by Luis de Sousa
Fri Jan 20th, 2017 at 11:16:36 AM EST
Frank Schnittger has been a proficient writer here at ET on the exit of the UK from the EU. One of the questions he has been raising is the assumption that the UK will automatically fall back to WTO rules if it leaves the EU and the European Economic Area (EEA). The UK is a member of the WTO by virtue of its membership of the EU, if it leaves the union how can it still be member of the WTO?
With the UK government indicating to the press that indeed it wishes to extract the country both from the political and economic unions, the WTO question becomes pivotal. Days ago I raised this issue in the Financial Times commentary box and got an elaborate reply from a reader that seems far more acquainted with the subject. It is rather worthy of reproduction in this forum.
An important and under reported issue: Frontpaged - Frank Schnittger
It [the UK] won't leave the WTO, but it will be the only WTO member without a schedule of commitments and rights. It will have to negotiate these with all 160 odd members of the WTO. Fairly straightforward for tariffs, provided the UK sets them no higher than the EU CET, but horrendously complicated for tariff rate quota and other rights it might try to reserve for itself. Not only will it have to negotiate TRQ carve outs with the EU, it will have to get them agreed by any member of the WTO that might be affected.
The rights that the UK currently has at the WTO could also prove problematic. It is likely that we will lose all rights that the EU has negotiated for us and will have to try to get the other members to agree if we attempt to reserve them outside of the EU.
One such right is a derogation from the WTO GATS free movement of persons providing services provisions. Basically, GATS commits signatories to open up their territory to citizens of another country who wish to travel to that member's territory in order to offer services. The UK currently has a derogation for most of these provisions - that is we have a right to say that the provisions don't apply to the UK. When we leave the EU, we lose that right and will have to ask for it back. China and India, to name but two countries, might not agree to give us it back.....
GATS stands for General Agreement on Trade in Services. Some relevant excerpts from the WTO page on GATS:
Presence of natural persons consists of persons of one Member entering the territory of another Member to supply a service (e.g. accountants, doctors or teachers). The Annex on Movement of Natural Persons specifies, however, that Members remain free to operate measures regarding citizenship, residence or access to the employment market on a permanent basis.
[...] The supply of many services is possible only through the simultaneous physical presence of both producer and consumer. There are thus many instances in which, in order to be commercially meaningful, trade commitments must extend to cross-border movements of the consumer, the establishment of a commercial presence within a market, or the temporary movement of the service provider himself.
[...] Under Article II of the GATS, Members are held to extend immediately and unconditionally to services or services suppliers of all other Members "treatment no less favourable than that accorded to like services and services suppliers of any other country". This amounts to a prohibition, in principle, of preferential arrangements among groups of Members in individual sectors or of reciprocity provisions which confine access benefits to trading partners granting similar treatment.
What is the practical result of all this? It seems to me that indeed the UK needs to negotiate a derogation of free movement of service providers under GATS in order to prevent European citizens to work in its territory. Moreover, under the WTO rules there is neither the possibility for the UK to differentiate between European citizens and other foreigners wishing to move into the UK under the WTO services framework.
I am left with the feeling that not even the WTO will be enough to fulfil all the promises put forth by the Exit campaign.