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Deep and Not Comprehensive? What the WTO Rules Permit for a UK–EU FTA

Published online by Cambridge University Press:  29 May 2018

EMILY LYDGATE*
Affiliation:
UK Trade Policy Observatory, University of Sussex
L. ALAN WINTERS*
Affiliation:
UK Trade Policy Observatory, University of Sussex

Abstract

WTO rules prohibit Free Trade Areas (FTAs) that provide tariff-free access or services liberalization in only one or a few sectors. In this sense, a narrow, sectoral approach to concluding an FTA between the EU and the UK would contravene WTO law. However, assuming the EU and the UK were able to agree a substantially broad tariff-free FTA, WTO rules would not prevent them from moving further to maintain the bulk of the benefits of the Customs Union and the Single Market in a few key sectors. They could establish customs union-like conditions by coordinating external tariffs in some sectors and agreeing on relaxed Rules of Origin (RoOs) administered lightly and Single Market-like access could be approximated through sectoral Mutual Recognition Agreements. Such an approach would enable continued deep integration, whose desirability has been signalled on both sides. It would fall short of current market access levels even in the selected sectors, and, in the case of tariff coordination, re-create some of the limits to an independent trade policy that Brexit aimed to remove. If the trade-off were deemed desirable, however, the approach could be reconciled with WTO rules including the ‘Most Favoured Nation’ requirement that equal treatment be awarded to all WTO Member States.

Type
Review Article
Copyright
Copyright © Emily Lydgate And L. Alan Winters 2018 

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Footnotes

We thank Ingo Borchert, Peter Holmes, Federico Ortino, and Geraldo Vidigal Neto for comments on a previous draft. Thanks also to two anonymous reviewers for helpful comments, as well as participants at a UK Trade Policy Observatory (UKTPO) seminar on this subject on 22 February 2017 at Chatham House. Naturally, none of these people is responsible for the paper's remaining shortcomings. All editorial processes for this paper were handled by Professor Petros Mavroidis.

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