK-EU trade.
2.3.1 Rights and Obligations under the GATT

One of the primary goal of WTO is to minimize regulatory barriers between countries. It
permits the imposition of customs duty and other duties or financial charges and forbids
imposition of any quantitative restrictions or other non-tariff barriers. As per Article XXVIII
bis of the GATT, WTO members are required to negotiate mutually with other members and
reduce imposition of tariffs.87 Tariff negotiations are based on reciprocity and mutual
advantage88, and the MFN treatment obligation. These negotiations often results in tariff
reduction and concessions, which are then set out in the Schedule.
Article II of GATT provides a purpose of Schedules and the rules for trade for member who
have submitted a Schedule. It provides that during the point of import, the maximum customs
duty that a member can impose cannot exceed what is provided for in the Schedule. 89 This is
also known as ‘Bound Tariff’.90 The content of the Schedules can be modified or renegotiated
by members under Article XXVIII of the GATTs.91 Thus it can be concluded that the purpose
of Schedules are mainly for transparency. It is an important indicator for countries exporting
to determine if the customs duty they face at the point to export is WTO bound or not.92
One of the biggest debate currently is whether post Brexit UK will need to establish its own
Schedules through negotiation with the remaining 163 countries or whether UK, being
member of WTO on its own rights, already have its own schedule of concession and can
continue with the same.
87
Article XXVIII Bis, Tariff Negotiations,
https://www.wto.org/english/res_e/booksp_e/gatt_ai_e/art28bis_e.pdf, visited on 19 July 2017.
88
According to the principle, where a Member requests another Member to reduce its tariffs on certain products,
it must also be prepared to reduce its own tariffs on products of export interest to the Member to whom the
request is made.
89
Article II of GATT.
90
Bossche. P. V. D., n (69) at 465-466.
91
Introduction to WTO Basic Principles and Rules, WTO E-learning, n (77).
92
Bossche. P. V. D., n (69) at 465.
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To comment on this point, as Bartels argues,93 we need to first understand the legal
obligations under GATT to determine UK’s Schedules. As he rightly points out, under WTO
the requirement to add schedule arises only at the point of original membership or accession
to the WTO under Article XI of Marrakesh Agreement. Article XI states that any member of
GATT 1947 who accepts the Marrakesh Agreement and for which Schedules are annexed to
GATT, can become the original members of the WTO. From the text of this Article it can be
said that the words ‘for which’ in Article XI (1) means that schedule of concession can be
submitted on behalf of a member. Further as per Article 31 of the Vienna Convention of the
Law of the Treaties, a treaty should be read in good faith and in accordance with the ordinary
meaning of the text in the light of its object and purpose. 94 Therefore, it is fair to conclude
that, Article XI can be interpreted to include situation of members of customs union for
whose Schedules were submitted by one member. Therefore in agreement with Bartels, it can
be rightly established that since January 1995, UK had its own schedule of concession which
was submitted on its behalf by EU. This also, aligns with the Panel’s decision on EC/Certain
MS – Airbus95 and Bossches’ view that every member of the European Union has its own
rights and obligations.96
Given the legal validity of UK’s schedule, the problem that lies ahead of UK is more of
political in nature. If the remaining 163 countries will accept UK’s continuing rights and
obligation under the Schedules that were submitted by EU is uncertain. The problems with
continuing with the EU Schedules as UK’s own is that UK might not be able to agree to the
same level of Tariff Rate Quotas (TRQ) and subsidies for farmers and agriculture that has
been agreed by the EU. UK will need to set for its own TRQs and subsidies and therefore will
require renegotiation or modification of concessions and subsidies under Article XXVIII of
GATT. The current stand of UK government, as mentioned by Secretary of State for
International Trade, Dr Liam Fox MP, is that UK will opt for a technical rectification, rather
than a modification.97
93
Bartels. L., n (81) at 3-7.
94
Article 31(1) of the Vienna Convention on the Law of Treaties.
95
EC/Certain MS – Airbus; n (83);
96
Bossche. P. V. D., n (69) at 40-42.
97
International Trade Committee Oral evidence: UK trade options beyond 2019 HC 817-vii Wednesday 1
February 2017,
http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/international-trade-
committee/uk-trade-options-beyond-2019/oral/46903.pdf, visited on 20 July 2017.
20 | P a g e
As per the Decision of 26 March 1980 on Procedures for the Modification and Rectification
of Schedules of Tariff Concessions (Decision),98 a certification process was agreed, whereby
changes could be made to authentic texts which were annexed to the GATT. This
certification process allowed for rectification of Schedules which were of a purely formal
character. Under this process a member state cannot alter the scope of concessions that is
already provided for, but can only make technical change.99 This process of certification
provides that acceptance is implied unless the same is formally objected by a member state
within thirty day of proposal of rectification. This is therefore a preferred mode over
modification or re-negation which requires rounds of negotiations becoming time consuming
affair.
Bartels argues that as per paragraph 5 of the 1980 Decision100, UK can submit a new schedule
to the GATT 1994 under the category ‘change which does amount to modification’. This
process could also relieve UK from going through the procedures for modification.101
However, this argument can be problematic and is not supported in the current paper. This
clause has been used in the past by states who acquired new independence. They usually
inherit the pre-existing schedule of concessions which were there under the colonised stated,
which they would prefer to as an independent new WTO member.102 For such states, any new
schedule submitted to the WTO members is considered as changes not amounting to
modification.103
For UK, the current situation is not particularly that of a colonised state which gained
independence. Being a part of Customs Union is a separate legal arrangement and
furthermore UK as a country is already a member of WTO. There is no new accession to
WTO required and hence we cannot exactly compare UK to that of a newly gained intendent
98
Paragraph 1 of the GATT Contracting Parties, Procedures for Modification and Rectification of Schedules of
Tariff Concessions, Decision of 26 March 1980, L/4962, provides that “Changes in the authentic texts of
Schedules annexed to the General Agreement which reflect modifications resulting from action under Article II,
Article XVIII, Article XXIV, Article XXVII or Article XXVIII shall be certified by means of Certifications.”
99
Hunter Nottage, ‘Giving Legal Effect to the Results of WTO Trade Negotiations: An Analysis of the Methods
of Changing WTO Law’, Journal of International Economic Law, (2006), vol. 9 edn. 4, at 989.
100
The procedure of Certification under this Decision may be applied for the establishment of consolidated
Schedules or of new Schedules under paragraph 5(c) of Article XXVI, wherein all changes are modifications or
rectifications referred to in paragraphs 1 or 2.
101
Bartels. L., n (81) at 7.
102
ARTICLE XXVI, GATT, https://www.wto.org/english/res_e/booksp_e/gatt_ai_e/art26_e.pdf, visited on 20
July 2017.
103
21 | P a g e
state. Therefore, the application of Paragraph 5 of the 1980 Decision might not be feasible in
its literal sense. Thereby, if UK wants to introduce new Schedules, it might have to go
through a long route of negotiation with all the members.
In parallel to establishing UK’s own tariff Schedules, trade with EU will start from the date
of Brexit will happen as per MFN rules under Article 1 of the GATT. Article I is further
complemented by Article XIII of the GATT which states that if any quantitative restrictions
or tariff quotas is imposed then the same should be in a non-discriminatory manner. Under
the above provisions UK is required to extend MFN treatment to like products from all WTO
Members regarding the customs duty, internal taxes and charges, and internal regulations.
The same will be the case for EU, and UK will not enjoy zero tariff and barrier free tariff
from EU. EU will need to extend similar treatment to UK that it does to other WTO
members. GATT provides exception to MFN rule under Article XXIV, when WTO members
forms regional FTAs, including customs union, preferential FTAs. Therefore, unless an
interim agreement set out the trading rules for EU and UK, post Brexit trade will be under
MFN regime with not free access to European market.
2.3.2 Trade under GATS

