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No deal Brexit – trading on the basis of WTO rules

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Townsend Matthew
Matthew Townsend

Partner

London

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Benson Jonathan
Jonathan Benson

Senior Associate

London

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dArdenne Tom
Tom d'Ardenne

Senior Associate

London

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Renard Francois
François Renard

Partner

Hong Kong

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28 February 2019

The protracted negotiations over the terms of the UK’s withdrawal from the EU have brought into stark focus the prospects of a ‘hard’ Brexit.

One of the well-publicised consequences of this would be that the UK would have to rely on general World Trade Organisation (WTO) rules to trade with the EU (and vice versa). This would represent a dramatic change for companies that trade or provide services cross-border, and some believe it would have a damaging impact on many sectors of the UK economy.

This briefing note explains the UK’s process for becoming a fully independent member of the WTO, provides a short introduction to key WTO concepts and describes some of the main consequences for businesses operating in such a trading regime post-Brexit.

UK becoming a fully independent member of the WTO

As a co-founder of the General Agreement on Tariffs and Trade (GATT - the WTO’s predecessor), the UK is a member of the WTO in its own right. However, under the EU Treaty, the EU institutions have exclusive competence over international trade matters, including WTO issues. The UK has, therefore, largely been trading on the basis of the EU’s WTO goods and services schedules2 of concessions and commitments, in particular the common external tariff that sets the maximum duties that apply to imports of goods from third countries.

In order to become a fully independent member of the WTO and to reduce disruption following the UK’s withdrawal from the EU, the UK submitted its draft goods and services schedules to the WTO last year.3 To all intents and purposes, these replicate the existing applicable EU schedules. The UK had hoped that the process for “certifying” its WTO schedules.