Boris Johnson was taken to task by the BBC’s Andrew Neil over his knowledge of GATT 24 – the clause in WTO rules he believes could allow the UK to continue to trade freely with the EU in a no deal scenario.
In a heated debate between the veteran presenter and the prospective Prime Minister aired on Friday, Mr Johnson said: “It might be possible, and I accept this has to be done by mutual agreement, but it might be possible for instance as we come out to agree under GATT 24 paragraph 5b that both sides agree to a standstill, a protraction of their existing zero tariff, zero quota arrangements until such time as we do a free trade deal. That would be one way forward and I think that would be very attractive.”
However he struggled when asked by Mr Neil “how would you handle paragraph 5c” – initially saying he would “confide entirely in paragraph 5b” before admitting he did not know what was in paragraph 5c.
And, when the importance of the clause was put to him, the man most likely to become the UK’s next prime minister deflected the question – instead asking “Why this defeatism? Why this negativity? Why can’t we rely on the goodwill and the common sense of these parties to get this done?”
What is GATT 24?
The General Agreement on Tariffs and Trade, better known as GATT, was an agreement on the rules of world trade between states including the UK in 1948, and established the rules countries should trade under when it comes to goods. It was this general agreement the World Trade Organisation grew out of 50 years later, and the regulatory body still holds onto the rules established in it.
Some backing the plan to drop out of the EU with no-deal have said GATT’s article 24 will allow the UK and the EU to continue to trade without tariffs as they do now – however it is not as simple as dropping out of the union and into a free trade agreement.
What is paragraph 5b?
Paragraph 5b, quoted by Mr Johnson as a way to “agree to a standstill” is a rule that allows a new temporary free trade area to be made between two countries, as long as it does not unfairly damage trade in other countries outside of the deal.
As the UK and EU already have a deal, the wording of the agreement means the UK could continue to trade as it does currently. However the rule only applies to goods – and not to services, which made up 40 per cent of the UK’s exports into the EU in 2017.
It would also depend on the ability of the UK to get the EU to agree to move to the free trade agreement – a potentially difficult step given the union’s commitment to stick to the deal negotiated by Theresa May before her resignation.
On top of this, if the UK drops out from trading with the EU even briefly, WTO members could argue that a new deal would harm the nature of their trade with either side, fully closing the door on an interim agreement between Britain and Brussels.
What is paragraph 5c?
Despite his response to Andrew Neil, Boris Johnson can not “confide entirely in paragraph 5b”. While the paragraph allows a potential get-out, the countries behind the rules put a clause in to make sure stop-gap trade agreements do not run on forever.
The rules under 5c say that any interim agreement must “include a plan and a schedule” for the formation of a full free trade area “within a reasonable length of time”.
That length of time has been agreed by WTO members to mean less than 10 years – which means Mr Johnson must negotiate a clear idea of what the eventual relationship between the UK and the EU will look like in the next decade before dropping out into a no deal scenario if GATT 24 is going to help the UK continue to trade.
The schedule meanwhile will tie the UK to a formal date ending the interim agreement, leaving the nation compelled into a ‘Canada’ style deal which must also be agreed with the EU.
Can GATT 24 work?
While the plan has approval among some pro-Brexit MPs, it has so far been deemed the wrong step by parliament, and has been challenged by the chief of the WTO.
The House of Commons voted down the plan by 164 votes to 374 when it was put forward as the Malthouse Compromise by conservative MP Kit Malthouse.
While earlier this week WTO director General Roberto Azevedo told Prospect Magazine “If there is no agreement” on what the future plan would be “then Article 24 would not apply, and the standard WTO terms would”.