GATS is the first multilateral agreement which covers international trade in services. The
primary principle of non-discrimination and reduction of trade barrier are similar to that of
GATT. Nevertheless, the rules of market access is significantly different than that of GATT.
Under Article I of GATS, supply of service happens mainly through four modes - cross
border supply from one member to another; consumption of services abroad where the
customer travels to receive a service; commercial presence of a service provider, and
presence of natural persons.104 Members can accept different commitments and limitations
associated with each mode of supply and are bound only by the sectors they make
commitments in the Schedules.105
EU and its members jointly submitted their respective Schedule with specific
commitments.106 Article XX of the GATS requires WTO members to annex the Schedule for
104
Article 1 of GATS.
105
Umut Turksen & Ruth Holder, ‘Contemporary problems with the GATS and internet gambling’, (2015)
Journal of World Trade, Volume 49, Issue- 3, Page. 460.
106
Bartels, L., n (81) at 12
22 | P a g e
itself, unlike that in GATT.107 The reason for such requirement is primarily because during
accession, the European court of justice held that European Communities (EC), now
European Union, did not have the competency to become a member of the GATS and TRIPS.
Therefore, EC had to get into a “parallel membership” with its member states in the WTO
and each member state submitted their own schedule. 108
Given, the GATs schedule of commitment was individually submitted by the UK, it is easier
to establish that UK already has its schedule and post Brexit trade will commence under the
same. The process of rectification of the GATS schedule is very similar to that as discussed
above in section 2.3.1. The advantage of submission for certification by rectification is that
consent of all members are not required and have limited grounds on which objection can be
raised.109 However, it is completely political decision whether UK wants to provide access to
new areas of service and that will require full negotiation with all the WTO members.
Post Brexit, trade with EU will happen on MFN basis under Article II (1) of GATs. If the UK
leaves the single market and the customs union, UK’s trade in service with EU will be under
the market access conditions and the permitted modes of supply that EU has for rest of the
WTO members. Until a trade agreement is reached, both EU and UK will have to trade under
MFN rules otherwise Article II (1) of GATS requires them to immediately extend the
conditions granted to the each other to all other WTO members.
Even though UK submitted its own schedule under the GATS, as per Article II (2) of GATS,
a WTO member can submit a list of exemptions from the most favoured nation treatment
obligation during the time of its accession to the WTO.110 Under this clause, EU had
submitted quite a few number of exemption and they are EU member wide and not
necessarily specific to UK.111 To determine which exemptions are applicable to UK, the same
107
Article XX (1) of the GATS states that ‘each Member shall set out in a schedule the specific commitments it
undertakes under Part III of this Agreement’. GATT does not provide similar wordings. The text of GATS is
clear and specific to each WTO Member; Bartel. L., n (81) at 4.
108
Opinion 1/94 concerning the competence of the EC to conclude international agreements concerning services
and the protection of intellectual property, sECLI: EU: C: 1994:384; Thomas Streinz, Cooperative Brexit:
Giving back control over trade policy, Oxford University Press and New York University School of Law. Int J
Const Law 2017; 15 (2).
109
110
Peter Ungphakorn, If the EU and UK fall back on WTO commitments what does this mean for services?
April 12, 2017, https://tradebetablog.wordpress.com/2017/04/12/eu-uk-wto-services/, visited on 20 July 2017.
111
Ungphakorn, P., n (110).
23 | P a g e
needs negotiation and hence till an agreement is reached UK cannot apply such exemption
with its trade with EU or other third countries.112
2.3.3 The Tariff Rate Quotas

