We now know what Brexit means. It means that the UK will go it alone in trade and become once again a free-standing entity within the WTO and do a standalone deal with the EU. A free trade agreement within the terms of GATT Article XXIV:6. In March, the UK will trigger the EU’s Article 50 procedure to allow the UK to leave the EU. The UK will not seek to stay part of the EU’s single market or the customs union. It will be a clean break. It’s what the commentators call a ‘hard’ Brexit. There may be some sectors in which the UK will seek to cooperate or align its policies with those of the EU, but if that is to happen it must be on a case by case basis. All decisions must be decisions of the UK’s parliament which is to regain its absolute sovereignty. The Court of Justice should have no competence to rule on what happens in the UK. Most commentators now say that May’s approach is very much in line with what she has been saying for some time. She told the Conservative Party conference that the UK had to get control of immigration and get out from under the power of the Court in Luxembourg.
Talk of the Norwegian or the Canadian approach has dropped from the general debate. But should it. The deals these countries have with the EU are free trade agreements. The details are different in each deal but in law, the Norway and Canada deals are similar in structure to the deals the EU has with South Korea and South Africa and Ecuador and the like.
What the UK will have to achieve over the next two years is daunting. It will have to negotiate a GATT Article II country schedule with the other 163 Members of the WTO. The agreement has to be unanimous. Failure of any one Member to sign up blocks any deal. This is not auspicious. The WTO members have failed to agree on anything of significance since 1994 when the Uruguay round concluded.
At the same time the UK will have to negotiate a free trade agreement with the EU. This will not be easy either. It took 7 years to complete the free trade negotiations with Canada. The EU and the US have failed so far to do a deal on TTIP. Imagine how complex it is going to be between the UK and the EU given the current state of integration of their economies.
It seems that May wants to make the UK independent first and then work out the deal with the EU. This means prioritising the negotiations within the WTO. This sort of negotiation is inherently complex. WTO members will want to ensure that the overall access of each member to the UK market is not lessened by the standalone stance. This is not something that can be calculated in the abstract. It is something that depends on industrial sectors on all sides providing detailed information to the negotiators and hard mercantilist negotiations and compromises.
The negotiations on a free trade deal with the EU will be of a somewhat different nature. The UK has indicated that it is willing to align itself with some EU policies. But how will it do this without avoiding the possibility that the EU Court of Justice will interpret those policies. Will the UK seek a mechanism that it can withdraw from an alignment approach in any specific sector if it doesn’t like a Court ruling. What would UK industry think of such an approach?
Now that May has spoken the heat has been taken out of the debate. Public debate is currently blinded by events in Washington DC. But when the debate gets taken up again it can only lead to concern. It is hard to see how any deal either with the WTO or with the EU can be done and dusted within the 2-year timetable set out in EU Article 50.