The UK up and running in the WTO: how fast, how far can it go?

 

Originally published by the European Centre for Political Economy on 26 February 2020

After Brexit, our attention to UK trade policy has focused mostly on future FTAs, and in particular trade negotiations between the UK and the EU. But another front has quietly been opened.

Having left the European Union at the end of January, the UK has an opportunity to start making its mark on the global stage at the WTO. It’s always been there, as a founding member of both the GATT and the WTO itself. But for the last 40 years it has sat mutely among the EU Member States in WTO meetings while the Commission spoke on its behalf. That’s not to say that it didn’t have influence, both within and outside the EU, but it’s not the same as speaking for oneself – which it is now starting to do.

What is the UK getting into? The WTO is seen as being in a state of paralysis, with the membership at loggerheads internally and the organisation under attack externally. Active as the WTO scene always is, concrete results have been elusive. There is too little positive forward motion. The UK in the WTO might be like Alice in Lewis Carroll’s graphic novel “Through the Looking Glass”, to whom the Red Queen says:

Now here, you see, it takes all the running you can do to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!

How fast and how far is the UK prepared to run in the WTO, and is it worth the effort?

It’s worth noting at the outset that, during the transitional period up to the end of 2020 the UK, in accordance with the principle of sincere cooperation, will not behave in a way which is prejudicial to the EU’s interests. It is nevertheless free to negotiate international trade agreements (as long as they don’t enter into force before 31 December). In practice it will probably take a year or two for the UK to get up to full speed in the WTO – assuming it’s up for the race.

The extent to which the UK wishes, and is able to, use the WTO to advance its commercial and political interests remains an open question at present. It comes to the table with some considerable strengths but also faces a number of challenges and pitfalls.

Strengths

The UK has long professed a strong commitment to international rules-based trade governance. It therefore seems to be a natural fit for the WTO. And, while it might have a tendency to overstate its weight in an emerging world of economic behemoths, it is still significant in international trade.

The “Global Britain” slogan also implies a strong commitment to trade multilateralism. Momentum for reform of some of the WTO’s more arcane practices is building and its dispute settlement system in particular needs to be fixed. An independent, pragmatic UK voice could contribute constructively to the search for a more viable institutional framework.

Its trade policy has usually leaned towards the liberal and open end of the spectrum. Its recognition of the role that trade can play in promoting growth and employment is aligned with core WTO principles.

A caveat might be placed in that the Johnson government has yet to put past fine words into practice. Indeed some of its pronouncements have been ambiguous – for example there have been hints that part of the reason for leaving the EU is to enable it to afford more protection to British industry.

The UK has an understanding based on experience of the role that trade can play in development, and is a leading exponent of international development assistance. While some relationships are not entirely straightforward for historical reasons, the UK arguably has more credibility than most in efforts to bridge the ideological gulf between developed and developing countries that bedevils progress in the WTO.

Some observers have commented on the UK’s inexperience and lack of capacity for trade negotiations. While there may indeed be short term constraints, the subject matter in trade negotiations is hardly rocket science and is capable of being absorbed fairly quickly. The UK has a talented civil diplomatic service with English, the main working language of the WTO, as the mother tongue.

Moreover, the chairpersonship of key WTO councils and committees tends to alternate between developed and developing countries. As the US and the EU have renounced taking up such positions, there is a limited pool of developed country candidates to chair the top WTO bodies, so the UK can expect periodically to assume positions of leadership. That does not mean that it can direct operations but it will be in a position to play an honest broker role from – hopefully – a pro-trade and pro-system perspective.

Challenges and pitfalls

In the early post-referendum period the UK government appeared to adopt an almost evangelical free-trade philosophy. Sad to say as it may be, this is unrealistic and needs to be toned down. A subtler pro-trade, pro- development message would play better.

Assuming that planned major FTAs go ahead, a major challenge for the UK’s profile in the WTO will be a perception that it is effectively the hostage of the US and the EU. Try as it may to project an independent voice, the impression will linger that, when the chips are down, the UK’s commercial imperatives are aligned trans-atlantically. So, when crunch talks take place among the WTO’s real movers and shakers, the UK may not be invited to the table. The WTO mountain has many climbers – even Mount Everest is crowded these days, and the UK could struggle for oxygen at the highest altitudes.

The most effective single operators in the WTO use fully integrated government and domestic mechanisms to project coherent messages on global commercial policy in the WTO and around the world. It is not yet clear that the UK is sufficiently well organised in this respect.

At the governmental level, the UK has multiple agencies reflecting a variety of commercial and diplomatic interests which, while appearing to coordinate well, add a layer of complexity.

Negotiators are only as good as their instructions. There is little point in winning battles at the negotiating table if the results are of no concrete benefit. The most effective operators in the WTO are those governments that come to the table with clear and consistent policies backed by domestic stakeholders. The UK government is addressing this challenge but has not yet cracked it: for example, segments of UK business still do not feel that their views on trade policy are being adequately taken into account.

Is the WTO worth the effort?

It’s valid to ask whether the UK needs to expend significant resources on the WTO when it’s apparently in such a mess. But the question misses the point. It’s precisely because the WTO and the global trading system is in trouble that stakeholders need to bring pressure on government to sort it out. Things have been better – and they can be better again.

For companies and trade associations that need to think strategically, it is vitally important to have a predictable rules-based global trading system. The wheels have been coming off in recent times. Business dislikes – and in many cases has paid the price for – the uncertainty which has been created. The current unpredictability affects investment, growth and employment too. We all need to get the WTO bicycle back on the track.

More specifically, some of the UK’s strengths lie in services and digital trade. Here there are ongoing opportunities to improve rules and market access. For example, a large group of WTO member governments are actively working an agreement to improve global rules on e-commerce.

Services trade has unfortunately not yet received the attention it deserves in the WTO. Negotiations have been desultory but there is scope for re-energising them. A subset of WTO members almost reached a Trade in Services Agreement in 2016 but the talks foundered on US-EU disagreements at the last minute. Could the UK, with strong trans-atlantic links, play a role in reviving them?

The WTO also remains active and relevant across a very broad spectrum of issues affecting agriculture, food safety, technical barriers to trade, trade remedies such as anti-dumping and countervailing measures against unfair subsidies, and rules on intellectual property, among others.

A major effort at WTO reform is currently under way in Geneva, with the highest priority being reformulation and reactivation of the appellate feature of the dispute settlement system. Without this, uncertainty will not only continue but increase. Other elements include re-energising the WTO’s negotiating function and day-to-day activities, and updating a rule book which is showing the strains of age. Without doubt the UK, with its experience and expertise, could have a significant role to play in finding pragmatic solutions.

Much will depend on the priority the UK places on the multilateral trade scene. In the WTO as in life, there is no gain without pain: it takes a sustained effort with talented resources to have an effect. The opportunity is there and it’s definitely worth it. However, at this stage and with so many FTAs to negotiate, it must be an open question as to whether the UK is really up for the race in Geneva. The Red Queen might have added that “it’s both a sprint and a marathon”.