The big hole in Boris Johnson's Brexit deal plans

Tom Belger
Finance and policy reporter
Former London mayor and Tory leadership candidate Boris Johnson. Photo: Frank Augstein/ BP Photo

Boris Johnson spelled out his Brexit plan in a TV debate with his Tory leadership rivals on Tuesday night—but it raised far more questions than it answered.

Johnson said Britain should be able to enjoy free trade under an interim post-Brexit agreement with the EU for as long as it takes to negotiate a longer-term trade deal.

He pulled out what some Leave supporters call a “secret weapon” to achieve the seemingly unachievable—a little-known clause in World Trade Organisation (WTO) rules.

The frontrunner in the contest to be the next UK prime minister said Britain could exploit Article 24 of the General Agreement on Tariffs and Trade, a set of global trade rules.

What is the ‘secret weapon’ of Article 24?

WTO rules generally prevent countries agreeing to have no tariffs, as Britain and the EU would do under Johnson’s plan, unless they scrap tariffs for every other country too.

But Article 24 creates an exception for countries which have signed free trade agreements with each other, or have a detailed plan and timetable to create one.

This is how the EU itself is allowed to keep frictionless trade and zero tariffs among members, while keeping certain barriers to other countries outside the bloc.

READ MORE: What you need to know about the chaotic Tory TV debate

And this is also the tool Johnson, Farage and other Brexiteers hope to use to keep free trade with the EU immediately after Brexit, without having to immediately open Britain up to competition from the whole world too.

“There will be no tariffs; there will be no quotas because what we want to do is get a standstill in our current arrangements under GATT 24—or whatever it happens to be—until such time as we have negotiated an FTA,” Johnson said on the ‘Our Next Prime Minister’ debate.

Why are there major holes in the plan?

So far so good—or so it seems. UK prime minister Theresa May is not the first to have pointed out the apparent magic bullet “does not actually reflect accurately” Britain’s situation.

The first problem is that the EU itself would have to agree to form this kind of ‘interim agreement’ to get it off the ground.

It is far from clear the EU would be happy to grant Britain such relatively generous terms for up to 10 years after the UK leaves, particularly before any future relationship had been agreed.

The second problem is that Britain and the EU are only allowed an interim agreement if they can prove they already have a “plan and schedule” towards a future free trade deal. If not, other WTO countries have a right to demand they scrap the plans.

Johnson suggested he could keep short-term free trade while negotiating a long-term free trade deal - but he would actually have to negotiate the future deal before he could guarantee immediate free trade.

Could Johnson pull off a deal before Brexit?

That would give the government and Brussels until 31 October to successfully negotiate large chunks of their future relationship, which is a seemingly impossible deadline.

Many free trade deals take years to negotiate, and the EU is unwilling to negotiate the future relationship until Britain’s divorce is settled. Johnson’s recent threat to withhold Britain’s divorce bill could make negotiations even harder.

READ MORE: Why a no-deal Brexit could mean twice the bureaucracy for manufacturers

The EU’s trade commissioner Cecilia Malmstrom called the Article 24 proposal “completely wrong” earlier this month, saying Britain would inevitably face new tariffs if it left without a deal.

As Peter Ungphakorn, a trade expert and former WTO official, has noted: “That’s a pretty blunt ‘secret weapon.’”

What happens if Johnson’s plan fails?

Children play by the Scunthorpe steelworks. Photo: Christopher Furlong/Getty Images

If Johnson fails to make progress but still wants to leave the EU by 31 October, Britain would have to leave without a deal.

This would mean a chaotic end to current frictionless trade, leading to immediate new border delays and checks on many types of trade in and out of Britain. Some areas could see trade stopped altogether, as they would be left unregulated.

Countless businesses and experts have warned this could be catastrophic for the UK, potentially disrupting the flow of vital everyday goods and services from medical devices to car parts to groceries.

The Bank of England has warned unemployment and food prices could soar, the pound could crash and house prices could plunge by as much as a third.

The only way Britain would be allowed to maintain reasonably free trade in some sectors with the EU would be by lowering trade barriers to all countries, not just European ones.

That could see Britain flooded with cheaper goods and services from across the world, which are currently locked out of the EU market.

Under the government’s current plans for this kind of scenario, many British producers including steel and bicycle makers could be devastated by the increased foreign competition.

READ MORE: What is a no-deal Brexit?