TRQ was first introduced during the Uruguay Round Agreement to provide better market
access to sensitive and domestic commodities.113 The main reason behind the adoption of
TRQs was to ensure minimum levels of market access and also to safeguard current levels of
access which might increase due to Tariffication.114 The TRQs have a two level structure, the
first level is where at the point of import, a limited volume of imports are allowed at a lower
tariff. Once that quota is filled, the remaining import faces a higher tariff. In simple terms
whichever country exports first, gets lower tariffs.115
Currently UK does not have its individual TRQ. It has been negotiated by EU with the third
countries and are contained in the EU’s Schedules. Given that it has been proved earlier in
chapter 2.3.1, that EU’s Schedules will be adopted by UK as its own. Therefore, it would
seem that EU’s external tariff goods and its import quotas will also be the same for UK’s
schedule.116 However, TRQs has been negotiated by the EU with third countries. The TRQs
of EU are enjoyed by all the current EU member and are divided country wise, with New
Zealand enjoying the maximum TRQ and a remaining 200 tonnes is assigned under the
heading “others”.117 Once out of EU, UK will fall under the head “others”.118
The EU’s Schedule which are certified at the WTO level is only for 15 EU countries and not
for all 28 countries.119 The important and difficult task, as pointed out by Peter Ungphakorn,
is to determine whether UK’s tariff quota will be based on the TRQs which have been
certificated under the WTO for the 15 members of the EU or on the existing uncertified
112
113
Harry De Gorter and Erika Kliauga, Reducing Tariffs versus Expanding Tariff Rate Quotas,
http://siteresources.worldbank.org/INTTRADERESEARCH/Resources/Ch5_AgTradeBook_deGorter_Kliauga.
pdf. Visited on 20 July 2017.
114
During the Uruguay Round Agreement on Agriculture, the countries were required to convert non-tariff
barriers to tariffs. This process was called Tariffication.
115
Gorter, H.D., Kliauga, E., n (113).
116
Brexit: WTO Process and Negotiation of FTAs, https://lif.blob.core.windows.net/lif/docs/default-
source/default-library/170320-wto-brexit-process-final.pdf?sfvrsn=0, visited on 20 July 2017.
117
Peter Ungphakorn, The limits of ‘possibility’: Splitting the lamb-mutton quota for the UK and EU–27,
January 6, 2017, https://tradebetablog.wordpress.com/2017/01/06/limits-of-possibility/ visited on 20 July 2017.
118
Ibid.
119
Ungphakorn. P., n (117).
24 | P a g e
regulation for the current 28 EU countries. Bartels, Peter Ungphakorn and Häberli, agrees
that the possible way to decide on the TRQs will be through Article XIII (2) and 2(d) of
GATT, i.e. using the last three years import export data.120
However, adaptation of any method of separating TRQs for UK and the other 27 countries of
EU will need to meet the legitimate expectations of all quota beneficiaries. This distribution
of UK’s TRQ is most likely going to be challenged by most member states who have
relatively less shares in TRQs.121
Christian Häberli suggests that post Brexit, UK should adopt a single tariff for each product
for all WTO members including that of EU.122 However, as rightly pointed out by Häberli,
removal of country specific TRQs is politically not feasible, but this might help UK to
continue a relatively smooth trade. This alterative definitely seems more of a practical
approach to adopt during the interim through the rectification process, than to negotiate the
TRQs with 27 member states of EU and the rest of the world.
2.3.4 Share of the EU agricultural subsidy commitments
The Agreement on Agriculture (AOA) governs how a WTO member can impose and use its
subsidies on agricultural products. Part IV of the AOA lays down the rules on domestic
support.123 The AOA exempts certain varieties of domestic support measures of members.
This distinctions between an exempt measure and non-exempt measures is commonly done
under the rules of annexures of the AOA which are also known as green box, blue box and
amber box. However, the AOA does not refer to any boxes throughout its text and it is only
something that has been adopted by WTO members in practice.124
120
The 1980 Panel Report on “EEC Restrictions on Imports of Apples from Chile” considered it appropriate,
with regard to both Articles XI:2(c) and XIII:2(d), and “in keeping with normal GATT practice … to use as a
‘representative period’ a three-year period previous to 1979, the year in which the EEC measures were in effect.
Due to the existence of restrictions in 1976, the Panel held that that year could not be considered as
representative, and that the year immediately preceding 1976 should be used instead. The Panel thus chose the
years 1975, 1977 and 1978 as a ‘representative period’”.
121
Ungphakorn. P., n (117).
122
Häberli, C, n (28).
123
Alan Matthews, WTO dimensions of a UK ‘Brexit’ and agricultural trade, January 5, 2016,
http://capreform.eu/wto-dimensions-of-a-uk-brexit-and-agricultural-trade/, visited on 20 July 2017.
124
Lars Brink, Classifying, Measuring and Analysing WTO Domestic Support in Agriculture: Some Conceptual
Distinctions, http://ageconsearch.umn.edu/bitstream/7337/2/wp070002.pdf, visited on 20 July 2017.
25 | P a g e
Article 6.1 of the AOA states the rules to determine a member’s domestic support
commitment and how they should be expressed.125 This commitment level acts as a ceiling
for that particular commitment. Members have made a Aggregate Measures of Support
(AMS) commitment in Part IV of their WTO Schedule.126 This sets the maximum limit on
their allowed non-exempt support.127 In a situation when a member has not provided any
commitment on total AMS under its WTO schedule, it cannot provide any support to its
agricultural producers more than the minimum level as prescribed under Article 7.
The UK was a member of the EU when AOA was enforced and it never submitted its stand-
alone total AMS commitment. This was negotiated by the EU on behalf of the 12 members.
There is no rules under the AoA to determine the share for UK to subsidise or provide
support to its agricultural production. If UK leaves the EU, it will need to negotiate with EU
and determine its own total AMS commitment. Therefore, post Brexit, as Allan Mathew’s
points out, UK can provide a generalised support to its agricultural farmers till an agreement
is reached with EU.128
2.3.5 Accession to the Government Procurement Agreement
Government Procurement Agreement was included in the WTO in 2012 and then revised in
2014.129 Unlike other WTO agreement a member can opt to be a part of this Agreement. This
agreement aims to open up public procurement markets between the contracting parties. The
list of procurement available to each country is heavily negotiated and all rules does not
automatically apply to all procurement activities of each party. 130 Article XXII of AOA
provides the rules for accession and entry to this agreement and the footnote to Article XXII
(1) states that “For the purpose of this Agreement, the term ‘government’ is deemed to
include the competent authorities of the European Communities.”131
125
Ibid.
126
Alan Matthews, Establishing the UK’s non-exempt limit on agricultural support after Brexit, January 29,
2017, http://capreform.eu/establishing-the-uks-non-exempt-limit-on-agricultural-support-after-brexit/
127
Matthews. A., n (126).
Article 1(a) of the AOA defines AMS as the level of support which is usually given annually in monetary terms
for an agricultural product to agricultural producers in general.
