Not out of the woods

By Pete North - December 14, 2020

It is blithely assumed that the election of Biden will bring remedy to the dysfunction at the WTO. But then the current impasse predates Donald Trump, and though Biden is taking a more collaborative tone, he’s not likely to be a pushover. America retains its standoffish approach to multilateralism whoever is in office.

In matters of trade disputes, the writing has been on the wall for some time. The WTO will remain mired in politics, probably for as long as it exists. This is why the EU has been building ever more sophisticated dispute resolution mechanisms into its own FTAs. It’s better to sidestep the WTO than attempt to repair it.

This is where the Brexiteers have erred in their assumption that the WTO can serve as an adequate dispute system for its dealings with the EU. For starters, WTO agreements are limited in scope and the institution has inherent bandwidth issues. It can only ever handle the high profile cases. The smaller complaints are always best resolved directly through a bilateral apparatus.

If anything, the WTO is likely to take a back seat while WTO law is transposed directly into EU FTAs with a view to mirroring the functions of the WTO. EU deals already incorporate a range of WTO obligations. This has become standard operating procedure in FTAs, especially where the parties find it difficult to agree to any further, deeper disciplines. They serve as a baseline which can later be extended. This, incidentally, is why we shouldn’t get too excited about CPTPP. From what I’ve seen of it, it doesn’t go much beyond that WTO baseline.

The advantage to this approach is that the WTO could cease to function entirely but WTO law would live on in much the same way GATT has as an operating system for trade agreements. For the EU, this puts it at the centre of network of FTAs, becoming a major power in setting trade norms, perhaps even competing with the WTO itself.

In this, it has a major head start having accorporated core WTO agreements into deals with Canada, Japan, Kazakhstan, Ukraine and Mexico. I’m by no means an authority on the dispute mechanisms therein, but the EU will likely seek to forge a uniform approach to formal and informal dispute resolution within the constructs of its FTAs.

This point has no doubt escaped Brexiteers, who believe that no-deal Brexit can be a permanent state of affairs. Even if that were realistic, it will find other partners resolving their deputes bilaterally with the EU, and a lot faster than the WTO, where the EU will continue to exert considerable influence. Though we may well have reclaimed our decision making authority, the parameters of our options will not necessarily be defined by us. There is a tendency to underestimate the power of norms in the international arena which in some cases are more powerful than law.

With this in mind, the Brexit debate has largely been distracted by relatively peripheral issues. LPF issues were always resolvable and should be fairly uncontroversial between two likeminded partners. The major concern, particularly if “sovereignty” is foremost in the British mind, the configuration of the dispute resolution mechanism should have been the primary topic of conversation. These mechanisms potentially pose as much a problem to the exercise of sovereignty as supranational authority when global norms are taken into consideration.

Though the UK has escaped the direct rule of Brussels, it is a mistake to think we are ever going to be free of Brussels influence. We could, for instance, design our own vehicle safety requirements, but while the rest of the world is converging on UNECE regulations (often dominated by the EU), the UK’s exercise of sovereign power could prove to be impotent. Though it notionally has a free hand to legislate on purely domestic matters, anything remotely trade related is more likely to track the EU.

The short of it is, in or out, deal or no-deal, Britain is set to be in constant negotiations with the EU for all of time. There is no “fire and forget” option, and we don’t have the free hand the Brexiteers think we do. We may be leaving the EU but the EU continues to exist as a powerful actor in trade, and has the power and influence to call the shots even if there is no deal.

Though I have long disputed the idea that the UK becomes powerless and without clout in these such affairs, by way of its sizable particpation at the cutting edge of numerous sectors, we are going to have to get used to the idea that we are still a “rule taker” and some aspects remain beyond the reach of democratic processes. Globalisation and technocracy are here to stay – and the EU is consolidating its position at the centre of it all. To think we can unplug entirely and be entirely free of its influence is a mistake.

As we have noted so very often lately, the word sovereignty is deployed in a nebulous sense, often in the absence of more accurate terms. Among Brexiteers it is taken to mean absolute freedom from obligation and freedom to act unilaterally without regard to the interconnectedness of the global economy. Sooner or later this presumption meets reality. The mainstream Brexit prospectus has has never compared notes with life on this planet, and with such ill-defined aims, the Brexit blob are not likely to be satisfied with the outcomes.

This is largely to do with the fact that Brexit of itself never was a complete solution. Much of what was wrong with our relationship with the EU was the inadequacy of our own democracy, having a largely feral elite making major decisions without reference to the people. Brexit certainly limits what they can do to us via the EU but with global technocracy now taking the place of the EU, and with no meaningful domestic reforms, Brexit may do nothing at all to quell the disaffection that brought us to this point.