What role can the UK play in the World Trade Organization post-Brexit?

It’s not clear exactly when the UK will fully emerge as an independent voice on the global trade policy stage in the WTO in Geneva. Technically, it will need to establish its separate WTO identity on leaving the EU at the end of March 2019 but under the terms of the subsequent transitional period (of nearly two years) it may be necessary to continue tracking the broad direction of EU trade policy.

The UK may therefore be somewhat constrained, initially, as to what it can say and do in the WTO setting.  Nevertheless the time is certainly approaching when the UK will be able to project its own distinct vision of the global trading system and play a full part in WTO activities. What does this mean for the UK, the WTO and international economic cooperation in general?

The WTO needs leadership

Since its establishment in 1995, the WTO has had limited success as a forum for negotiating trade liberalisation and rule-making, which was at the outset seen as one of its main functions. There are some bright spots, such as liberalising parts of international telecoms, trade in information technology products, developing a new trade facilitation agreement and eliminating agricultural subsidies.

But the bigger picture tells a different story: the push for progress across the board in the range of major subjects covered by the Doha Round ended in a swamp of conflicting interests. There is now considerable scepticism among many governments and in the business community about the WTO’s ability to deliver results. The United States was instrumental in establishing the WTO but the current Administration is now deeply disillusioned. The WTO, in short, badly needs a dose of pro-trade pragmatism.

The UK ventures into this morass with a message, from its current Government, of strong commitment to free trade and multilateralism, and a promise to play a leading role in reviving the WTO. How realistic is this; what would the UK need to do to deliver on its aspirations; what is in it for the UK?

Consensus-based decision making at the WTO may impede rapid progress but it gives everyone a voice, including the UK

The UK could provide that leadership

The first thing to note is that the WTO has a very flexible structure of governance. There is no UN-style Security Council here, with a core of permanent members written into its constitution. This is not to say that the big players – currently the WTO’s “G5” (the US, EU, China, India and Brazil) – don’t call the shots on occasions. But their dominance is not set in concrete and in fact there is a long history, in both the GATT and the WTO, of medium-sized countries playing pivotal roles in multilateral trade negotiations. The practice of consensus-based decision making may impede rapid progress but it gives everyone a voice, including the UK.

The UK certainly has an opportunity to make its mark as a leader in the WTO. But this is not an opportunity which is going to fall into its lap. If it happens, it will be hard earned. Two factors are crucial – message and means.

The UK’s overarching aim could be to create a new normative consensus as to the purpose of the WTO, which all countries could buy into, or at least not oppose

Leading through an inclusive, pro-trade message

Calibrating the message is tricky, to say the least. Sadly, the bulk of the WTO membership is not looking for a free trade messiah. The UK should by all means be pro-trade but it should moderate this with a message of inclusiveness. Progressive and incremental progress is the name of the game in the WTO.

The UK is in fact quite well equipped to play this role. For historical reasons it has a very good understanding of the link between trade and development. It is well placed to build bridges between developing and developed countries, to identify common ground, to explain the relevance of trade to development and, potentially, to construct creative compromises.

Its strong commitment to the global trading system, represented by the WTO, is another advantage in this context. So the UK’s overarching aim, admittedly easier said than done, could be to create a new normative consensus as to the purpose of the WTO, which all countries could buy into, or at least not oppose.

Leading through competence and expertise

On the means of achieving a leadership role, the UK starts from a low baseline, since international trade policy has not been a domestic priority for the last 40 years. It has however already started to build capacity in this area and has a talented civil and diplomatic service. There is no reason why the UK cannot, over time, succeed provided it is prepared to devote the necessary effort and resources.

Nothing can be taken for granted but opportunities will arise. As one of the few developed countries in the WTO it can aspire to chair major councils and committees in the WTO regularly, including the General Council and the Dispute Settlement Body. It can use these platforms to project its leadership and its message of impartiality and inclusiveness, as well as shaping future work.

Technical and diplomatic excellence is a prized commodity in Geneva. The UK has the potential – if it chooses to make the effort – make a name for itself in this regard. The aim should be to ensure that its participation in the inner sanctums is regarded as constructive, useful and an indispensable asset in the search for positive outcomes.