128
Matthews. A., n (126).
129
Kamala Dawar, Brexit and Government Procurement, UK Trade Policy Observatory, Briefing Paper 8 –
March 2017, http://blogs.sussex.ac.uk/uktpo/files/2016/11/Briefing-Paper-8.pdf, visited on 19 July 2017.
130
Ibid.
131
Article XXIV of GPA.
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Therefore, it is clear that the EU entered into this agreement on behalf of all its members and
hence, UK is currently a signatory party to the Agreement through its membership in the EU
and has not ratified this Agreement on its individual capacity. After Brexit, UK can no longer
access the public procurement made available by EU and also other contracting parties. It
will need to negotiate its coverage with all the other contracting parties. As for EU, under
Article XIX, it will be required to give notification to all contracting parties on modification
of its schedule.132
This chapter established that UK already possess all the rights and obligations under the
WTO agreements. It has also been established that UK already have its Schedules under the
EU’s commitments and post Brexit UK will need to extract the same from the EU’s
Schedule. The best option to adopt UK’s Schedule will be by replicating EU’s existing
commitments. The UK government aims to adopt replicate EU’s Schedule and adopt them
after following the process of rectification. One of the advantages of rectification is that
unlike modification UK will be required to pay compensation to the other existing members.
While there are chances that the rectification process might be vetoed by members thereby
delaying the certification of UK’s Schedules. However, even if the Schedules are not
certified, UK’s commitments still exits and can continue to trade unless any member brings
in a claim for breach of WTO rules. EU has been trading under many uncertified Schedules
and it still have not faces much challenges against it.133 The challenging fact is that some of
the UK’s commitments are difficult to extract from that of EU’s. These are mainly the TRQs,
agricultural subsidies and share of government procurement. These quotas have to be
established after negotiation with the relevant members of the WTO as per Article XIII (2) of
the GATT. With regard to GPA, UK cannot extract its commitments from EU, since it is not
a party to that agreement under its individual rights and hence UK will first need to negotiate
its place into this agreement.
Once UK’s rights and obligation under the WTO has been established and it is clear how
trade with EU continue post Brexit, we move on in the next chapter to the problems that UK
will face while trading with EU or any other country under the WTO.
132
Dawar K., n (129).
133
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Chapter 3 – Post Brexit Trade Dilemma under WTO
UK’s membership in EU has raised trade and it’s GDP through trade liberalisation and
economic integration. Greater openness to trade and investment boosts economy by
increasing competition, wider access to funds and investments, improved quality of
production inputs, and creates incentives to innovate and adopt new technologies. Leaving
the EU, UK will lose all the benefits of the existing free access to EU market and will face
increased trade barriers. Even zero tariff the administrative cost cannot be absolutely done
away with. One of the way to mitigate this risk relatively will be to enter into preferential
trade deal. However, under the current negotiation under Article 50 of TEU, EU has refused
to negotiate trade deal in parallel to withdrawal agreement with UK. 134 Therefore, given the
present scenario, UK government gains from negotiating a transitional agreement under
Article XXIV (5) of GATT135 with EU mainly with regard trade post the Brexit date and till a
FTA is reached.136
In the circumstance of UK not able to negotiate this transitional deal along with the
withdrawal agreement, it will have to deal with EU and rest of countries under the WTO
rules.137 Membership of the WTO is most certainly good for trade liberalization. It helps
developing and least developed countries to open up its market, regulate fair prices and
practice, minimize trade restricting practice, etc. However, in recent times, WTO rules afford
very limited protection against discrimination. Most of the discrimination happens through
non-barrier trade measure or various technical barriers to trade.138 Therefore, for a country
134
135
Under Article XXIV (5) of GATT member can form customs union or a free-trade area or negotiate an
interim agreement which is required to form the customs union or the free-trade area.
136
The “WTO option” for Brexit is far from straightforward, The Economist, (United Kingdom, 07 Jan 2017),
https://www.economist.com/news/finance/21713818-becoming-independent-member-wto-could-be-difficult-
process, visited on 20 July, 2017
137
Brexit Preparations – Supply Chain Mapping, Linklaters, 2017,
www.linklaters.com/pdfs/mkt/.../Brexit_preparations_-_Supply_chain_mapping.pdf, visited on 20 July, 2017
138
The Agreement of Sanitary and Phytosanitary Measures set down rules on food safety and the standard of
animal and plant health. Countries are permitted to set their own reasonable higher standard. Therefore, this
creates a set to check to ensure that the animals and plants meet such standards. Further various labelling
requirements leads to inspection of products both pre-shipment and on reaching ports. Determining rules of
origin is another set of checks required. Therefore, these all together causes delay and are the problems of
modern trade in the 21st century.
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which has reaped the benefits of Customs Union and single market, overall trade will suffer
on leaving the single market.
This Chapter provides a brief analysis on how the possible WTO options for trade with the
EU. The following sections detail out the pros and cons of the MFN measures for goods and
services and further discusses the issues with regard the proposed rectification of schedule
and discusses the issues UK will face with regard to TRQs, Subsidies and government
procurement.
3.1 Applying an MFN Trade Rule on Goods
UK being the member of the WTO can start trading under the Schedules that it will extract
from EU. These Schedules contain the highest tariff (bound tariff) and other quantitative
restrictions that a member can impose on its imports. EU imposes a common external tariff
on all members with whom it does not have a preferential trade agreement. Under WTO
rules, EU has to apply same tariff which is in compliance with EU’s MFN obligation to UK.
Therefore, UK will be facing a trade barrier like that of other WTO members. Currently EU
has highest tariff with regard to dairy products of around 35%.139 On average EU’s tariff is
around 5.3% for countries outside customs union and single market.140 Considering that UK
used to enjoy zero tariff while exporting to EU, it will now face a substantial increase in cost
of exportation. Similar problem lies with adopting EU’s Schedule, UK will also have a
similar tariff for EU and imports from the EU would need to charge a higher tariff which will
make imports more expensive. UK currently imports around 53% of its total imports from
EU,141 increase in tariff will substantially affect UK’s economy and GDP.142 On the other
hand if UK lowers its tariffs to facilitate easy access for imports from EU, it would need to
lower the tariff for every other member of the WTO pursuant to its MFN obligation under
