h1

Can the UK trade under WTO rules and avoid a hard border in Northern Ireland: the WTO Security Exception

December 1st, 2018

Of all the issues covered by the 600-odd page Withdrawal Agreement, it is hondootedly Article 6:  “Until the future relationship becomes applicable, a single customs territory between the Union and the United Kingdom shall be established”, or “the backstop”, that causes the greatest angst; critics say it ties the UK into EU customs alignment with no unilateral means of exit and want Theresa May to junk it. Designed to prevent a hard border in Northern Ireland, without the backstop, there is no Withdrawal Agreement or transition period and we crash out next March, likely on WTO terms.

Although the subject of some debate, let’s assume, together with Theresa May’s government, the EU, the RoI, and many people in Ulster, that a hard border in Northern Ireland would be a very bad idea. Can the UK, therefore, crash out “on WTO terms” and avoid one?

Many people, Anna Soubry for example, have said that trading on WTO terms would, ipso facto, require a hard border in Northern Ireland. But this is not the case. The WTO does not require its Member States to secure their borders, or do much at all, apart from follow WTO rules. “Black helicopters of the WTO will not descend”, as the WTO itself puts it, to enforce a border. So how could trading on WTO terms result in a border if the WTO won’t enforce one?

One of those WTO rules concerns non-discrimination, whereby under “most favoured nation” (MFN) principles, all trading partners must be treated equally. Suppose that the UK decided not to put up a border in Northern Ireland and let Irish Republic widgets in unchecked. Meanwhile, widgets arriving in the UK from the United States are subject to controls.

The United States could bring a dispute to the WTO’s Dispute Settlement Body (DSB) citing an MFN violation and claiming that the UK wasn’t treating it fairly. The DSB’s judgement might then agree with the United States (and nearly 90% of the time it has sided with the complainant) that the UK wasn’t treating its trading partners fairly and it could then force the UK either to let United States widgets in unchecked, or to put up border controls at the Irish Border, further reading here.

More recently, the suggestion has emerged that within the WTO rules there is a way to avoid the need to put up hard borders in any scenario. Article 21 of the General Agreement on Tariffs and Trade (GATT), the Security Exception, says that nothing in the GATT agreement should prevent “any contracting party from taking any action which it considers necessary for the protection of its essential security interests”.

It has been argued that to safeguard peace in Northern Ireland the UK could “self-judge” the issue to be one of national security, invoke Article 21, and thereby not put up a border.

Although at face value this seems attractive, further examination of Article 21 makes it clear that it is designed to protect States in times of war or potential conflict and refers to a very narrow set of circumstances. States are exempt from free trade principles in matters where fissionable materials, arms, ammunition and implements of war are involved, or in times of war.

In fact, one of the rare usages of the Security Exception was during the Falklands war when the EU (EC as was) in support of the United Kingdom instituted a trade embargo against Argentina, claiming they were justified in so doing given the security interests involved and, when Argentina went to GATT dispute, they were rebuffed. Another example was in 1975 when Sweden banned imports of footwear because they believed the effect on domestic production of imports was affecting their ability to produce boots for their armed forces.

What is clear here is that the Security Exception has been used in times of national emergency, or perceived national emergency, to institute not take down trading barriers. Analogously to Nick Boles’ mooted use of the “emergency brake” on immigration, were the UK to join the EEA, those who advocate use of the Security Exception to prevent a border in Northern Ireland are torturing the legislation as it is written to fit their needs.

This is not to say that the WTO couldn’t construct a different exemption which might obviate the need for a hard border in Northern Ireland, but the Security Exception ain’t it. Theresa May has grasped the fact that anything other than the Backstop leaves the door open to a possible route to a hard border in Northern Ireland, and that is why her deal remains the only option available to MPs, come the meaningful vote.

Topping

(Topping is a long-standing PB & ex-Army officer)