Following the recent WTO Ministerial Conference in Buenos Aires, a number of “open plurilateral” initiatives have been launched in e-commerce, micro/small/medium enterprises and investment facilitation, with the aim of forming a critical mass for new WTO rules in these areas. The UK has expertise which could enable it to add significant value in these negotiations.

Finally, in order to achieve the respect which is necessary for a leadership role, the UK would need to set an example in terms of compliance with WTO obligations and active participation in WTO activities. One of the most important areas would be dispute settlement. This function of the WTO is currently under attack, principally from the United States, and credible intermediaries to find a way through the impasse are in short supply.

Why would the UK want to lead the WTO?

What is in it for the UK? First, at a strategic level, the UK in its own interests promotes rules-based international cooperation. In the trade and economic field, the WTO, for all its imperfections, remains the most viable global body to advance this agenda. Secondly, playing a leading role in the WTO would be a concrete manifestation of “Global Britain” in action.

At a more practical level, the current UK Government, while wanting to see progress across the board in trade negotiations, has identified three priority areas – digital trade, trade in services, and trade and development. These may certainly be advanced initially through preferential trade agreements. For example, digital and services trade feature significantly in the recently concluded Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), as well as in the (currently stalled) Trade in Services Agreement (TiSA) negotiations. However these subjects are also on the agenda at the WTO, which is uniquely equipped to ensure convergence of rules in the long run. And the WTO is undoubtedly a better forum to discuss trade and development.

Finally the UK, as an “independent” member of the WTO, can also be more specific in defending its rights. While the EU has certainly been very active in dispute settlement and trade remedies, such as anti-dumping, compromises inevitably have to be made when acting for 28 countries.

Alone, the UK can be more targeted. On trade remedies, it has tended to be more liberal than some others in the EU. Hopefully its use of these instruments will be relatively moderate and confined to strict necessity. In dispute settlement, admittedly, the UK will be on a learning curve and it will take time to build up expertise and experience.

There need be no conflict between the UK playing the “good citizen” in the WTO and using it as a forum to advance its specific interests. It may sometimes require a balancing act but many countries have successfully trodden this path in the past.

Many small and medium sized economies currently lack sufficient economic weight to sway the overall balance. The UK, in its own interests, can add some weight

Seizing the opportunity

Overall, the biggest mistake the UK could make would be to assume that members of the WTO will welcome it as a saviour. The free trade message has very limited mileage and it will take years of concerted and subtle effort for the UK to establish its credentials as an opinion former and a leader.

Nevertheless, there is an opportunity, given the current leadership void in the WTO: with the United States disengaged; the EU on the one hand preoccupied with internal issues and on the other prioritising bilateral trade agreements; China a source of apprehension for many members of the WTO; and India in general adopting a somewhat negative attitude towards international trade.

It is impossible for the UK alone to fill this void. But there are many small and medium sized economies which also understand the importance of the system to global welfare as well as to their own interests. They currently lack sufficient economic weight to sway the overall balance. The UK, in its own interests, can add some weight; it can deploy its (potential) expertise; its understanding of trade and development; and its ability to articulate the case for trade and for a healthy trading system.

So the opportunity is undoubtedly there for the UK to play a leadership role in the WTO. The question is: will the UK devote the necessary effort and resources to seize it, in other words can it “walk the walk” as well as “talk the talk”? Supporters of the multilateral trading system must certainly hope so.

Stuart Harbinson

One comment

  1. I feel this blog misses out on one critical way the UK could conceivably lead the free trade debate. That is not to talk of free trade as if it is simply an end in itself but to justify it in terms of economic and social development for all. Currently the debate feels purely transactional, cold blooded – we’ll open up our market if you open yours – and the focus seems to be on maximising the gains of one side while limiting those of the other side.

    Yet economic development is a win-win. By increasing prosperity in developing countries, we create new customers for our own products and services. We also reduce global inequalities, encourage the creation of stable and peaceful political systems and generally save a fortune on wars and fighting the effects of extreme poverty (disease, malnutrition and failing states).

    @HuwSayer

    Liked by 1 person

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