Article 1 of GATT. That would not be a desirable situation for UK because reducing its tariff
139
House of Lords, European Union Committee, Brexit: Trade In Goods, HL Paper 129. 14 March 2017,
https://publications.parliament.uk/pa/ld201617/ldselect/ldeucom/129/129.pdf, visited on 20 July 2017
140
Ibid.
141
Swati Dhingra, Gianmarco Ottaviano, Thomas Sampson and John Van Reenen, ‘The consequences of Brexit
for UK trade and living standards’, (2016) Centre for Economic Performance (CEP), London School of
Economics and Political Science, Paper Brexit 02, http://cep.lse.ac.uk/pubs/download/brexit02.pdf, visited on 20
July 2017
142
Ibid.
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for every member would not leave any incentive to strike a free/preferential trade
agreement.143
The important characteristics of MFN treatment is to extend similar tariff to all members who
has ‘like’ products. While the WTO case laws and rules provide clarity on procedures for
determining like products, much of it is decided on the products’ tariff classification, physical
properties, consumer demands and the end-uses in the market. This is a very difficult and
time consuming matter given EU has more than 15,000 tariff classifications.144 This can lead
to dispute settlement cases if UK does wrong classification.145
Further, under the WTO rules UK will face rule and regulations determining ‘rules of origin’.
Rules of origin are mainly used to determine what measures are required to be imposed by
the importing country and whether the products being imported should be treated under the
MFN policy or if they deserves some preferential treatment.146 While in the single market and
customs union, the rules of origin principle are not applicable and trade is faster without any
border checks. Post Brexit it will become time consuming to determine the rules of origin and
potentially damaging to industries dealing with trade of perishable goods. Economist predicts
that it could increase cost of export from 4% to 15%.147
Finally, under WTO, individual businessman, trader or industry cannot bring a claim or
address their grievance. Unlike the current situation where any individual could bring a
claim, after UK’s exit from EU and under the WTO, only governments can approach the
dispute settlement process.148 This process again can be lengthy and not always feasible for
individuals who cannot bring their claim in the WTO forum.
143
UK Growth, A New Chapter, LSE Growth Commission Research,
http://www.lse.ac.uk/researchAndExpertise/units/growthCommission/documents/pdf/2017LSEGCReport.pdf,
What trading outside the Single Market looks like, http://blogs.lse.ac.uk/brexit/2017/03/01/what-trading-
outside-the-single-market-looks-like/, visited on 20 July 2017.
144
Jones. B., n (60).
145
Sophie Natascha Vasbo, Economic Consequences of Brexit for the United, Kingdom, Copenhagen Business
School, September 2015, page 26-28,
http://studenttheses.cbs.dk/bitstream/handle/10417/5728/sophie_vasbo.pdf?sequence=1, visited on 20 July 2017.
146
Dhingra. S. and Sampon, S., n (15) at 10.
147
Brexit and Trade, Not so simple, Sep 15th 2016, The Economist,
https://www.economist.com/news/britain/21707251-britain-will-not-find-it-easy-strike-comprehensive-trade-
deals-quickly-not-so-simple, visited on 20 July 2017.
148
Dhingra. S. and Sampon, S., n (15) at 10.
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3.2 Trading services under GATS
As mentioned earlier in Chapter 2.3.2, the Schedule for market access of EU has been
submitted by each individual EU members, which are often non homogenous in nature.
Therefore these commitments are not uniform.149 Different member of the EU have different
set of rules for market access depending on particular sub-sectors and mode of supply.150
However trade in services are mostly dependent on national policies and any member can
choose to be more liberal than the GAT Schedules.151 Therefore, UK will need to negotiate
with individual EU members to clarify its market access. Unless that negotiation is
completed, trade of services will happen under the MFN rules.
Under the WTO rules the most difficult will be free movement of person across borders.152
While UK is in the single market, any people can move across the EU member states seeking
jobs and settlement, enabling a fairly easy way to provide service without any restrictions.
However, movement under mode 4 of GATS153 will be difficult, since it does cover
movement of people to seeking access to employment market but does not cover rules with
regard to permanent residency or citizenship.154 Further, under WTO rules, EU members
149
Jim Rollo, Ingo Borchert, Kamala Dawar, Peter Holmes and Alan Winters, The World Trade Organisation: A
Safety Net For A Post-Brexit UK Trade Policy?, UK Trade Policy Observatory, (Briefing Paper 1, July 2016).
https://www.sussex.ac.uk/webteam/gateway/file.php?name=briefing-paper-1.pdf&site=18, visited on 20 July
2017.
150
Rules for establishing commercial presence under mode 3 in life insurance are similar across most EU
members but the rules with regard the legal sector varies. For example, in France non-EU firms are not allowed
to establish branches under their own name or to form partnerships with locally licensed lawyers.
151
Rollo J, Borchert I, Dawar K, Holmes P and Winters A., n (143).
152
Ingo Borchert, ‘Services Trade in the UK: What Is At Stake?’ UK Trade Policy Observatory, Briefing Paper
6 - November 2016. https://www.sussex.ac.uk/webteam/gateway/file.php?name=briefing-paper-6-
final.pdf&site=18, visited on 20 July 2017.
153
Article 1 (2) (d) of GATS. This is also known as Mode 4 of supply. This mode of supply of services covers
natural persons who are either themselves the service suppliers or who work for a service supplier established in
another WTO member.
https://www.wto.org/english/tratop_e/serv_e/mouvement_persons_e/mouvement_persons_e.htm, visited on 20
July 2017.
154
Hamid Mamdouh, Movement Of Natural Persons Under The GATS, IOM / World Bank / WTO Seminar on
Trade and Migration, Geneva, 4 October, 2004,
https://www.wto.org/english/tratop_e/serv_e/sem_oct04.../hamid_mamdouh_e.ppt, visited on 20 July 2017.
31 | P a g e
have to apply the MFN rules and cannot give better access to UK than to rest of the WTO
members. However, under Article VII (1) of GATS, UK can give mutual recognition to EU
on a unilateral basis or a bilateral basis.155 But a unilateral recognition and entry to EU is not
favourable without the promise that same will be granted to the UK service providers in EU.
Therefore, UK and EU could opt for a mutual recognition agreement. 156 Law firm, Slaughter
and May is of the view that a mutual recognition agreement could work out better for UK for
services sector, since this agreement could be restricted sector wise making it feasible as an
exemption from the MFN principle.157 Such agreement seems to be a better proposal than a
preferential trade deal, where EU and UK needs to enter into trade in almost all sectors
without the ability to select individually.
Hosuk Lee-Makiyama, the trade director of European Centre for International Political
Economy is of the view that trading of services under single market had not grown
substantially and hence the services provided by the indigenous service providers of EU or
UK should not be affected.158 This paper disagrees with this statement, because the
movement of people and establishment of new branches under the four modes of GATS is
particularly problematic, given the varied national regulation of services across the EU
