No hope of avoiding tariffs in ‘no deal’ Brexit: EU’s Malmstrom

June 14, 2019

GENEVA (Reuters) – Supporters of Brexit are “completely wrong” if they think recourse to an obscure trade rule will stop tariffs springing up overnight if Britain leaves the European Union without a deal, EU Trade Commissioner Cecilia Malmstrom said on Friday.

Some British politicians have suggested that in the event of a “no deal Brexit”, Article 24 of the World Trade Organization’s General Agreement on Tariffs and Trade can be invoked to keep Britain and the EU trading without tariffs.

“It is completely wrong,” Malmstrom told Reuters.

“They will have to trade with us and other countries, until there are trade agreements – and we hope that will be a trade agreement – on the ‘most favored nation’ basis. And that will mean new tariffs.”

The “most favored nation” basis is a misnomer because it means no special treatment.

Trade experts have repeatedly poured cold water on the idea that Article 24 could soften the economic blow of a “no deal” Brexit, but they say the claim keeps resurfacing.

Article 24 is a clause in the WTO rules that countries can use if they agree to a trade deal and want to declare an interim trade agreement, along with a plan and a timeframe for the full deal to take shape.

Brexit Party leader Nigel Farage wrote in February in the pro-Brexit Daily Telegraph that “if we apply to the WTO, and Article 24 of the GATT Treaty is used with both the consent of us and the EU, we would have a minimum of two years with no tariffs and quotas during which a trade deal could be concluded”.

On Monday, a former leader of Britain’s governing Conservative party, Iain Duncan Smith, explained in the same paper why he was backing Boris Johnson to succeed outgoing Prime Minister Theresa May.

“Boris… believes that we should offer a trade deal and, while that is being negotiated, we should seek an implementation agreement with the EU under which we will both go to the WTO and invoke Article 24, which allows us to continue tariff free trade until the final deal is agreed,” he wrote.

Trade lawyers are exasperated that the Article 24 idea keeps resurfacing, calling it a “misrepresentation” and “utter nonsense”, while May has said it is “perhaps not quite as simple as some may have understood it to be”.

(Reporting by Tom Miles; Editing by Raissa Kasolowsky)

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