Richard North, 22/08/2020  

If no deal is done, Nick Beake, the BBC's Brussels correspondent writes: "the UK would trade with the EU on World Trade Organization terms for the first time in decades".

But considering that the WTO officially came into being on 1 January 1995 under the Marrakesh Agreement, and the UK has been a member of the EU since 1992, and before that the EC and then the EEC, it is fair to say that the UK has never traded with the EU – or anyone else for that matter – on WTO terms.

Even if this were a tiny slip, it would be significant in that it would illustrate the BBC's lack of attention to detail. But to suggest that we've been there before rather understates the nature of the problem confronting us: we are totally in virgin territory. Trading under WTO terms easily qualifies as an "unknown unknown". To suggest otherwise is a major error.

Another issue which is rather let slip by Beake is that that the WTO only covers certain aspects of trade, while our "future relationship" with the EU and its Member States goes far beyond the WTO remit. Civil aviation agreements, for instance, lie outside WTO rules, yet need to be a part of our relationship with the EU.

In some respects, therefore, a no-deal scenario means no rules at all. We may have the basic international organisations to contend with, but they tend to set frameworks within which bilateral or multilateral agreements fall.

Commercial fisheries agreements tend to be like that, with the framework set by UNCLOS (United Nations Convention on the Law of the Sea), the straddling stock agreement and (for the UK and relevant EU Member States), the North-East Atlantic Fisheries Commission Convention.

Agreements on migration, as we know, are bound up by the United Nations Convention relating to the Status of Refugees, adopted in 1951, the 1967 Protocol, plus other measures such as the Protocol against the Smuggling of Migrants by Land, Sea and Air, the Safety of Life at Sea (SOLAS) and Search and Rescue (SAR) Conventions, and the European Convention on Human Rights.

Customs cooperation is another interesting one. WTO does have some remit – particularly in the area of trade facilitation - but the main cooperation agreements are based on the World Customs Organisation (WCO) template. What happens there is that countries make agreements with each other, but they must be based on the WCO codes.

In terms of trading with the EU, vehicle construction standards, of course, lie partly within the domain of UNECE (WP.29) and with the EU when it comes to whole vehicle type approval. Components and accessories mostly fall with the purview of UNECE. An agreement with the EU, therefore, will depend on a willingness jointly to accept UNECE standards, which must then be overlaid with the EU's type approval system.

Interestingly, marketing standards for vegetables and some fruits are also within the domain of UNECE although, for reasons I've never been able to fathom, the OECD is also involved. But here, the "top level domain" is the UN's FAO, which works through its "three sisters", the World Organisation for Animal Health, the International Plant Protection Convention and the Codex Alimentarius.

Agreements here tend to be highly complex, requiring conformity with the wide spectrum of standards, but these are often applied through the prism of the WTO's SPS Agreement, which makes it something of a hybrid system.

Classification and labelling of hazardous chemicals is also an UNECE domain, through what is known as the UN's "Globally Harmonised System" (GHS). There is also the European Agreement concerning the International Carriage of Dangerous Goods by Road, and a similar agreement applying to inland waterways. If we want a deal with the EU, we have to buy into these standards.

Financial services is another interesting issue – completely outside the remit of WTO. At global level, we have G20, the Financial Stability Board (FSB) and the OECD, plus a whole raft of subordinate bodies, such as the Basel Committee, the International Association of Insurance Supervisors, the International Accounting Standards Board, the International Actuarial Association and nine other agencies alongside the World Bank and the IMF.

Working with the EU in the financial services sector require adopting many of the standards promulgated by these bodies, with specific variations to deal with the special conditions within the EU.

The modern-day "free trade agreement", therefore, tends not to be a single agreement, but a composite – a framework agreement pulling together a myriad of agreements from across the globe. Take away that framework and you are left to craft individual agreements spanning a multiplicity of sectors.

This, in part, explains why comprehensive agreements tend to be so long – often in excess of 1,000 pages – but it also underlines why a "no-deal" scenario is a non-starter. You end up having to tie together a confusing complex of international agreements which is almost impossible to manage.

This is one, if not the main reason why the EU is so keen on governance issues. It really does not want to manage what could be hundreds of different agreements, with different rules and procedures. Loose arrangements are far too resource-intensive and difficult to police.

But the very fact that we still have the UK side talking about tariffs and quotas suggests that our negotiators are still way down on the learning curve, more or less working from the "trade agreements for dummies" manual. If all they are doing is talking (and thinking) about WTO rules, they haven't the first idea of what is going to hit them when the transition period finally comes to an end.

The worst of it all is that we probably won't know what we are missing until some unfortunates bump up against barriers they didn't know were there, or when a job goes south because the right papers or permissions haven't been procured, or simply because some unspecified rule hasn't been followed and goods end up rotting on some distant dockside.

We have a government which hasn't got close to the level of detail we have seen on the EU's "notices to stakeholders", presenting us with a remarkable situation: when we want to find out what is going to happen, we have to read an EU website.

The result of all this, of course, will be a savage contraction in the UK's exports – both goods and services. Businesses don't take the risk of exporting to distant shores if they are not certain they will be paid, or if they find they are subject to hidden costs and delays which erode the profitability of transactions.

In some cases, businesses will simply migrate, so that they are still covered by EU rules and know where they stand. Operating out of the UK will become a study in uncertainty, to be avoided by anyone with any sense.

The one thing we can be sure will prosper, though, is transnational organised crime (TOC). In a nation where much of government is now a criminal enterprise, we can be assured that criminal groups will readily adapt to uncertainty, in a way that honest businesses cannot.

It shook me to learn that as many as fifty-two activities fall under the umbrella of transnational crime, from money laundering, counterfeit goods and arms smuggling to human trafficking, prostitution, slavery and environmental crime. These crimes undermine states' abilities to provide citizens with basic services, fuel violent conflicts, and subject people to intolerable suffering.

Last time I looked, the cost of TOC was estimated to be roughly 3.6 percent of the global economy, or $2.1 trillion. But that was in 2009, and it is very hard to get an update, although I see the 3.6 percent figure used quite widely.

The fight against international crime itself requires a hugely complex level of international cooperation, again built on a series of treaties and formal and informal agreements. They too disappear when we slip out of the transition period with no-deal. WTO rules will be the least of our problems.

Also published on Turbulent Times.

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