members. However, it is true that it is the third countries who would be affected most initially
under the WTO.159 These countries access the EU market through UK, which will be affected
if they do not have the passporting rights to EU.160 Under the WTO rules this will not be
possible and hence these service providers might want to move out of UK causing an
economic disruption for UK.
3.3 Problems of Rectification and Modification
WTO functions on the principle of negotiation and reciprocity. Traditionally all trade
negotiations have evolved and concluded around reciprocal market access, where each party
155
Brexit and Financial Services: the GATS option; (GAT Option),
https://www.slaughterandmay.com/media/2536339/brexit-and-financial-services-the-gats-option.pdf, visited on
20 July 2017.
156
Ibid.
157
GAT Option, n (155).
158
https://player.fm/series/trade-policy-comments-with-christofer-fjellner-mep/hosuk-lee-makiyama-on-trade-
after-brexit, visited on 20 July 2017.
159
Ibid.
160
For example most bakes and financial investors like the US based Citi Bank and Nomura, they passport into
the EU out of London.
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wants to get the maximum market access for its product into the importing country. Given
that UK is already a member of WTO in its own right and it can extract the Schedule under
GATTS and GAT submitted by the EU on behalf of its members. UK government has opted
to propose a rectification by certification, and thus replace the EU’s schedule as UK’s
schedule, unless objected by any WTO member.161 The problem arises if the WTO members
are of the view that during the rectification their concessions agreed with EU after thorough
negotiation are disproportional or reduced given that UK is no longer a member of the EU,
especially the process of separating UK’s TRQs from EU’s Schedules.162 Further, Mr. Luis
González García comments that UK’s leaving the EU and it further negotiation with non EU
members would alter the Schedule of EU and therefore cannot be considered a
rectification.163 In such scenario WTO members might object to the rectification proposal by
UK.164
3.4 Issues of subsidies and TRQs
As discussed in Chapter 2.3, trade with EU under WTO rules will be disruptive with regard
the subsidies and the TRQs UK used to enjoy under the EU. Currently these benefits are
given to all the EU members and they have been set after negotiation with the third countries.
Post Brexit, UK will have to extract the TRQ and agricultural subsidies from the EU
Schedules. As observed by Allen Matthews and Peter Ungphakorn, it is inevitable that some
members will be aggrieved and would face greater market access costs and difficulties than
161
Blitz. J., and Donnan, S., n (30).
162
Written evidence by Peter Ungphakorn, The Select Committee on the European Union, House of Lords,
http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/eu-external-
affairssubcommittee/brexit-future-trade-between-the-uk-and-the-eu/written/39818.html, visited 22 July 2017.
163
House of Lords, Written evidence by Luis Gonzalez Garcia, The Select Committee on the European Union,
http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/eu-external-
affairssubcommittee/brexit-future-trade-between-the-uk-and-the-eu/written/39823.html, visited 22 July 2017.
164
Once out of single market and the customs union, there will no free flow of goods. This is particularly
problematic for third countries which were dependent on Pan European free trade. Taking the example quoted
by Holmes, Rollo and winters, Kenya exports its cut flowers to Rotterdam, from where these flowers are
distributed throughout the EU countries. Once leaving the EU, these flowers will incur an import duties as they
enter the UK or be inspected for pests or disease. This will increase the export costs for Kenyan exporters,
therefore arguing that its rights under the Uruguay Round are affected.
Peter Holmes, Jim Rollo and L. Alan Winters, Negotiating The UK’S Post-Brexit Trade Arrangements, National
Institute Economic Review, November 2016, No. 238;.
http://journals.sagepub.com/doi/pdf/10.1177/002795011623800112, visited on 22 July 2017.
33 | P a g e
before.165 UK will require negotiations with the EU members and other interested parties on
the TRQs and the total AMS. These negotiations further requires to be approved by the
remaining WTO members which might become extremely time consuming, since a full
consensus is a rarely observed in the recent WTO negotiations. Further, if no agreement can
be reached the aggrieved members could file a dispute and claim for compensation. 166
3.5 Trade under GPA
The Tokyo Round Code on Government Procurement, 1981 was the first international
procurement agreement and UK was party to it. This was replaced by GPA in 1994 and later
revised in 2014. Since 1994 UK is no more a member of GPA in its own rights but as a
member of the EU.167 At present UK has access to the GPA commitments made by EU with
other countries. The total amount of business under the GPA is around US$1.3 trillion.168
Getting out of the EU will lead to loss of membership of the GPA for UK and losing
substantial interest of business. It is most likely that UK would want to be a member of the
GPA since it gives access to government procurement of United States, Japan, Canada and
China.169 The problem might arise if third countries or even EU vetoes UK becoming a
member to the GPA. UK will need to negotiate its place back into GPA. Till UK negotiates
its position in the GPA, the default position of WTO rules will apply and there will be no
mutual rights of access to public procurement for EU and UK.
It is clear from the above discussion that if UK is going to trade under the WTO rules and
failing to reach any trade deal with the EU, around three-fifths of its exports will be affected.170
Further, UK will need to re-establish its position with regard to subsidies, TRQs and GPAs. As
the WTO works on the principle of consensus, every member needs to agree to a proposed
change. With its 164 members, it is hard and time consuming to achieve consensus amongst all
165
Matthews, A., n (123), Peter Ungphakorn, Brexit, agriculture, the WTO, and uncertainty, October 22, 2016,
https://tradebetablog.wordpress.com/2016/10/22/brexit-ag-wto-answers/#q4, visited 22 July 2017.
166
Ibid.
167
Jean Heilman Grier, Brexit: Implications for WTO GPA – A First Look, , September 13, 2016;
http://trade.djaghe.com/?p=3235, visited 22 July 2017, Agreement on Government Procurement,
https://www.wto.org/english/tratop_e/gproc_e/gp_gpa_e.htm, visited 22 July 2017.
168
Ibid.
169
Grier. J. H. n (167).
170
Jim Rollo, Alan Winters, Negotiating Britain’s new trade policy, 09 August 2016,
http://voxeu.org/article/negotiating-britain-s-new-trade-policy, visited on 20 July 2017.
34 | P a g e
member and hence in recent past WTO negotiation has often failed without any consensus.
Given this complex procedure, any member’s opposition to rectification will result in going
back to full (re)negotiations or litigation, which are often political in nature. The principle of
reciprocity is the underlying factor, and whether UK’s Schedules and share out of EU’s
Schedules will alter the rights and obligations of the other WTO members.171 Therefore,
renegotiating UK’s rights and obligations in certain sectors under WTO is going to be
extremely tedious. Further, the agreement between EU and UK will be the base structure
determining UK’s relationship with the WTO’s members and their acceptance of UK’s
Schedules and access to GPA. It can be fairly concluded that trade with EU under the WTO
