Has Boris Johnson handed Liam Fox a poisoned chalice?

By nominating Dr Liam Fox as the next Director General of the WTO has Boris Johnson handed him a poisoned chalice?

As Liz Truss warns in the leaked letter below, under Boris Johnson’s ‘political’ plan for post-Brexit Britain, we are heading for a head-on diplomatic car crash with members of the WTO.

If that happens, it will have severe consequences for British businesses and the economy.

Therefore, the likelihood of Dr Liam Fox being elected is almost zero.

From 23.00 GMT on 31 December 2020 will the UK be in a cleft stick:

·       negotiating tariff schedules with WTO members in order to regularise its status as an independent member of the WTO (and it only takes one member to block agreement); and

·       be in breach of WTO rules, because Boris Johnson’s Brexit border plans for Northern Ireland have violated WTO rules – which experts conclude they will (see below).

In the parallel universe of Brexit negotiations with the EU, if no deal is agreed prior to 23.00 GMT on 31 December 2020, then simultaneously, will Britain be left between a rock and a hard place, because:

·       our status within the WTO will not have been regularised before the end of the transition period; and

·       there will have to be a hard border between Northern Ireland and the Republic of Ireland, because Britain will have become a third country, and in spite of hours of rhetoric by Conservative Brexiteer MP’s in the House of Commons, no solution has been developed that is capable of practical implementation before 23.00 GMT on 31 December 2020 – i.e. because it is impossible to square that circle.

THE UNITED KINGDOM’S WITHDRAWAL FROM THE EUROPEAN UNION COMMUNICATION FROM THE UNITED KINGDOM, dated 1 February 2020 STATES,

‘The transition period will end at 23.00 GMT on31 December 2020, and the United Kingdom has made clear that it will not seek an extension. The transition period provides continuity in the trading relationship between the United Kingdom and the European Union, and with other WTO Members, with the United Kingdom remaining part of the European Union’s customs union and single market during that time. The Withdrawal Agreement also provides that, for the duration of the transition period, the United Kingdom is treated as a Member State of the European Union for the purpose of international agreements entered into by the European Union.1,2 The United Kingdom will continue to apply the European Union’s Generalised Scheme of Preferences for the duration of the transition period and the provisions of the European Union’s regional trade agreements will continue to apply to trade with the United Kingdom during this time.

 The United Kingdom was a founding party to the GATT 1947, and is an original Member of the WTO, in its own right. However, as a Member State of the European Union, the United Kingdom’s concessions and commitments on goods and concessions and specific commitments in services were contained within the schedule of concessions and commitments for goods and schedule of concessions and specific commitments in services of the European Union.

On 24 July 2018 the United Kingdom’s draft schedule of concessions and commitments for goods, draft Schedule XIX – United Kingdom, was circulated for certification in document G/MA/TAR/RS/570 under the Procedures for Modification and Rectification of Schedules of Tariff Concessions.3 The United Kingdom is continuing productive discussions with certain Members about aspects of that schedule. As part of that process, the United Kingdom has initiated a process under Article XXVIII GATT with respect to tariff rate quotas and the United Kingdom is currently taking forward negotiations and consultations with relevant Members.

On 3 December 2018 the United Kingdom’s schedule of concessions and specific commitments in services and the United Kingdom’s list of Article II GATS (MFN) exemptions was circulated for certification in document S/C/W/380 and S/C/W/381 under the relevant procedures.4 The period for objections to the certification of that schedule and list of Article II GATS (MFN) exemptions expired on 17 January 2019. The United Kingdom continues to consult with one Member under these procedures.

During the transition period, the United Kingdom will continue to be covered by the schedule of concessions and commitments on goods and the schedule of concessions and specific commitments in services of the European Union. The United Kingdom’s Article II GATS exemptions will continue to be listed in the Article II (MFN) exemptions of the European Communities and their Member States (GATS/EL/31).’ United Kingdom and the WTO: https://www.wto.org/english/thewto_e/countries_e/united_kingdom_e.htm

‘The UK government’s strategy for the Irish border if there’s a no deal Brexit will mean no tariffs on Irish goods going to Northern Ireland, but some Irish food products entering Great Britain will face high tariffs.

