Those who now advocate a no-deal Brexit on World Trade Organisation (WTO) rules would bring about a loss of democracy and a betrayal of Leave voters. The UK would become a rule taker in the WTO instead of a rule maker in the EU whilst discussions in Davos last week cast doubt over the very future of the WTO.
So much for “taking back control” of our democracy. We were reliably informed that once we left the familiar orbit of EU institutions - the Council of Ministers, the EU Commission and European Court of Justice – UK law would rule supreme. But instead a no-deal Brexit would thrust the UK into the orbit of an alien star – the WTO where we would have much less control over trade rules and government intervention alongside crippling uncertainty for business.
The truth is that a no-deal Brexit would result in our rules being made by a World Trade Organisation Council of Ministers where we would have less say, administered by a Commission where we would have fewer appointees, and enforced by a panel of judges that would not be democratically elected and would overrule British courts.
I should know having served as the trade rapporteur for the Council of Europe on the WTO. The UK would have just one of 160 votes on the WTO Council of Ministers alongside dictatorships and repressive regimes making decisions by a simple majority. In contrast, in the UK now has a vote based on its population within the 28 democracies of the EU with decisions needing unanimity or a significant majority of the vote. And, unlike the EU, its Commission (the General Council) is not accountable to a democratically elected Parliament.
Meanwhile, Lexiters – Labour Brexit enthusiasts – need to understand that with the WTO they’re signing up to less state intervention and higher NHS costs. WTO rules ban or strongly discourages state aid, so any intervention not permitted inside the EU is likely to be “prohibited” or “actionable” by the WTO and to trigger economic penalties against the UK. Within the EU the UK can deploy more intervention than it currently does but, outside the EU, WTO rules would provide much greater restrictions on state aid. In addition, the WTO heavily protects patents particularly on medicines which would restrict the supply of cheaper generic drugs to the NHS. So a no-deal Brexit can’t seriously be backed by anyone wanting an interventionist Labour Government and a well-funded NHS.
Trade deals are likely to be on worse terms too. Currently the UK benefits from the collective negotiating power of Team EU when facing economic giants like China and the US. In addition, the EU has reduced the risk of member governments being fined by multi-nationals through Investor State Dispute Settlements (ISDS) by changing them to an Investor Court System in their Canada deal and removing ISDS from the EU-Japan deal. Standing outside the EU Britain will be forced into time-consuming less favourable deals vulnerable to ISDS fines under WTO rules.
To add to the uncertainty, plans for a major structural upheaval of the WTO are being discussed at Davos last week as a way to overcome the trade war between the US and China which threatens to destabilise world trade. The EU will be an important mediator in the discussion and its 28 member countries working and voting together carry considerable weight. This partly explains why Donald Trump and Vladimir Putin are so keen on Brexit as it isolates Britain, destabilises the Union and increases their relative power.
True to form, Donald Trump is causing deadlock by refusing to approve appointments to the WTO appeals panel, thereby disabling the dispute settlement mechanism. Already a dispute before the WTO takes several years and is a significant drain on public finances and business confidence. In contrast, the EU has a panel of professional judges, each appointed by a member state, which processes cases far more quickly.
Those countries reliant on WTO are desperate to do something to break the deadlock. But this is a giant game of trade chicken and those who need it least, because they have alternative trade arrangements like the EU, will do best of all. For Brexiteers, who seem to relish the opportunity to walk away from negotiations, it is clear that you should have a viable back-up by having trade deals, which they are calling for the UK to abandon. So, relying on WTO would leave the UK a weak, vulnerable rule-taker susceptible to the demands that any country may put on us.
This is a betrayal of those who voted to Leave the EU to “take back control”. The tragic irony is that those who whipped up populist rhetoric during the referendum over a lack of democracy in the EU, are now encouraging a no-deal Brexit on WTO rules that would multiply the “democratic deficit” many times over. Leave voters in Swansea are saying to me that they don’t want the chaos of no-deal Brexit but instead a public vote on the EU deal so they can have the final say on whether the deal on the table is better than their current deal in the EU.
Geraint Davies Labour MP Swansea West and former Trade Rapporteur from the Council of Europe to the WTO