rules is not straightforward and benefiting as one would like them to be.
171
Brexit: Is the UK set for WTO limbo?’ New Law Journal, (09 May 2017), Issue, 7745.
https://www.newlawjournal.co.uk/content/brexit-uk-set-wto-limbo, visited on 20 July 2017.
35 | P a g e
Conclusion
Brexit is one of the most significant political event of 21st century, with the potential to affect
every sphere of life in UK, EU and to certain extent to rest of the world. Since joining the UK
in 1973, UK had increased and liberalised trade, while its GDP grew. Leaving EU is likely to
have a wide range of impacts starting from economy, immigration, internal rules and
regulation, legal procedures etc. It would lead to forgoing benefits from EU membership and
a ‘leap into the unknown’172. Not marginalising any of the area likely to be affected by
Brexit, this project has tried to portray the UK’s trading relationship with EU under the WTO
rules, the problems therein and provide possible guidelines to ease these hurdles.
On the basis of analysis provided in this paper, it has been proved that UK is already a
member and possess all the rights and obligations like any other WTO members, even if
those rights and obligations are now being exercised by the EU. UK’s Schedules are already
in place (under the EU’s Schedules) and after leaving the EU, it will just need to extract the
same from that of EU’s Schedule. However, extracting commitments from another member’s
Schedule is more difficult than it appears. EU’s Schedules have commitment which were
entered after negotiations as per Article XIII (2) of the GATT, which are not EU member
specific. The most affected commitments are the TRQS and the agricultural subsidies. With
regard the TRQs and agricultural subsidies, this paper agrees with the view taken by Bartels,
Peter Ungphakorn and Häberli, that the possible way to decide UK’s commitment would be
through Article XIII (2) and 2(d) of GATT, i.e. using the last three years import export data.
However, the potential problem with regard to division of TRQ and subsidies by EU under
Article XIII (2) could lead to non-violation complaint by other members of the WTO. This is
because these quotas were initially agreed between the members and EU including UK and
did not consider a situation when a state leaves the EU.
The paper further supports the process of adopting UK’s new Schedules under Article II of
the GATT 1994 and Article XX of the GATS by rectifications. While this process is easier
since it does not require the UK to enter into renegotiation of the entire Schedule, but the
probability of other WTO members disputing to this process is highly likely. However, even
if the Schedules are not certified, UK’s commitments still exits and can continue to trade till
any member brings in a claim for breach of WTO rules. One of the example of members
172
Dhingra. S. and Sampon, S., n (15) at 14-16.
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continuing with uncertified Schedules is that of EU which had been trading under many
uncertified Schedules without facing significant challenges.173
Another area where UK might face challenges to trade will be getting the government
procurements of various members. Losing out on the government procurement can cause
serious impediments to UK’s economy and competiveness. Currently, UK is not a member of
GPA in its own rights, therefore, will not be able to extract any part of EU’s Schedule with
regard the GPA unless it negotiates its place into the agreement as the earliest.
It has been established in Chapters 1 and 3 that trade with the EU is vital to the UK economy.
If UK trades with EU under the WTO rules the total trade volume will be effected due to the
tariff barriers and more significantly the non-tariff barriers to trade. Trade in services with the
EU under the GATS Schedules will result in a significant deterioration in access and
movement of natural person as compared to in the single market. UK should aim to initiate
informal trade talks so as to maintain same level of access in the EU market and to avoid
trade disruptions.
After leaving the EU, if UK wants to maintain the same level of openness that it currently
shares with EU, negotiating a FTA is inevitable. Entering into a FTA is a time consuming
matter and might take years before the terms are concluded. As discussed earlier in Chapter 2
and 3, WTO permits entering into interim agreement under Article XXIV(7)(a) of GATT
prior to reaching a FTA. Therefore, UK government could aim to enter into an interim
agreement immediately after it ceases to be an EU member.
Further, UK can apply for a waiver for its obligations under the WTO as per Article IX of the
WTO to be exempted from specific obligations. Waivers require three fourth consensus by
WTO members to be granted and lasts for two years unless extended.174 As commented by
Richard North, waiver can be used to address the tensions between a country’s domestic
needs and international requirements.175 Therefore, both UK and EU can apply for a
transitional waiver till the final terms of their trade relationships are negotiated. This will help
prevent claims and dispute settlement from other WTO member for the waiver period.
173
174
Aakanksha Mishra, ‘A Post Brexit UK In The WTO: The UK’S New GATT Tariff Schedule’ in Jennifer A.
Hillman and Gary Horlick (eds.), ‘Legal Aspects Of Brexit, Implications Of The United Kingdom’s Decision To
Withdraw From’, The European Union, Institute Of International Economic Law, Georgetown Law, pg. – 26,
175
Richard North, Brexit: Waivers and Safeguards, August 24, 2016,
http://eureferendum.com/blogview.aspx?blogno=86191
37 | P a g e
While it is true that UK’s economy will be affected under the WTO rules, it is similarly
correct to state that UK’s leaving the EU will have significant implications for the rest of the
EU and countries outside EU.176 This is mainly because Brexit will affect the concessions and
quotas which EU had given to its trading partners and now with UK, the third largest
economy in the union, leaving the EU, those concessions or benefits might be open for
negotiation. Therefore, both the EU and the UK have common interest to maintain an open
trade relationship, and approach the WTO member jointly to avoid grievance and minimise
trade distortion.
Much of the future trade with EU and rest of the WTO members would depend on the
withdrawal agreement pursuant to Article 50 of TEU and any future interim agreements or
FTA. The gravity of these agreements are still unknown and UK would also need to negotiate
with domestic industry (mainly with regard to subsidies). With the ongoing negotiation with
the EU, the future trading scenario seems to be in a state of constant flux. Given that trade
under WTO is inevitable (at least for a short term) it will be prudent for the UK to start back
office diplomacy to secure the goodwill and trust from the states who are likely to be affected
by the Brexit and also the major WTO members. The success of Brexit depends on crafty
political diplomacy and goodwill while operating under the gambit application of the law.
176
Prof. Dr. Eberhard Sandschneider (Hrsg.), The United Kingdom and the European Union: What would a
“Brexit” mean for the EU and other States around the World?, Almut Möller and Tim Oliver (edn.), DGA
Panalyse 16, September 2014, page 105, https://dgap.org/en/article/getFullPDF/25763, visited on 1 August,
2017.
38 | P a g e
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Post Brexit Uk- EU Trade Under WTO