Under the plan, the UK also won’t impose any physical checks or controls on the border, but is it legal? ….

Senior counsel at law firm Linklaters, Lorand Bartels, said the plan raised the question of whether the UK could apply different tariffs at different borders.

If the answer to that is negative then the UK would need to justify its differential tariffs, he added.

It’s understood the government has looked at what is known as the ‘public morals’ exemption.

Dr Bartels is sceptical about that: “It is hard to see how this could be justified on the basis of public morals, but other exceptions might work.

Former WTO negotiator Dmitry Grozoubinski argued that while the proposal was “probably not” compliant with WTO rules, the organisation could not force the UK to change its policy.

There were two subsequent issues with this, he said.

Even if other WTO members believe they are being disadvantaged by the rules and complain to the WTO, the lengthy disputes process means it would take “many years” before it could allow other members to impose reciprocal tariffs on UK exports.

If a complaint was made, the UK would then be “obliged” to consult with the other country over a 60-day period to try to resolve their differences.

He added that only after that 60-day period could they even begin the process of launching what’s called a “WTO dispute”, which takes a year to come to a conclusion.

He argued that if the UK has decided it is comfortable being in breach of the rules, or willing to deal with the consequences, little would change in the immediate aftermath.’

Brexit: Does NI tariffs plan violate WTO law?: https://www.bbc.co.uk/news/uk-northern-ireland-47559880

‘UK Prime Minister Boris Johnson’s Brexit border plans could break international trading rules, risk the UK’s international credibility, and lead to smuggling from the European Union, a senior member of his government warned in an explosive leaked letter seen by Business Insider.

Though Britain is set to leave EU trading and customs rules at the end of the year, the government announced last month that full border controls would not be applied on goods until July 2021.

Business Insider reported last week that the plan raised serious concerns among business groups, who said it could be a “disaster” for firms trading with the EU.

On Wednesday, Liz Truss, the international trade secretary, wrote in a letter to Rishi Sunak, the chancellor of the exchequer, and Michael Gove, the chancellor of the Duchy of Lancaster, expressing four “key areas of concerns” about the government’s plans to leave EU trading and custom rules at the end of 2020.

Truss told Sunak and Gove that a failure to make sure all ports are ready to carry out the full range of checks on incoming goods by January could lead to smuggling into the UK.

“I would like assurances that we are able to deliver full control at these ports by July 2021 and that plans are in place from January to mitigate the risk of goods being circumvented from ports implementing full controls,” she wrote.

Truss also said she was worried that the legality of the UK’s plan for a phased approach to checks on goods coming from the EU from January to July could be challenged at the WTO.

She said the UK would “be vulnerable to WTO challenge” because of its border policy. This is because the UK plans to temporarily give the EU preferential treatment, which could be a breach of WTO rules if there is no UK-EU free-trade agreement in place.

Truss also suggested that as of January 1, all goods going to Northern Ireland from elsewhere in the world could have the EU tariff applied by default, as the system for applying both UK and EU tariffs is not expected to be ready on time.

“I understand that the digital delivery of the dual tariff system (both EU and UK tariff) in Northern Ireland is a high risk and that HMRC are planning to apply the EU tariff as a default to all imports in NI on 1 January 2021,” she wrote.

Truss said she was worried that it would anger unionists in the province, telling Gove and Sunak that “this is very concerning as this may call into question NI’s place in the UK customs territory.”

This section of the letter is likely to fuel concerns in Northern Ireland that businesses in the province will face significant new costs as of next year. Business Insider reported last month that businesses were considering leaving the province in anticipation of trade with Great Britain becoming more expensive.

