Brexit: there are no rules

By Pete North - February 21, 2021

I’m not the only one to notice but things keep happening as though WTO agreements and rules don’t even exist. It seemed like a very Trump thing to do to put tariffs on particular things directed at particular countries but I’m gradually arriving at the conclusion that the galaxy of rules that have influenced our decision making over these last few years don’t actually matter to anyone. They should, and in an ideal world they would, but they just don’t.

There is a WTO agreement on technical barriers to trade which is meant to encourage harmonisation and the removal of unnecessary protectionist regulation. There is also the SPS agreement designed to ensure that members’ sanitary and phytosanitary measures do not arbitrarily or unjustifiably discriminate. But America will do whatever it wants and the EU will do whatever it wants.

This they can do because the WTO has no authority and if an issue ever did get as far as the WTO there are ways and means to derail and delay the process. The WTO is often described as dysfunctional but it can only ever work as far as its members respect the rules and the organisation itself. Everybody makes the right platitudes about the “rules based order” but when it comes down to it, there are enough get-out clauses and arguables that the major trade powers comply only when it suits and only when it’s politically in their interests.

Had I arrived at this conclusion sooner, and perhaps I should have, my arguments about other things might have been very different. It’s not just to do with America blocking the appellate body. This is just the nature of the game. What’s legal is what you can get away with until enough people notice.

Here the EU has a dual advantage in that its own rules are so opaque they can often be read any way you want them to be read. There’s sufficient grey area in things like EFSA risk assessments that they can effectively ban a product even if it does comply with its own standards. This makes for a number of headaches in the near future.

Meanwhile the lack of a functioning WTO Appellate Body allows WTO Members to avoid their obligations and escape a binding ruling by simply appealing a panel report. This prompts the EU to take its own actions in recognition of the fact that the long running WTO dispute is no closer to a resolution. Having engineered WTO tract into its bilateral FTAs, it now seeks to bypass the WTO entirely, placing itself at the centre of its own hub and spoke global trade system.

This, in effect, reduces the WTO to a toothless talking shop and as far as the UK is concerned, the king has been deposed. Further WTO agreements and rules may certainly influence the EU in the future but unless and until the EU incorporates them, they may as well not exist. In short, we must deal directly with the EU or not at all – and deal with them we must.

This is where things are going to get interesting. There is no sign of a change in tone from the UK government having put David Frost back in charge of our EU trade relationship who will no doubt yield similarly lamentable results. The EU prefers to “work toward solutions” while the Tories seem to think the bull-in-a-china-shop act will work.

Ministers are now looking at proposals to restrict the import of European mineral water and several food products, comprising direct retaliatory measures in response to Brussels’ action on UK shellfish. Brussels will argue that it is entirely within its rights and that the retaliatory measures are unlawful. But then what’s good for the goose is good for the gander. If WTO rules no longer carry weight, then the stage is set for a long and mutually punishing tit-for-tat trade war.

This tends to reinforce our view that there will be no change of mood between the two until the Tories are gone, thus no improvement until the Tories are gone. The game isn’t about fixing trade, rather it’s about painting the EU as the petty and unreasonable actor looking to punish Brexit Britain, thus deflecting some of the blame. And to a large extent, it will work. Labour is not in a position to call them out on it lest they be accused of siding with the EU, thereby reinforcing the perception that they’re still fighting Brexit. In the meantime, the collapse of our exports is collateral damage.

If we’re taking it as read by this point that Keir Starmer is not going to be the next prime minister then for at least a decade we’ve pretty much closed the door on European exports. It’s bad now and it’s going to get worse, and Frost is going to do all he can to make it harder to recover. WTO rules are not going to save us.