Article in SSRN Electronic Journal · January 2017

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Electronic copy available at: https://ssrn.com/abstract=3025413

Chapter 1 – UK’s Membership in the EU ............................................................................................... 8

1.1 A Prologue to UK’s trading relation with EU since 1973 ...................................................... 8

1.2 The Possible options after ‘Brexit’ ....................................................................................... 11

1.2.1 CETA Model ................................................................................................................. 11

1.2.2 Customs arrangement .................................................................................................... 12

1.3. The unescapable WTO ............................................................................................................... 13

Chapter 2 - Trade with EU under the WTO rules ................................................................................. 15

2.1 What is WTO? ...................................................................................................................... 15

2.2 UK a WTO member? ............................................................................................................ 17

2.3 UK-EU trade under WTO ..................................................................................................... 18

2.3.1 Rights and Obligations under the GATT ...................................................................... 19

2.3.2 Trade under GATS ........................................................................................................ 22

2.3.3 The Tariff Rate Quotas ................................................................................................. 24

2.3.4 Share of the EU agricultural subsidy commitments ...................................................... 25

2.3.5 Accession to the Government Procurement Agreement ............................................... 26

Chapter 3 – Post Brexit Trade Dilemma under WTO ........................................................................... 28

3.1 Applying an MFN Trade Rule on Goods .............................................................................. 29

3.2 Trading services under GATS............................................................................................... 31

3.3 Problems of Rectification and Modification ......................................................................... 32

3.4 Issues of subsidies and TRQs................................................................................................ 33

3.5 Trade under GPA .................................................................................................................. 34

Electronic copy available at: https://ssrn.com/abstract=3025413

Prior to 2009, none of the EU treaties provided a clause on voluntary withdrawal of a

1.1 A Prologue to UK’s trading relation with EU since 1973

1.2.1 CETA Model

EU and Canada entered in to CETA on 30 October 2016.56 The characteristic features of

1.2.2 Customs arrangement

1.3. The unescapable WTO

2.1 What is WTO?

2.3 UK-EU trade under WTO

2.3.1 Rights and Obligations under the GATT

2.3.2 Trade under GATS

2.3.3 The Tariff Rate Quotas

2.3.4 Share of the EU agricultural subsidy commitments

2.3.5 Accession to the Government Procurement Agreement

3.1 Applying an MFN Trade Rule on Goods

3.3 Problems of Rectification and Modification

3.4 Issues of subsidies and TRQs

3.5 Trade under GPA

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