On Sunday, Prime Minister Boris Johnson once again repeated his readiness to go ahead with a no deal Brexit if the talks with the EU continue to be deadlocked. Speaking by phone to his Polish counterpart Mateusz Morawiecki, Mr Johnson promised Britain would negotiate “constructively” in face to face talks that resumed today. However, he reiterated his position that the UK is ready to leave on what he referred to as “Australia terms”, meaning without a trade deal.
A Number 10 spokeswoman, issuing a readout of a phone discussion with Mr Morawiecki, said: “On the UK’s future relationship with the EU, the Prime Minister welcomed the agreement on both sides to an intensified process of negotiations in July.
“He said the UK would negotiate constructively but equally would be ready to leave the transition period on Australia terms if agreement could not be reached.”
The statement refers to the existing trade relations between the bloc and Australia, which generally follow World Trade Organisation (WTO) rules with the exception of specific agreements on certain goods.
As trade talks with the EU drag on with no breakthrough in sight and chances of no deal grow, unearthed reports shed light on the WTO and what Britain’s active role in the intergovernmental organisation might mean for the rest of the world.
In an entry for the London School of Economics (LSE) blog, Stephen Woolcock, a lecturer in international political economy, argued that the WTO is in poor shape, partly due to tensions between the US and China.
Mr Woolcock wrote: “Even before the coronavirus pandemic, the world trading system was not in great shape. Trade protection was averted in the aftermath of the 2008 financial crisis thanks to a shared commitment to resist protectionist responses on the part of the major trading powers.
“But over time, protectionist measures have grown.
“After years of trying, the Doha Development Agenda (DDA) in the World Trade Organisation (WTO) negotiations effectively came to an end in around 2014 with no real progress.
“Then the incoming Trump administration initiated an aggressive, unilateral trade policy in an attempt to force its trading partners to make concessions.”
The pandemic is now on track to create an economic recession on a par with that of the Thirties, when beggar-thy-neighbour policies including trade protectionism brought about a collapse of the trading system.
To avert a similar outcome, Mr Woolcock argued, the multilateral, rules-based trading system needs to become more resilient.
According to the Professor, a multilateral system rests on the World Trade Organisation (WTO), which is in turn supported by three pillars: rules to provide the framework for trade and investment; a mechanism for resolving disputes; and procedures for monitoring the implementation of the core principles and rules.
However, according to Mr Woolcock, this pillar of the system is now being violently shaken by the US, which has blocked all appointments to the Appellate Body on the grounds that the dispute settlement system – and the Appellate Body in particular – is doing more than is set out in the 1995 Understanding on Dispute Settlement.
The Professor continued: “This US veto of new appointments effectively neuters the dispute settlement system because any party that has a decision go against it in the main panel process only needs to appeal the decision.
“With the Appellate Body out of action nothing happens and the system reverts to one in which trade disputes are resolved by threats or the use of power-based strategies.
“That clearly favours the more powerful economies and governments that are willing and able to wield this power – in other words, the USA and China and disadvantages everyone else.”
Britain’s active role at the WTO’s table, particularly after a no deal Brexit, though, could help bring change and drive the much-needed progress to facilitate global trade.
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In its first independent speech given at the WTO in February, the UK’s Ambassador to the WTO and UN in Geneva, Julian Braithwaite, announced plans to modernise and reform the WTO and to “encourage and empower developing countries to play a role in shaping the global trade system”.
Mr Braithwaite said: “The stability and predictability of this system remains vital to all of us and the UK is committed to supporting the international institution that underpin it.
“There are big challenges facing the WTO today and it is important they are addressed.
“The UK will play its part in doing so.”
International Trade Secretary Liz Truss added at the time “This is an historic moment which will give us an independent voice at the WTO for the first time since its inception.
“We will be speaking up on issues that matter to people and businesses in Britain, including crucial UK industries like fisheries and digital trade, as well as championing free trade against the rising tide of protectionism.
“The WTO is under significant pressure, with all its functions under strain. So, it is more important now than ever that, as one of the strongest supporters of free trade globally, the UK rises to the challenge and does everything in our power to help strengthen and reform it.”
Moreover, according to a recent report by The Times, Britain has been tipped to play a crucial role at the WTO, with former International Trade Secretary Liam Fox being lined up as a candidate to lead the organisation.
The former Cabinet minister was sacked by Mr Johnson last year, but he has remained loyal to the Prime Minister and would be a popular choice among Tory backbenchers.
His biggest rival for the nomination is thought to be Peter Mandelson, the former Labour Cabinet minister and EU trade commissioner, who would be unlikely to get the nod from Downing Street.
Dr Fox has close links in Washington and would need its support, or backing from one of the other big WTO power brokers, to land the job.
However, support from the Trump administration could backfire elsewhere in the world, given the President’s attempts to sabotage the workings of the WTO that have created the biggest crisis in its 25-year history.
Ministers have until July 8 to nominate a candidate and will meet this week to discuss the issue.