PRESERVING TRADE, PRESERVING JOBS?
(The original Eurorealist article)
In the recent Guildhall debate on survival outside the EU, arch-Europropagandist Sir Martin Sorrell asked why we would “cut off our trade”? He also raised the prospect of having 10% duty on our motor exports to the EU if we left.
The chances are he’s wrong on both counts. For a start, the ‘EU27’ sell us far more vehicles than we sell them, and would get hit worse by any punitive measures. European economies are in such a state that a trade war would be disastrous to them.
Sorrell might also be the species of Europhile that doesn’t read treaties. If he picked up the Treaty of Lisbon, he might note:
TEU Article 21, para 2 states: “The Union shall define and pursue common policies and actions, and shall work for a high degree of cooperation in all fields of international relations, encourage the integration of all countries into the world economy, including through the progressive abolition of restrictions on international trade.”;
TFEU Article 206 also lays down: “...the Union shall contribute …to the harmonious development of world trade, the progressive abolition of restrictions on international trade and on Foreign Direct Investment [FDI], and the lowering of customs and other barriers.”
For neighbouring countries (i.e. us after we’d left!), he would also find that the Treaty legally commits the EU to the freest possible trade, free movement of capital and peaceful co-operation.1
All of the ‘EU28’ are members of the World Trade Organisation (WTO), where the EU has group representation. It is a principle of the WTO that once trade is liberalised, it stays liberalised, or compensation becomes payable.2
The WTO allows regional unions (such as the EU) as a means of easing trade between members, but not to raise barriers to the trade. In fact, they must avoid creating adverse effects (tariff or non-tariff barriers) to other WTO members (i.e. us), and to do so would result in legal action.3
Under WTO GATT/GATS principles, once goods/services are allowed into a market, discrimination on grounds of nationality is banned. (Referred to as ‘most favoured nation’ or ‘MFN’).4
This is a working generalisation and there is some small print (for instance, it is legal to temporarily ban imports on public health grounds). MFN rules may sometimes allow temporary exemptions, but the WTO is vigilant over possible abuse.
The situation is very different to 1975, as world trade barriers have since been slashed, removing one ‘argument’ for being in the EEC/EU.
To those who fear that the EU would try to make it difficult for Britain to stop us leaving, the evidence actually points to the opposite. The European Commission policy was expressed in “Trade, Growth and World Affairs: Trade Policy as a Core Component of the EU’s 2020 Strategy”, (COM(2010)612).5
This confirms the intention to dismantle barriers and promote balanced free trade as far as reasonably possible. It is committed to work via the WTO, and is not against ‘bilateral’ agreements – so it would not deter EFTA countries like Norway from trading with us.
The WTO noted in 2011 that, apart from the EFTA countries (Switzerland, Norway, Iceland, Liechtenstein), the EU had extended free trade agreements to Albania, Algeria, Bosnia and Herzegovina, CARIFORUM states, Chile, Croatia (now in the EU), Egypt, Faroe Islands, Former Yugoslav Republic of Macedonia (FYROM), Israel, Jordan, Lebanon, Mexico, Montenegro, Morocco, Palestinian Authority, Serbia, South Africa, Tunisia, and certain overseas countries and territories.6
This also bodes well for extending trade with us in areas not yet covered by the somewhat hyped ‘Single Market’. Although Norway, Iceland, Liechtenstein pay a subscription to join in the EU’s wider EEA arrangements, countries like Mexico and Israel do not pay to freely trade with the EU. It could strongly be argued that, having paid for 40 years to set up the ‘Single Market’, nor should Britain be charged for a free trade relationship and it would be against WTO rules if the EU tried.
There is also nothing to stop us working with the EU (and others) in wider trade agreements if and when needs coincide. So any free trade deals in the pipeline, such as possibly with the USA, need not be lost if we left the EU in the near future.
As for our trade deals already cut by the EU, international treaty law points towards them remaining in place by default if we left, although some working arrangements would need to be regularised.7
This short article is necessarily a simplification of a complex topic, and the late Ron Dorman of CAEF would warn about the dangers of ‘free trade’ possibly straying into essential areas of public services like the NHS.8
The purpose of the article, however, is essentially to provide assurances on maintaining existing trade and jobs that could be crucial to winning a referendum on leaving the EU. Only if self-government is restored, could the UK then negotiate any international agreements in the national interest.
This article features in the Dec 2013 issue of EuroRealist. It is based on an article in the Autumn 2013 issue of the ‘Resistance’ newsletter, which stressed that it was a discussion paper on an unfamiliar topic: “This is a provisional understanding based on detailed investigation. It is not to the best of our knowledge legally tested, but given as a straw man for others to disprove.”
1 Lisbon Treaty TFEU Art.206; TFEU Art 63, TEU Art 8
2 “Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994”, p33/p34. Also The General Agreement on Trade in Services (GATS), part IV; “Introduction to The General Agreement on Trade in Services, WTO, 31 January 2013”.
A dispute settlement procedure concentrates on compliance, but can make the parties discuss and agree compensation; if that fails, the injured party can request permission to invoke trade sanctions.
NB The WTO is merely concerned with trade, but wider international law applies, and for an account of the principles of reparation (restitution, compensation, satisfaction) see a paper: "Restitution and Compensation, Reconstructing the Relationship in Investment Treaty Law“
3 Reaffirmation on p33, “Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994”.
Some permitted/temporary exceptions - The General Agreement on Tariffs and Trade, 1947, various Arts XII-XXI
5 Trade Policy As a Core Component of the EU’s 2020 Strategy, 2010 (COM(2010)612). NB This backs Lisbon TFEU Art206, which commits the EU to work for the progressive abolition of restrictions on international trade and on foreign direct investment, and lowering of customs and other trade barriers
6 WTO document WT/TPR/S/284 (http://www.wto.org/english/tratop_e/tpr_e/s284_e.pdf),
TRADE POLICY REVIEW, Report by the Secretariat, EUROPEAN UNION 28.5.2013, lists 33 EU Preferential Trade Agreements as at December 2012
((26 countries/groups had previously been listed in document WT/TPR/S/248/Rev.1, Page 13, “TRADE POLICY REVIEW, Report by the Secretariat, EUROPEAN UNION, Revision”, dated 1.8.11 (S248R1-03.pdf, www.wto.org, seen 23.5.13)).
7 The Vienna Convention on the Law of Treaties, 1969, Art 70
(although the WTO advises that there is no GATS obligation to privatise Government services).
For more information, visit the website www.wto.org, especially “Understanding the WTO”, http://www.wto.org/english/thewto_e/whatis_e/tif_e/understanding_e.pdf.
This page compiled: 25 October 2013; revised: 25 May 2014