Responding to the leaked letter, the Northern Ireland Retail Consortium’s Aodhan Connolly said: “If true, a plan to implement EU tariffs as a default provides unprecedented problems to retailers who trade in Northern Ireland.”

He told Business Insider: “Retail accounts for 70% of the value of trade that crosses GB-NI and even if we were able to reclaim the tariffs the implications for cash flow while waiting for refunds makes the premise untenable.”

He added: “I am glad the International Trade Secretary shares our concerns about a workable system being in place by January 2021. That’s why we want to see tried and tested off the peg solutions such as a trusted trader or green channel scheme that will remove friction and allow the majority of goods to flow freely.”

In her letter, Truss also appeared to confirm that a UK government plan to waive customs declarations on exports to the EU had been dropped.

“I am pleased to hear that following the XO [EU Exit Operations] meeting last Friday, it was decided that the temporary waving of export declarations will not be included in the publication,” she said.

Truss signed off by telling her colleagues: “We need to ensure that the UK border is effective and compliant with international rules, maintaining our credibility with trading partners, the WTO and with business.”

The UK trade department needs a “clear view of operational plans, timescales and risks going forward,” Truss wrote.

Johnson’s government is set to publish its full plans for how the borders will work from January 1 on Monday.

The opposition Labour Party said the letter showed that the government was “making things up as they go” on Brexit.

“This email confirms fears that several ministers have been making things up as they go with a lack of awareness of the real world consequences of border policies they’ve had four years to develop,” said Rachel Reeves, the shadow chancellor of the Duchy of Lancaster and shadow Cabinet Office minister.

“At the general election people were promised an ‘oven-ready’ deal to be implemented by the end of this year, not chaos, confusion and a further risk to jobs.”

A government representative said: “We do not comment on leaks.”

Truss’ letter, which was also shared with Home Secretary Priti Patel, echoed concerns voiced by business groups in recent weeks over the UK’s readiness for leaving the European single market and customs union in 2021.

Groups last week told Business Insider that Johnson’s government had failed to guarantee that the new IT system for processing customs checks on exports — the Goods Vehicle Movement Service — would be ready on time.

Alistair Carmichael, the Liberal Democrats’ spokesman for Brexit and foreign affairs, called on Johnson’s government to explain the letter to Parliament, telling Business Insider: “At a time when the UK is already facing the COVID-19 crisis, we cannot afford to crash out of the EU without a deal in place or to accept bad deal.

“Time and again this Government has brushed off concerns about the damaging consequences of Brexit for trade and the border on the island of Ireland. This explosive email clearly reveals the panic in the dark corridors of Whitehall.

“It is essential the Government publishes detailed impact assessments immediately and come before Parliament and be honest with the public.”

Naomi Smith, the CEO of Best For Britain, a group campaigning for a comprehensive UK trade deal with the EU, said: “The government ignored concerns that we wouldn’t be ready to end the transition period on 31st December, despite numerous warnings from business and trade bodies.”

Smith added: “This email proves that those concerns were valid, and the senior Cabinet minister trusted with Britain’s future trade shares them.”

The campaign group has also called on Truss to publish the letter — as well as Gove and Sunak’s response — in full.’

Leaked Liz Truss letter warns that Boris Johnson’s Brexit border plans risk smuggling, legal challenge, and global reputational damage: https://www.businessinsider.com/leaked-liz-truss-letter-boris-johnson-brexit-border-plans-concerns-risks-2020-7?r=US&IR=TSee also:

·       ‘Negotiating the UK’s post­Brexit trade arrangements’: http://sro.sussex.ac.uk/id/eprint/65554/1/__smbhome.uscs.susx.ac.uk_qlfd7_Desktop_NIER%20submitted%20final.pdf

·   UK nominates Liam Fox as next Director General of the WTO: https://www.gov.uk/government/news/uk-nominates-liam-fox-as-next-director-general-of-the-wto

·  Candidates for DG selection process 2020: https://www.wto.org/english/thewto_e/dg_e/dgsel20_e/dgsel20_e.htm